ANALYSIS

Assessment of land(LULUCF) as CDM pro

Marcos Alexandre Teixeira , MInstituto Superior Tcnico-IST-AV, Rovisco Pai

A R T I C L E I N F O

Article history:

attempt is made to outline potential guidelines for future actions. This paper demonstrates

today. They have the potential to promote the sustainable use of forestry and soil resources.

paper concludes that Brazil has significant potential to develop LULUCF CDM projects and

E C O L O G I C A L E C O N O M I C S 6 0 ( 2 0 0 6 ) 2 6 0 2 7 0

ava i l ab l e a t www.sc i enced i rec t . comthat these projects can promote sustainable development through direct impact on thesustainable livelihoods of local communities over the long-term. It is recommended, in linewith Brazil's current emission profile, that to realise this potential it is necessary to design anew relationship model between the key players involved in the CDM process: governmentagents, local stakeholders, national academia and private parties. Further it is necessary forthe Federal Government to foster the LULUCF projects. Supporting actions include definingFrom the analysis it is clear that satisfying local community needs and commitments is anecessary prerequisite to achieving a situation where the risks associated with the issuingof the CER's (Certified Emission Reductions) could be better managed and also in line withenhanced support from the national authorities (as part of local development plans). The Corresponding author. Fax: +351 21 847 5545E-mail addr ess: mteixeira @navier.ist.utl.ptURL's: http://na vier.ist.utl.pt/susten ergy/

http://na vier.ist.utl.pt/susten ergy/ (M.G. Carv1 Fax: +351 21 847 5545.

0921-8009/$ - see front matter 2006 Elsevdoi:10.1016 /j.ecolecon.2005. 12.003that A/R projects have a significant potential impact on local and rural development in BrazilKeywords:CDMLULUCFBrazilEmissions mitigation potentialuse and land use change and forestryjects in Brazil

arcus Luke Murray 1, M.G. Carvalho 1

s,1049-001, Lisbon, Portugal

A B S T R A C T

Brazil is an active player in the CDM business, even playing host to the first CDM project everregistered. Although the majority of the CDM actions which have been developed to date inBrazil are in the energy sector, an analysis of Brazil's emissions profile demonstrates thatthe energy sector does not have a significant share of the country's emissions. Rather that25% and 56% of the emissions stem fromAgriculture and Land Use activities, respectively. Inthe light of this profile, this paper re-evaluates Brazil's national Green House Gas (GHG)matrix, and attempts to highlight the potential of the Land Use and Land Use Change andForestry (LULUCF) CDM projects. An analysis of potential actions for improved penetrationof LULUCF projects is presented, alongside key recommendations for future actions. Thispaper outlines how and why LULUCF projects can become the cornerstone of sustainabledevelopment policy in the North and North East region of Brazil, two of the main lessdeveloped regions in the country, totalling 62% of the country's land mass. A focus is madeon three A/R projects recently development in Brazil. Through these case studies, an

www.e l sev i e r. com/ l oca te /eco l econReceived 11 July 2005Received in revised form16 December 2005Accepted 19 December 2005Available online 7 February 2006clear policies that minimise risk and/or reduce perceived risk and the promotion of multi-stakeholder involvement in the CDM project development process.

2006 Elsevier B.V. All rights reserved.

. (M.A. Teixeira).(M.A. Teixeira), http://navier.ist .utl.pt/sustenergy / (M.L. Murray),alho).

ier B.V. All rights reserved.

M I Cassessment of the current national emission profile andgoes further to explore the potential opportunities for other countries, it has a strong renewables sector in the1. Introduction

When Climate Change was first discussed at theWorld Forum(WCED World Commission on Environment and Develop-ment, 1987), it was clear to all, that although extremelyimportant, the issue was poorly understood from a globalperspective and scale. Today there is general consensusamong the scientific community that the phenomenon ofanthropogenic induced climate change is real and significant.Global efforts now focus onmitigating and adapting to climatechange. However, there is no consensus as to the optimumstrategy for addressing climate change. One of the mainanswers became in the form of the United Nations FrameworkConvention on Climate Change (UNFCCC), which was createdto support the reduction of global Green House Gas (GHG)emissions.

This paper focuses on one of the three flexiblemechanismsestablished by the UNFCC to assist Annex I countries toachieve their GHG emission reduction obligations, namely theClean Development Mechanism (CDM). Expressed simply theCDM enables Annex I countries to invest in climate mitigationprojects in non- Annex I countries and earn emissionreduction credits in the Annex I from where the project wasfunded and originated.

The conceptual framework behind the CDM focuses onoptimising GHG emission reduction efforts through the mostcost-effective solutions, where possible through the use ofbetter technologies and even through the creation of awholenew market in terms of CER's (Certified Emission Reductions)and or new technologies.

The rules and regulations for CDM were established atannual meetings hosted by the United Nations, called theConference of the Parties (COP). This process is on-going withmany issues remaining under discussion and debate. Onekey issue that continues to be discussed by the signatories atthe COP meetings is the effectiveness of the CDM as a tool toaddress the sustainable development of small or communi-ties at local level. As one first wave of initiatives, the SmallScale CDM projects lacked the critical mass to support theburden of their fixed costs (even with the simplifiedmethodologies).

The second wave of most promising CDM projectsconsisted of those that focused on the transfer of appro-priated technology to developing countries. However, theseprojects have been experiencing difficulties due to theburden of proving their additionality, as the UNFCCCitself had defined. Non-Annex 1 countries typically lack thestate of the art technologies and necessary associatedinfrastructure to achieve major industrial growth over thelong-term that promotes sustainable development (Rusnok,2004).

This paper focuses on Brazil as a non-Annex 1 country,attempting to highlight the problems and potential solu-tions that CDM attempts to deal with and can bring intothe climate change debate. The analysis starts with an

E C O L O G I C A L E C O N OCDM projects specifically concentrating on LULUCFpotentials.2. Results

2.1. Brazil GHG emissions profile

Since the beginning, Brazil remains at the forefront of thedevelopment of the CDM framework in the UNFCCC where ithas been since the start of the process. Brazil has adopted asignificant leading role among the developing countriespromoting the principle of common but differentiated respon-sibilities in the challenge of addressing climate change.

