How the CDM is less lucrative in forestry
- Slides: 8
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 > 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 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 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 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 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 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 1865 202 635 © 2007 Eco. Securities Group plc Carbon credits - origination to commercialisation
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