How the CDM is less lucrative in forestry

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How the CDM is less lucrative in forestry Contribution to the side event at

How the CDM is less lucrative in forestry Contribution to the side event at COP 13 on “A/R CDM projects stranded? Methodologies and tools that help them fly” Till Neeff 14 December 2007, Bali, Indonesia © 2007 Eco. Securities Group plc Carbon credits - origination to commercialisation

Overview > Forestry CDM is a challenge > Methodological complexity is an important limitation

Overview > Forestry CDM is a challenge > Methodological complexity is an important limitation > Being less lucrative is primary limitation in forestry CDM > It is difficult to sell temporary credits > We want to achieve that forestry thrives in the markets © 2007 Eco. Securities Group plc Carbon credits - origination to commercialisation

Forestry CDM is a challenge > Forestry projects are challenging as such > The

Forestry CDM is a challenge > Forestry projects are challenging as such > The CDM is challenging as such > In forestry CDM revenues will always be small compared to non-CDM revenues > Particularly restrictive CDM regulations – particular rules forestry – complicated methodologies – crediting temporary and credits are not fungible > Particularly restrictive markets forestry CDM © 2007 Eco. Securities Group plc Carbon credits - origination to commercialisation

Methodological complexity is an important limitation > Writing forestry PDDs requires specialization > There

Methodological complexity is an important limitation > Writing forestry PDDs requires specialization > There are specialized service providers for PDD and methodologies > Complexity causes high transaction costs > Design and implementation of tropical forestry projects is costly as well > Scale makes up for transaction costs > Profitability depends on financial characteristics, rather than the methodological complexity © 2007 Eco. Securities Group plc Carbon credits - origination to commercialisation

Being less lucrative is primary limitation forestry CDM > Relative margin always smaller than

Being less lucrative is primary limitation forestry CDM > Relative margin always smaller than sales price > Prices forestry CDM carbon credits are low – compared to regular carbon credits, only the time-value of money – less time-value of money in government accounting – limited demand > Poor demand forestry CDM carbon credits – less useful than regular CDM carbon credits – buyers don't bother dealing with the complexity – EU ETS exclusion © 2007 Eco. Securities Group plc Carbon credits - origination to commercialisation

It is difficult to sell temporary credits > Survey results > Slow demand from

It is difficult to sell temporary credits > Survey results > Slow demand from governments > Excluded from the EU ETS © 2007 Eco. Securities Group plc Carbon credits - origination to commercialisation

We want to achieve that forestry thrives in the markets > Lost opportunities for

We want to achieve that forestry thrives in the markets > Lost opportunities for Kyoto > Lost environmental and so-economic cobenefits > Lost funding for landmanagement sector > Process needs to be reviewed (KP, Art. 9) © 2007 Eco. Securities Group plc Carbon credits - origination to commercialisation

The profitability of carbon finance in forestry Till Neeff (Principal Consultant) till@ecosecurities. com +44

The profitability of carbon finance in forestry Till Neeff (Principal Consultant) till@ecosecurities. com +44 1865 202 635 © 2007 Eco. Securities Group plc Carbon credits - origination to commercialisation