In 1992 at the United Nations Conference on SustainableDevelopment hosted in Rio de Janeiro, the government ofBrazil was the first national body to sign the Convention onClimate Change. Further commitments to the Kyoto Protocolhave since been reinforced by the approval of the first CDMprojects in Brazil. These are as a direct result of a determinedand conscientious effort from government, private compa-nies, academia and civil society. The first national inventorywas published in Brazil's Initial National Communication tothe UNFCCC (Nov, 2004), by the Science and TechnologyMinister (MCT Minister of Science and Technology/GeneralCoordination on Global Climate Change, 2004), as part of theCDM commitments process.

The national inventory summarizes the Brazilian govern-ment's efforts towards promoting the implementation of CDMprojects and is a key reference on the topic. The nationalinventory also acts as an official inventory of Brazil's GHGemissions. One important issue is that this inventory clearlyoutlines that the highest levels of GHG emissions are notassociated with the energy sector (unlike global norms,especially those experienced in Europe) rather with areasthat have not previously been addressed by the UNFCCCinitiatives: the forestry and the agricultural sectors.

The Brazil national inventory lists up to 1.5 million tonnesof CO2 equivalent (based on 1994 data, compared to a CO2equivalent non-official calculation), and the main sector thatcontributes to these emissions is not the energy sector, as isseen in developed or Annex I countries, rather the Land Use/Change and Forestry sector this information can be viewedgraphically in Fig. 1.

Upon more detailed review, the breakdown of Brazil'semissions reveals an interesting profile: 81% are not fromenergy related sectors, rather due to agriculture (25%) andLand Use Change and Forestry activities (56%). Clearly this is avery different emission profile from that previously consid-ered in the CDM projects market standard national profile.

LandUse Change and Forestry ismade up of four categories(MCT Minister of Science and Technology/General Coordi-nation on Global Climate Change, 2004):

a) change in forests and other woody biomass stocks,b) forest conversion to other uses,c) abandoned land management and,d) CO2 emissions and CO2 removals from underground soil.

Also, highlighting the difference between Brazil and the

261S 6 0 ( 2 0 0 6 ) 2 6 0 2 7 0nation's energy mix (see Fig. 2). Unlike the majority ofcountries that are heavily dependent on fossil fuels, in Brazil

sugar cane and charcoal). Compare this to a world average ofclose to 14% of total energy supply from renewables. Under

North and Northeast regions). Secondly, by moving the targetimplementation CDM areas to areas where the highest rates ofdeforestation and land use change are occurring, a concretechance to achieve a direct impact on the country's emissionprofile is created.

Regarding the effects of the climate change phenomenaitself, as noted by academic and climate science specialists,there are some reflexes of the global warming process that arealready taking place, for what is clear that some environmentsare more sensitive than others, and per se would act as athermometer of the changes already in motion. This is shownby the: shrinking of the Sahara desert, the melting of theGreenland ice sheet, the changes on the North Atlanticcurrent, the effects on the Monsoon and also direct impacts

M I C S 6 0 ( 2 0 0 6 ) 2 6 0 2 7 0further scrutiny it is important to point out that from 42% oftotal energy supply Brazil produces 75% of total electricityproduction. With such a small percentage of Brazil's GHGemissions coming from the energy sector there is very littlescope for developing effective CDM projects in the energysector (MME, 2003).

With this awareness, and after assessing the currentemissions profile, the author decided to search for aninnovative approach to better understand the needs andopportunities for CDM Project in Brazil. It is thought this willbe more in line with the LULUCF sector projects than withenergy related projects.

3. CDM projects and sustainable development42% of energy supply comes from hydro and biomass (mainly

Emission by Sector in Brazil

Industry1%

Solvent0%

Agriculture25%

Land Use Change and

Forestry56%

Waste1% Energy17%

Fig. 1 Distribution of Brazil GHG emissions by sector(personal compilation).

262 E C O L O G I C A L E C O N Ogoals

One important aspect is that CDM projects are tools designedto achieve a more sustainable form of development. They arealso drivers for achieving better social and economical indexesand healthier relations between local communities and theenvironment. Achieving these sustainable development goalswith business as usual is a difficult challenge. The complexrules of building up, registering and certifying a CDM projectmake this even more difficult. Within the Brazilian regionaldisparities, promoting sustainable development could also beunderstood at decreasing the gap in development indicesbetween the South and Southeast regions and the otherregions of the country.

Moving the focus for development away from the southand central west regions is partially inline with Brazil'semissions profile; Firstly, in adopting this change in geo-graphical focus for CDM project implementation, the mainfocus of investments shifts from the South and Southeastregions (i.e.: Curitiba, Rio Grande do Sul, So Paulo and Rio deJaneiro states), to other areas. Such an action will bring with itmore equitable development benefits for the populations (i.e.on the Sustainability of the Amazon forest, as the climatechange could lead to decrease in the rainfall (Sample, 2004).From where the CDM projects should also be in line with theadaptation actions to the reflex of the climate changephenomena, besides targeting the GHG emissions.

According to the evidence presented above there are clearlya number of parameters that advocate that it would be betterto move the focus of CDM projects in Brazil to the North andNortheast regions of the country. However, the currentsituation in Brazil is that the majority of CDM projects areconcentrated in South and Southeast regions. The CDMprojects in Brazil also focus on energy related projects thathave very limited potential to address the issues of sustain-able development for local communities. Table 1 shows thecurrent CDM projects in Brazil, grouped by project type.

Upon analysis of Table 1 one clear conclusion is that theopportunity to make better use of the Kyoto Flexible Mecha-nism as an effective tool to enhance the sustainability of theless developed andmore vulnerable areas in Brazil is not beingmaximised. The current CDM projects are also not being usedeffectively to alter the country's emissions profile. This is asimilar state of affairs as in other parts of theworld, where keyaspects on the political repercussions of themarket options inthe CDM projects has lead several organizations (such asWWF) (Salter, 2004) to call for a re-evaluation of attitudestowards CDM.

It is important to start to look more seriously at the otherpossible CDM potential projects in the other suggested twoBrazilian regions that may provide an alternative to the

Domestic Energy Supply in 2002 Brazil

Biomass27%

Oil and Refined Products

42%

Natural Gas8%

Coal7%

Uranium2%

Hydraulic and Electricity

14%Fig. 2 Energy matrix for Brazil (MME, 2003).

activities and possible economic and social growth at thesame time? All this at the same time is incorporating the

M I Cnecessary adaptation to the imminent changes imposed byclimate change today.

