Accounting methods for carbon credits: impacts on the minimum area of forestry projects under the Clean Development Mechanism

Abstract The Ninth Conference of the Parties (COP-9) decided to adopt an accounting system based on expiring carbon credits to address the problem of non-permanent carbon storage in forests established under the Clean Development Mechanism (CDM). This article reviews and discusses carbon accounting methods that were under consideration before COP-9 and presents a model which calculates the minimum area that forest plantation projects should reach to be able to compensate CDM transaction costs with the revenues from carbon credits. The model compares different accounting methods under various sets of parameters on project management, transaction costs, and carbon prices. Model results show that under current carbon price and average transaction costs, projects with an area of less than 500 ha are excluded from the CDM, whatever accounting method is used. Temporary crediting appears to be the most favorable approach to account for non-permanent carbon removal in forests and also for the feasibility of smaller projects. However, lower prices for credits with finite lifetimes may prevent the establishment of CDM forestry projects. Also, plantation projects with low risk of unexpected carbon loss and sufficient capacity for insuring or buffering the risk of carbon re-emission would benefit from equivalence-adjusted average carbon storage accounting rather than from temporary crediting.

[1]  R. K. Dixon,et al.  Mitigation and Adaptation Strategies for Global Change , 1998 .

[2]  Axel Michaelowa,et al.  Transaction costs of the Kyoto Mechanisms , 2003 .

[3]  Addendum , 1964 .

[4]  B. DeAngelo,et al.  FORESTRY PROJECTS: PERMANENCE, CREDIT ACCOUNTING AND LIFETIME , 2002 .

[5]  K. Chomitz.  Evaluating Carbon Offsets from Forestry and Energy Projects: How Do They Compare? , 1999 .

[6]  L. Aukland,et al.  Laying the Foundations for Clean Development: Preparing the Land-Use Sector. A Quick Guide to the Clean Development Mechanism , 2002 .

[7]  Charlie Wilson,et al.  An equivalence factor between CO2 avoidedemissions and sequestration – description andapplications in forestry , 2000 .

[8]  Edward Vine,et al.  Guidelines for the Monitoring, Evaluation, Reporting, Verification, and Certification of Forestry Projects for Climate Change Mitigation , 1999 .

[9]  S Macdonald-Scott,et al.  Laying the foundations. , 1991, Health visitor.

[10]  K. Chomitz,et al.  Temporary sequestration credits: an instrument for carbon bears , 2003 .

[11]  Replacing carbon lost from forests: an assessment of insurance, reserves, and expiring credits , 2003 .

[12]  Philip M. Fearnside,et al.  Accounting for time in Mitigating Global Warming through land-use change and forestry , 2000 .

[13]  Gregg Marland,et al.  Accounting for sequestered carbon: the question of permanence , 2001 .

[14]  Michael Dutschke,et al.  Permanence of CDM forests or non-permanence of land use related carbon credits? , 2001 .

[15]  N. H. Ravindranath,et al.  Land Use, Land-Use Change, and Forestry: A Special Report of the Intergovernmental Panel on Climate Change , 2000 .

[16]  S. Scherr,et al.  Forest carbon and local livelihoods: assessment of opportunities and policy recommendations , 2002 .

[17]  D. Baldock,et al.  Carbon, forests and people : towards the integrated management of carbon sequestration, the environment and sustainable livelihood , 2002 .