The Brazilian government, is aware of this challenge, andhas started a series of strategic studies focusing the climatechange issue (NAE Ncleo de Assuntos Estratgicos daPresidncia da Repblica, 2005). These studiesmake a series ofcurrent situation. It is suggested that to start a valorisation ofthe CDM initiatives in these two regions, that besidesgenerating CER, can also address sustainable developmentand climate change mitigation. One type of project in Brazilcapable of achieving this are the LULUCF (Land use and LandUse Change and Forestation) project types.

4. Main challenges for LULUCF CDM project

There are many challenges imposed on CDM projects. In thecase of LULUCF projects, one of the main challenges is tosecure a sustainable development model that can lead to longlasting effects on the way-of-life for the population at locallevel. Is it possible to design a new relationship with theenvironment that will lead to a less carbon intensive level of

Table 1 Distribution of CDM projects in Brazil per type ofproject

Type of CDM Project Number of projects % of the total

Biomass energy 38 42Hydro 15 17Agriculturea 16 18EE industry 3 3Fossil fuel switch 4 4Landfill gas 12 13Fugitive emissions 1 1N20 1 1Total 90 100

Source: UNEP Ris Centre (2005).a All related to AWMS (Advanced Waste Management System), inits majority, manure treatment on confined cattle raising facilitiesin the states of South, Central and Southeast regions.

E C O L O G I C A L E C O N Orecommendations. The following have been highlighted:

Need to elaborate on the National Map on the Vulnerabilityand Threats related to the Climate Change;

Need to acknowledge that the country is poorly prepared inthe field of climate change, and the degree of knowledge onthe subject is insufficient, especially in the agriculturalsector. In general, the national research and developmentsector is aware of the relevance of climate change issues tothe sustainable development of the country;

The National government wants the international commu-nity to recognise that the country is not prepared to assumelimits to the emissions, as they would have a direct impacton the relation between capital and internal product, andthe availability of capital is a critical issue in the internalmarket with unbearable consequences in the job andpersonal incomes;

The theoretical estimated potential for CDM projects in theForestry and in Brazil is enormous. More then half of it(57%) is concentrated on Forestry projects. But 94% of thisforestry potential is yet in a theoretical study stage, noteven considered in the short or medium terms actionplans;

Many of the current CDM initiatives are focused in theenergy sector (such as the POINFA and PROCEL pro-grammes). There is also some confusion in defining suitableparameters for the calculation of the baseline.

Keeping in mind Brazil's emission profile, the nationalstrategy to reduce GHG emissions, and the need to achievesustainable development targets, must urgently address theissue of land use and land use change.

One of the main environmental impacts of a forest carbonproject is the decrease in the GHG emissions; this ismeasured in terms of the amount of carbon sequestered.Under CDM the level of carbon sequestered is the investor'sprime motivation, as the project justification must include adetailed presentation of net carbon additionality. Yet it isfundamental that designated national authorities (DNAs)when approving CDM projects must screen the projects inorder to ensure that they have the dual capacity to offer bothcarbon sequestration and sustainable development benefits.Further these benefits exist in a complementary andconsistent fashion, enhancing the credibility of this newmarket.

Each CDM project is reviewed by the relevant DNA toevaluate environmental, social and economic impacts andpotential contribution towards the local sustainable develop-ment. Each project will also be assessed in relation toachieving the national long term emissions reductionsscenario. Both of these tasks should fall under the responsi-bility of the DNA. In Brazil the selection process used by theDNA currently does not allow for different treatment forenergy sector based CDM projects than for LULUCF projects,even though the country's emissions profile clearly indicatesthat a greater impact can be made with a preference forforestry and agricultural focused projects.

Forestry and land use projects can be classified into threemain categories (May et al., 2003):

Commercial projects these prioritise the generation ofCERs for commercial reasons. They are: led by national and/or international enterprises may be implemented directly by trans-national corpora-tions with intensive emissions

or by a national industrial sector such as the lumberindustry or the biomass energy sector to obtain CERs and/or enhance sector competitiveness

Conservation projects these prioritise secondaryenvironmental benefits such as local forest and biodi-versity conservation. It is important to note that thisproject type was undermined by Marrakech COP. CDMprojects that would avoid deforestation as a basis forCERs were removed from the process for the duration ofthe first commitment period (20082012): These projectsare: normally mediated and implemented by NGOs, often

263S 6 0 ( 2 0 0 6 ) 2 6 0 2 7 0also they are associated with international investorcorporations

they seek CERs and the related impact in the companiespublic image.

Development projects these prioritise social objectivesalongside environmental objectives. Many project devel-opers have established partnerships with trans-nationalorganisations seeking CERs, offering the investors an imageof social responsibility as project financiers. These projects: give priority to the needs of local communities whileconserving the local environment

Also, this same study proposed a series of criteria andindicators for their assessment in reviewing CDM projects(May et al., 2003). Going beyond classification scientists haveprovided a series of criteria and indicators as a guide fordiscussion among interested groups and government officials,in the hope of providing a basis for the incorporation of localsustainable development concerns more explicitly in projectreview procedures (see Table 2) (May et al., 2003).

Also, during the project design phase there are manyadditional constraints imposed to create a suitable LULUCFCDM project, these include (CDM-Executive Board, 2005):

1. To accept and encompass the definition of forest as aminimum area of land of 0.051.0 hectares with tree crown

Table 2 Evaluation criteria for the analysis of a LULUCFCDM Project (May et al., 2003)

Component Criteria

Social Project budget shows evidence of financialcommitment to the social componentSmallholders in communities surroundingproject participate directly in the project'score business (carbon sequestration)

264 E C O L O G I C A L E C O N O M I CLand tenure concentration in project area isnot exacerbated by project activitiesNet employment is generated by the projectEmployment quality for communityparticipants is improved by the projectNet income is generated by the projectamong local participantsKnowledge and learning are generated anddisseminated based on project activitiesCommunity members have participateddirectly in project designForest management has been subject toprior certification

Environmental A net increase in terrestrial carbon storage isanticipated due to the projectLocal biodiversity will be maintained and/orenhanced by the projectBiodiversity effects of the project will bemonitoredProject impacts on water resources will bemonitoredSoil monitoringEnvironmental education

Economic The project will have a favourable effect onthe national balance of paymentsThe project will have a favourable incomemultiplier effect in the regional market andlocal communities

The project is cost-effective and competitivewith other climate abatement initiativescover of more than 1030% with trees with the potential toreach a minimum height of 25 m;

2. Assess the leakage in the project as the increase inGHG emissions outside the boundary of a project activity,i.e. if the project reduced access to land, food, fuel andtimber resources without offering alternatives may resultin carbon leakage as people find needed supplieselsewhere;

3. Access the status of the 5 Carbon pools: above-groundbiomass, belowground biomass, litter, dead wood and soilorganic carbon. Not only in Baseline calculations but also inthe monitoring phase;

4. Indicate if the project activity is related to aforestation orreforestation, based on the past history of the area, where:aforestation no Kyoto forest land cover for last fifty (50)years and reforestation activities no Kyoto forest since orbefore 31st December 1989;

5. Define the Baseline methodology, based on identificationof alternative land use types, similar to emission reduc-tions projects, as: existing or historical land us, mosteconomical land use alternative or most likely land usetype;

6. Decide the project crediting period, for the A/R projectactivity, for the purpose of issuance of temporary CERs(tCERs) baseline of a maximum of 20 years, which thencan be revised and renewed up to two times. Thus, up tothree consecutive crediting periods, summing up to amaximum of 60 years or long-term CERs (lCERs) non-renewable baseline of a maximum of 30 years on the onehand.

The aspects to be covered in analysing the potential for thedevelopment of LULUCF CDM projects are extensive. It is clearthat these projects need to include the participation of therelevant local and governmental stakeholders. An analysis ofthree of the case studies presented in this paper demonstratesthat these stakeholders are not properly involved in theproject development process. There is evidence (Yu, 2004) thatmany projects do contribute towards sustainable develop-ment, however, often the main weakness of CDM projectscomes from the fact thatmany are attached to other priorities,and that the inclusion of additional evaluation criteria will notmake them more sustainable. If the projects are evaluatedwith such criteria, then lessons can be learned promoting thedesirable development for the country/region. This suggeststhat development projects (those that prioritise both socialand environmental objectives), should be encouraged. Theyshould be developed with the active participation of and in apartnership with local communities and governmentalagents.

This approach, involving a merging of the local,regional and national interests into the sustainable devel-opment process and the definition of suitable LULUCFprojects via effective multi-stakeholder participation, couldbe quickly adopted into the CDM project developmentprocess. Clearly all partners should approve the process byconsensus, such that the potential issues and problemscan be identified and respected by the stakeholders. This

S 6 0 ( 2 0 0 6 ) 2 6 0 2 7 0process would give Brazil a powerful tool for capturingsynergies in the development for CDM projects. Such a

M I CThe Plantar Project is an example of a typical commercialproject. The project's justification for CDM eligibility is basedon the company's continued utilisation of charcoal as areducer for pig iron manufacture, rather than to convert touse of mineral coke, a tendency common among othersegments of Brazil's charcoal-based iron industry. Plantar isa reforestation company incorporated in the late 1960s. Itsrevenues in 2001 were about R$ 136.5 M (approx. US$ 75 M),from forest services, metallurgy, and sale of charcoal andseedlings. The project is situated in the central Cerrado regionof the southeast Brazilian state of Minas Gerais, this has longbeen a source of charcoal to the metallurgical industries ofMinas Gerais.

Project documents predict that Plantar could generate12.88 million metric tonnes (M t) of CO2 emissions reductionequivalents over a 28-year time horizon, seven yearscorrespond to reforestation and growth and 21 yearscorrespond to charcoal utilisation as an iron ore reducer bythe industry. These carbon credits would be generatedthrough three project components: a) 7.9 M t CO2 fromindustrial activity (net emissions by substitution of mineralcoke by charcoal); b) 0.44 M t CO2 from improvement ofcharcoal kilns (methane emissions reductions); c) 4.54 M tCO2 from reforesting 23100 hectares with eucalyptus andpotential methodology is described by Swart et al. (2003); itis based on a twin point analysis:

First recognise that GHG emissions, and anthropogenicinduced global warming, are determined by general devel-opment pathways and by specific climate mitigationpolicies. This leads us to start thinking of future options ina more holistic way, rather than just focusing on individualenergy supply, technology demand or adaptation measures.The critical aspect is to place climate policy in the broadercontext of technological and socio-economic policy devel-opment, rather than just being one among the many itemsof those policies.

Second recognition of the linkages and potential syner-gies and trade-offs in each concrete policy option. As theoptions were inventoried, it became clear that they arefocused in a certain issue within a specific sector. However,for a full economic appraisal it is necessary to take intoaccount the indirect impacts on climate (including mitiga-tion and adaptation), development targets and social goals.Policy options must not be guided by sector-specific resultsbut, instead, encompass the full spectrum of potentialimpacts.

5. On going activities in Brazil

Here by, three of the initiatives that have been carried out inthe filed of forestry projects are resumed, addressing some ofits particularities associated with the objectives assumed for aCDM LULUCF and/or A/R project.

5.1. The Plantar Project

E C O L O G I C A L E C O N Oassisting in regeneration of 478 hectares of nativevegetation.Part of the credits to be generated was negotiated with thePrototype Carbon Fund PCF, whose purchase commitmentguaranteed a loan to Plantar by the Dutch Rabobank to financepart of the forest plantation. The agreement between Plantarand PCF includes sale of 1.5 M t of CO2 credits, correspondingto about 12% of the total CERs expected by the project. Thenegotiated price was US$ 3.50 per ton of CO2 (about US$ 12.85/tC), determined by PCF estimates, resulting in potential creditstotalling US$ 5.25 M.

Plantar project socio-environmental benefits and localdevelopment potential:

The primary social benefit of the project would be themaintenance of 1270 direct jobs, which could be lost shouldthe company close down. This scenario that the companypredictedwould shortly occur if carbon financewere denied,due to the absence of alternative sources of capital to permitinvestment in forest assets.

The project has serious flaws with regards to localsustainable development, particularly in relation to theequity criterion. Given the role of forestry in the regionand Plantar's substantial technical know-how in hightechnology clone seedling production, there appears toexist considerable potential to secure local developmentbenefits through outgrowing under the forest farmerscheme. This could include the possibility for extendingcarbon credits to include such farmers. No such foresttechnology diffusion or social inclusion efforts wereproposed by the company, which restricted its relationswith the local community to a modest environmentaleducation programme and certified child friendly statusin respect of child labour laws.

The necessity for the purchase of large land areas for forestcarbon accumulation could encourage a new process oftenure concentration, bringing harmful social consequencesif schemes such as the out grower approach are not includedin the projects.

Plantar's pre-existent plantation certification assured inves-tors that the company is meeting all applicable environ-mental and labour laws, as well as permitting it to launch agreen pig iron label, associated with its chain-of-custodycertification from plantation to industry. Prior certificationaccording to these criteria however does not necessarilyassure social sustainability.

The CDM can guarantee and reinforce the economicsustainability of biomass based energy alternatives. Thisproject, which juxtaposes the utilisation of forest biomassagainst fossil fuel exploitation, is a good example of thispotential role for CDM.

5.2. The Peugeot/ONF/IPN Project

The Peugeot carbon sink Project has a primarily commercialobjective. It seeks to create an environment friendly image asa market strategy to counteract the negative environmentalperception of the emissions-intensive automotive manufac-turing industry. The fact that the investment is self-fulfillingand that the project does not intend to claim carbon credits,

265S 6 0 ( 2 0 0 6 ) 2 6 0 2 7 0allows the developers a substantial margin of freedom todecide on project activities.

M I C S 6 0 ( 2 0 0 6 ) 2 6 0 2 7 0The project is located in northwest Mato Grosso state, inthe so-called Arc of Deforestation of the Amazon basin.Reforestation began concomitant to the inauguration ofPeugeot's industrial facility in Rio de Janeiro in 2000. Theproject is implemented by ONF Office National des Forts, agovernment institution that tends to the public forests inFrance, in partnership with Instituto Pr-Natura (IPN), a socio-environmental NGO which has had a long-term presence inthe project region.

The publicity impact desired by the investor led to theestablishment of an overly ambitious target establishment of10 million native trees in three years on 5000 ha in anenvironment culturally and ecologically unfamiliar to theexecutor. As a result of this overly ambitious target, the projectfaced a number of hurdles during its initial phase, whichforced it to change course. The principal barriers to successfulimplementation were due to a low survival rate of seedlingsplanted in vigorous brachiaria grass, and the repercussions ofattempts made by the executors to surmount this hurdle byadopting aerial spraying with the herbicide Roundup. Thistogether with accusations of biopiracy against the executor,deeply affecting the project, forced its executors to changetheir approach, and to adopt a more accommodating positionregarding the relations with Brazilian public institutions.

The process of internal re-evaluation resulted in a numberof changes: (i) substituting the use of herbicides with manualweeding; (ii) reduction of reforestation targets from 5000 ha to2000 ha; (iii) restoration of permanent protection areas in linewith the state's rural land use licensing system; (iv) creation ofa Scientific Advisory Committee with the participation ofregional universities and government institutions; (v) substi-tution of foreign equipment and expertise with local inputs;(vi) enhancement of local integration through an environ-mental education program and seedling distribution to localfarmers.

Peugeot project socio-environmental benefits and localdevelopment potential can be summarised as:

In terms of carbon benefit, with the establishment of morerealistic targets, the initial estimation of 2 M t C to besequestered over 40 years has now been reduced to 500000t of Carbon over 100 years. However, this reduced targethas not undermined the positive image associated with itscar manufacturer. The area reforested is quite considerablein an area of agriculture frontier and rapid deforestation,where experience with native forest recuperation is veryweak. In this sense, the project has attracted considerableattention and reaction in attitudes of local landowners.The potential for technology adoption would only beeffective when combined with other social integrationefforts such as extension assistance, environmental edu-cation and financial support to sustainable land usepractice.

In terms of social benefits, the project has created jobopportunities in tree planting and maintenance, incomegeneration through seed purchase and service tax levied bythe local government. However these benefits have beenmost significant only during the project's implementation

266 E C O L O G I C A L E C O N Ophase. In the maintenance phase, beginning in 2003,employment and local tax revenues have fallen off quickly.The large-scale nursery established to expand carbon forestplantings in the region was de-activated.

A forestry extension activity of seedling distribution ofmultifunctional trees to smallholders is being undertaken inpartnership with IPN in line with the institution's role indisseminating agro forestry practices in the region. Alongwith modest donations for hospital facilities and theenvironmental education programme aimed at local school-children, this component has promoted some measure ofintegration of the project with local communities andsurrounding land reform beneficiaries.

Involvement of local farmers in carbon schemes would be amore effective means than large-scale demonstrationplantations to encourage sustainable land use practices.Project findings indicate that regional programmes inprogress of implementation such as Proambiente canleverage such involvement. Learning from Peugeot hasbeen timely and valuable.

5.3. The Bananal Project

The Bananal Project is essentially experimental. Its subliminalaim is to learn how to format competitive carbon projects andopen up future opportunities. As an experimental project itseeks to make no claim for tradable carbon credits, whichgives a margin of freedom to the developer to adapt itsactivities. The project was originally financed by AES BarryFoundation, a philanthropy linked to a British gas utilitycompany, and implemented by Instituto Ecolgica2, a regionalsocio-environmental NGO, based in Palmas, Tocantins state(IE Instituto Ecolgica, 1997).

The project is located in an ecological transition zone,covering three important Brazilian biomes: the Amazon forest,savannah bush land and the marshland. The location of theproject can be seen in Fig. 3. The project has introduced the socalled social carbon meaning carbon generated with apriority focus on social aspects, for which reason it isconsidered a carbon project of developmental type. Theforestry component is divided into three activities: protectionof 200,000 ha of standingmature forest, regeneration of 60,000ha of degraded Cerrado woods land and the planting of 3000ha of agro forestry practices with an estimated gain of 25M t C.

The project as originally conceivedwould strengthen forestconservation within parks of the Ilha do Bananal as its centralcomponent, to be managed in partnership with the respectiveFederal and State Government agencies responsible. However,these partnerships did not materialize for a number ofreasons, during the course of the project. This restricted theproject outputs to the social and research components.

Bananal project socio-environmental benefits and localdevelopment potential:

The research component focuses basically on the develop-ment of carbon monitoring methodologies and studies ofregional biodiversity. Monitoring of the deforestation rate inthe project intervention areas is foreseen throughout theproject's horizon. Due to the substantially reduced forestactivities, the amount of carbon sequestered by project2 www.ecologica.org.br.

the net results of such efforts for income and employmentwill require long-term support and assessment. Theirimpact on regional carbon stocks is indirect and difficult tomeasure.

Lessons learned suggest that partnerships with govern-ment agencies need to be formalized and budgets clearlydefined to avoid political discontinuity, endangeringresults. Although the Kyoto Protocol does not allow creditunder the CDM for avoided deforestation, in agriculturalfrontiers such as the Amazon region, complementaryincentives such as forest valuation by the carbon marketare urgently needed to guide proper land use. Governmentenvironmental agencies may thereby strengthen theircapacity to protect unique biomes, and rural development

267E C O L O G I C A L E C O N O M I C S 6 0 ( 2 0 0 6 ) 2 6 0 2 7 0related activities must be cut sharply. However, the conceptof using carbon funds to support official agencies to protectand restore conservation units could be fruitfully carriedforward by other projects. The key issue for baselineassessment is to consider deforestation as a reference foractions that may reduce its rate over a broader area insubsequent years.

The project's social component focused on environmentaleducation to school students and community members,support to income generation activities, distribution ofseedlings and establishment of agroforestry systems. Theprimary project stakeholders for these elements are landreform beneficiaries, community members and indigenousgroups. The project expects that raising environmental

Fig. 3 General position of Babanal Island in Brazilianterritory (http://www.geog.ucsb.edu/~rivers/sa/bananal-web/wetlands.html).awareness may also contribute to carbon benefits, both byincreasing tree planting and by reducing deforestation.

The project pioneered the introduction in Brazil of theSustainable Livelihood Approach to assess intervention onlocal communities with their participation. The project itselfdid not generate significant employment. Efforts are under-way to support sustainable income generation activities, but

cliffs and destruction of mangroves (MCT Minister of

Mean rate gross def

0

5.000

10.000

15.000

20.000

25.000

30.000

35.000

77/88

88/89

89/90

90/91

91/92

92/93

93/94

Def

lore

stat

ion

Rate

[km2/y

ear]

Fig. 4 Mean rates of gross deforestation in Amazon AreaScience and Technology/General Coordination on GlobalClimate Change, 2004). Another important aspect is thatclimate change will bring high levels of stress on the

orestation in Amazon Area

94/95

95/96

96/97

97/98

98/99

99/00

00/01

01/02

02/03

Yearagencies may thus induce landowners to restore manda-tory permanent reserves or establish sustainable produc-tion systems.

6. Profile of the north and northeast regionsand its relations with the Kyoto issues

In order to better explain the relationship between the Brazilemissions profile and the issues analysed here, some of thekey characteristics related to the north and northeast regionsof the country are detailed in the following section to furthersupport the ideas presented in this paper.

6.1. North region

The North region represents almost 45% of the country'sterritory (3,831,694 km2). It encompasses the region of theAmazon Forest, and is constituted by the following states:Acre, Amap, Amazonas, Par, Rondonia, Roraima andTocantins. The consequences of climate change for this regionare represented by an increase in sea level, leading to a biggerpenetration of the tides into the rivers. Flooding of theadjacent areas, with possible sedimentation of the river bed,the impact also will rise from the increased erosion on the sea(INPE Instituto de Pesquisas Aeroespaciais, 2004).

M I Cenvironment, and a significant number of species are likely todisappear (MMA, 2005).

Estimation on the level of deforestation in the Amazonregion was done based on Satellite images data analysis, andthe results, in terms of mean gross rate of deforestation in theregion can be seen in the Fig. 4. These data can now beobtained in a real time basis, due the development of a

Fig. 5 Main areas in Brazil that are likely to undergothe desertification process (MCT Minister of Science andTechnology/General Coordination on Global Climate Change,2004).268 E C O L O G I C A L E C O N Osurveillance system based in Satellite image processing, thePRODES and DETER projects (INPE Instituto de PesquisasAeroespaciais, 2004).

6.2. Northeast region

It represents only 17% of the territory (1,447,528 km2), with thefollowing states: Alagoas, Bahia, Cear, Maranho, Paraba,Pernanbuco, Piau, Rio grande do Norte and Sergipe. Theimpacts of climate change will be more serious in severalcoastal cities such as Recife, Aracaju and Macei, where theurbanization has expanded to low areas of coastal plains, alsowhere drainage problems associated with floods in Maranhostate, and Salvador city are to be expected. Some impact on therivers flows and possible increase on the sedimentationprocess in the river bed (that leads to the sea) is likely, andalso a possible decrease in the level of rain fall would enhancethe desertification pressure on the continent.

According to MCT Minister of Science and Technology/General Coordination on Global Climate Change (2004) asignificant area of the region is threatened with the deserti-fication process, as shown in Fig. 5.

7. Discussions

Getting back to the country emissions profile, and the need todevelop actions that are in line with the need to improve therelations of mankind and the environment in the most fragileand endangered environments in Brazil, it is necessary to seekfor an action plant capable to imprint a new form ofrelationship in terms of sustainable use of the naturalresources and a decrease in the pressure of the depletion ofthe natural resources. It is clear, that promoting the CDMLULUCF A/R projects is one of the possible strategic actions topromote forest and preservation actions.

When encompassing the requirements of a correct designof a A/R PDD (Project Design Document), many of the criteriaanalysed force the proponents not only to understand thedesign of LULUCF CDM projects as drivers of a new model forthe land use, but also as part of a deep understanding of thepast history of the local area and people that lives there. In thiscase they would need to certify the accomplishment of set offorestry development project criteria (defined in a mutualstakeholders consultation process). Understanding the habitsof the local population would avoid many undesirable out-comes and barriers for the CDM Project, as the leakage effect,and yet have the necessary statistical and numerical data tobuild a consistent database on all carbon pools (methodologyon how the carbon storage is accounted in A/R projects), pasthistory of the area (with official documentation and ormakinguse of remote sensing tools), in a historical perspectivedocumented in a sufficient lime line to support the aforesta-tion and or forestation criteria as defined by the UNFCCC andthe needs for the registration and certification process.

In defining the project activity, it is necessary to under-stand the current and potential future trends in the area/region's economical activities, so that they can be properlyframed in the calculations for the baseline and the method-ologies for crediting and certification activities.

All these must be done in order to take part in an LULUCFA/R project activity, and per se, incur the level of additionalcosts required to develop, submit and register the projectunder the CDM.

Perhaps this set of actions might be considered asunproductive in terms of promoting the necessary change inthe Brazil's emissions profile, as it does not tackles directly theGHG emissions reductions. However, the fact that those localissues are encompassed in the design of the A/R projects (thatis not an issue for the international community, as it is rathera national process), is necessary to the Brazilian society tounderstand the need to change and the tools, options andpotentials to be explored in pursuing the necessary changes toface the challenges imposed by the climate changephenomena.

Are the CDM LULUCF A/R projects suitable tools to addressthe necessary changes, and in what why? Do the case studiespresented here show that there is a common path, or even acentral national policy that could be implemented? If thePlantar Project could have proven its additionality. Whatwould have been if the Peugeot/ONF/IPN Project were only abit more focused on being a carbon focused project, and nothaving its core in the management of a companies imageaction, disassociated with the local communities?

Also, what would have been the outcome for the Babanalproject, if right at the beginning, the project could have count

S 6 0 ( 2 0 0 6 ) 2 6 0 2 7 0with a better carbon pool statistical database?Would all theseactivities had a different outcome?

likes to present itself as having a strongly regulated market.

M I CThe reality of thismarket is that due to the frequent instabilityand uncertainty in the country, investors tend to wait beforeinvesting. Often they wait for a better definition of the federalregulation in accordance to the investment environment (thatwould includes clear rules regarding the Kyoto Protocol). Thisbehaviour is normally adopted to avoid unexpected surprisesand unforeseen obstacles and events affecting this privateinvestment.

In that sense, for the future implementation of LULUCFCDM projects, as cost objective tools to decrease the globalemissions as they were originally designed, it is unforeseenthat purely market oriented tools would be significant todiverge the actual path of investments, been needed thereinforcement of other instruments, as national policies,regulatory actions and even scientific supporting studies.

The need to adopt a comprehensive government led toclimate change policy in Brazil, which is very strong. Thismustconstitute a common framework between several governmentinstitutions involved in the Management of the CDM actions(Environmental Minister, DNA, Agricultural Minister, Scienceand Technology, etc.) on their development plans and policiestowards promoting sustainable development.

It is important to understand that the internationaldemand for emissions reductions and its relations withdemand for CDM projects is a market orientated toll and, asa result the market will always naturally go for the lowest costand lowest risk options, which aremainly represented in CDMby the energy based projects. In terms of CDM potentialsLULUCF based projects, Brazil is an important host, and has asignificant role to play, as it has significant potential forLULUCF projects, estimated at approx 55.6 Mt CO2 per year asCERs in Brazil (NAE Ncleo de Assuntos Estratgicos daPresidncia da Repblica, 2005). In terms of global potential,Brazil represents the third most important host for sinkprojects (15%: 10 Mt CO2 per year), preceded by China (37%)and Indonesia (25%) (Niles et al., 2001).

Further it is important to recognise that forestry projects,while conceptually similar to sustainable management (asopposed to simple resource depletion), will tend to havereduced profitability. This is due to the need to pursuecomplementary benefits that foster the adoption of a moresustainable use of resources. (Pearce et al., 2003).

Brazil offers one of the biggest world potential for sinkprojects (under the LULUCF modality). However, undertakingthese projects requires a suitable set of conditions (social,environmental and governmental) than to create the optimumconditions. Brazil also needs LULUCF projects to be developedin order to achieve better long lasting effect in terms of carbonemissions mitigation and also climate change adaptation.

8. Conclusions

In climate change mitigation which is the achievement of theShould this additional support necessary come from theBrazilian government, in the form of clear climate relatedpolicy, and stronger support for research institutions? Brazil

E C O L O G I C A L E C O N Omaximum number or CERs, at the minimum cost, energybased projects are the most potential (when looking just intothe project boundaries, as they do lead to a more significantemission reductions). However, under the scope of countries'sustainable development goals this assumption is not correct.The LULUCF projects have greater potential to tackle local andrural development, promote the sustainable use of forestryand soil resources while still decreasing the anthropogenicemission of GHG.

So it is possible to say that for specific areas of the country,where the local needs and local governments commitmentsare made, the CDM projects based on the Land Use and LandUse Change and Forestry can, and should, be used to work in apartnership with the government and local stakeholders tomake a positive impact on the sustainable development ofsensitive regions of the globe under the stress of the climatechange.

On the other hand, although positioning the country as asuitable target for CDM investments is an important issue, fora non-annex 1 country, that yet does not have an imposedlimitation to its emissions, is also important to develop a set ofactions direct target on reducing its emissions.

This would be based, not only addressing correctly itsemissions profile, but in line with a strategic national plan torespond to future possible imposed emissions reductions. Onepossible collateral effect would also be a clear demonstrationto the international community and its commitments andthat efforts have been taken to attract investments in CDMprojects, by reducing risks and removing barriers, at the sametime that increase the International perception of been aninteresting target country for CDM projects.

Considering themix of Brazil's emissions, where 56% of theemissions are due forestry and land use and 25% in theagricultural sectors, there is no doubt that LULUCF CDMprojects must be pursued. And that while there are somegovernment initiatives, being implemented by the Ministry ofScience and Technology, and the Ministry of Environment,there is not an adequate sense of urgency.

LULUCF CDM projects need to play a significant role inBrazil's emissions reduction portfolio. As the Federal govern-ment has indicated that these projects represent more thanhalf of the country's CDMpotential (MCTMinister of Scienceand Technology/General Coordination on Global ClimateChange, 2004), and yet these projects are not currentlyreceiving a similar proportion of the attention. As a resultthere is a noticeable lack of coherence on emission profile andthe climate policy. This observation demonstrates the exis-tence of a dual position, in the Brazilian case, where in theenergy sector, contrary to the rest of the world, the countryhas a very Kyoto friendly situation, while in other sectors thereis little knowledge on the possible impacts (quantification),nor potential remediation and mitigation actions andstrategies.

There appear to be two separate issues, the energy profileand the emissions profile. An acknowledgment of thedifferences between these two would create a basis to avoidfuture emissions caps in future negotiations. This dual realitydemonstrates that with regards to climate policy Brazil'ssituation is mixed. As a result for emissions limits to beimposed, this would be only in the areas where a minimum

269S 6 0 ( 2 0 0 6 ) 2 6 0 2 7 0level of development is already achieved (industrial andenergy sectors, for example), and not where a lot of work is

yet to be developed, as in the fields of land use, agriculture andforestry.

The Brazilian government should act towards supportingLULUCF projects, by anymeans necessary, using tools such as:

Elaboration and public dissemination of a map of areassuitable for LULUCF projects based on satellite imageanalysis. Those areas must correspond to the forestationand aforestation criteria of the Kyoto Protocol (aforestation no Kyoto forest land cover for last fifty years and

government agents, scientific academia, and local stake-

The authors would like to acknowledge the importance of the

INPE Instituto de Pesquisas Aeroespaciais. Coordenao Geral deObservao da Terra-Relatrio Anual 2004. Issue 1.1 31January 2004. INPE: Braslia, 2004. Available at: http://www.obt.inpe.br/relatorio_obt_2004.pdf.

May, Peter H. (Coord.) and Boyd, Emily; Veiga, Fernando; Chang,Manyu. Local Sustainable Development Effects of ForestCarbon Projects in Brazil and Bolivia: a view from the field.Shell Foundation and IIED International Institute for Envi-ronment and Development: Rio de Janeiro, October 2003.Available at: http://www.iied.org/.

MCTMinister of Science and Technology/General Coordinationon Global Climate Change, 2004. Brazil's Initial NationalCommunication to the United Nations Framework Conventionon Climate Change. MCT, Brasilia. Available at: http://www.

270 E C O L O G I C A L E C O N O M I C S 6 0 ( 2 0 0 6 ) 2 6 0 2 7 0funding provided by the European Commission, within thescope of the OPET Latin America Program, managed by theEESD.We would also like to thank the collaboration of all localstakeholders, especially the interesting discussions with Mr.Alexandre B. Strapasson from the MMA-Brazil, and thededication of the entire project consortium.

R E F E R E N C E S

CDM Executive Board. Guidelines for Completing CDM-AR-PDD,CDM-AR-NMB and CDM-AR-NMM. Version 02, page 1, 2005.

IE Instituto Ecolgica, 1997. The Bananal Island CarbonSequestration Project, Brazil. Technical Proposal. Ecolgica,Palmas.holders associations, in the development of the projects; Establish a task force within the several stakeholders inpursuing a definition of a specific policy targeting CDMprojects in the area of Land use, that would encompassfederal regulation to avoid project barriers to projects thatare in line with a suitable model of development.

Acknowledgments31st December 1989); Specific regulatory framework, mandate to facilitate thesustainable timber use in LULUCF areas;

Quota system in the CDM projects approved in the countryby the DNA, forcing the market to developed more LULUCFprojects rather than only energy focused ones;

Improvement of the technological base of the projects underdevelopment with strengthening the bounds betweenmct.gov.br/clima/ingles/comunic/textocomunac.htm.MMA, 2005. INFORMMA Informativo do Ministrio do Meio

Ambiente (in Portuguese). MMA, Braslia. Special issues Proto-colo de Quioto, 16 February.

MME, 2003. BEM Balano Energetico Nacional (in Portuguese).Mines and Energy Minister, Braslia. Available at: WWW MME.gov.br.

NAE Ncleo de Assuntos Estratgicos da Presidncia daRepblica, 2005. Cadernos NAE n 3. Braslia: NAE, Sec. de Com.de Governo e Gesto Estrategica, vols. 1 and 2. February.

Niles, J., Brown, S., Pretty, J., A. Ball y, J. Fay, 2001. Potential carbonmitigation and income in developing countries from changesin use andmanagement of agricultural and forest lands. Essex:University of Essex, Centre for Environment and Society:Occasional Paper, April 2001.

Pearce, David, Putz, Francis E., Vanclay, Jerome K., 2003. Sustain-able forestry in the tropics: panacea or folly? Forest Ecology andManagement, vol. 172, pp. 229247.

Rusnok, David, 2004. Where the conditions are right. CarbonFinance. issue 11, October, 1415.

Salter, Liam, 2004. A Clean Energy Future? The Role of the CDM inPromoting Renewable Energy in Developing Countries. WWFInternational. 11 pp. Available at: http://www.panda.org/downloads/climate_change/liamsalterfullpapercorrected.pdf.

Sample, Ian, 2004. Pressure points. The Guardian. ThursdayOctober 14.

Swart, Rob, Robinson, John, Cohenc, Stewart, 2003. Climate changeand sustainable development: expanding the options. ClimatePolicy 3S1, S19S40.

WCED World Commission on Environment and Development,1987. Our Common Future. University Press, Oxford.

UNEP Ris Centre, 2005. CDM projects in the pipeline. ElectronicFile downloaded from: http://www.cd4cdm.org/Publications/CDMPipeline.xls at: 14-11-2005.

Yu, Chang Man Yu. Forestry Carbon Sequestration in Brazil Social,economical and policy dimensions (in Portuguese). PhD thesis,Curitiba: UFPR, January 2004.reforestation activities no Kyoto Forest since or before

Assessment of land use and land use change and forestry (LULUCF) as CDM projects in BrazilIntroductionResultsBrazil GHG emissions profile

CDM projects and sustainable development goalsMain challenges for LULUCF CDM projectOn going activities in BrazilThe Plantar ProjectThe Peugeot/ONF/IPN ProjectThe Bananal Project

Profile of the north and northeast regions and its relations with the Kyoto issuesNorth regionNortheast region

DiscussionsConclusionsAcknowledgmentsReferences