1. 4. REDD & Carbon Finance SPC /GTZ
Fiji National REDD Policy & Scoping Workshop
Suva, 27 August – 1 September 2009
4. REDD & Carbon Finance
Dr Sean Weaver, Principal, Carbon Partnership Ltd
© Text and illustrations Sean Weaver, Carbon Partnership Ltd

2. Monday 31 August 2009

3. Monday 31 August 2009

4. Framework Scope Reference Level Financing Distribution
What activities are eligible?
Reference Level
How are emission reductions measured?
Financing
Where does the money come from?
Distribution
Where do the money & benefits go to?

5. Carbon & Climate Related Finance
Financing
Where does the money come from?

6. Carbon & Climate Related Finance
Compliance Carbon Market
Voluntary Carbon Market
Driver = Binding Obligations
Driver = Carbon Neutrality & CSR
Kyoto – CDM
Copenhagen – REDD+
USA Domestic ETS
Various voluntary standards
Carbon Exchange
OTC
Payment for Ecosystem Services Market
Grant Finance
Driver = Strategic & Philanthropy
Driver = Corporate Social Responsibility (CSR)
Capacity Building
Buy credits
Project Development
Corporate Sponsorship
Direct Barter

7. Emissions Trading Carbon & Climate Related Finance
Compliance Carbon Market
Voluntary Carbon Market
Emissions Trading

8. Unconstrained emissions
CDM
Collective Cap
Emissions Trading
Collective target is an allowed emission volume
LULUCF
1 Unit (AAU) tCO2e
This volume is divided into units (tCO2e)
Units are allocated to POs pursuant to their individual target (Assigned Amount Units – AAUs)
Cap

9. NZ million AAUs
Units are allocated to POs pursuant to their individual target (Assigned Amount Units – AAUs)

10. NZ million AAUs
Units are allocated to POs pursuant to their individual target (Assigned Amount Units – AAUs)

11. To achieve compliance a country must demonstrate that its actual emissions over the management period match their number of allowances
NZ million tCO2e
Actual
Emissions
NZ million AAUs
Allowances

12. What if a country under-complies with their binding target by overshooting their allowance?
NZ million tCO2e
Actual
Emissions
NZ million AAUs
Allowances

13. What if a country under-complies with their binding target by overshooting their allowance?
Country B over-complies with their target generating surplus Allowances
Surplus Allowances
Country B million AAUs
Allowances
Country B million tCO2e
Actual
Emissions
NZ million AAUs
Allowances
NZ million tCO2e
Actual
Emissions
Country A
Country B

14. Got any spare Allowances?
Wanna sell them?
Got any spare Allowances?
Yep
Yep
Surplus Allowances
Country B million AAUs
Allowances
Country B million tCO2e
Actual
Emissions
NZ million AAUs
Allowances
NZ million tCO2e
Actual
Emissions
Country A
Country B

15. $ Country A Country B Surplus Allowances 2008-2012
Country B million AAUs
Allowances
Country B million tCO2e
Actual
Emissions
NZ million AAUs
Allowances
NZ million tCO2e
Actual
Emissions
Country A
Country B

16. $ Country A Country B Surplus Allowances 2008-2012
Country B million tCO2e
Actual
Emissions
NZ million AAUs
Allowances
NZ million tCO2e
Actual
Emissions
Country B million AAUs
Allowances
Country A
Country B

17. $ Country A Country B Surplus Allowances 2008-2012
Country B million tCO2e
Actual
Emissions
NZ million AAUs
Allowances
NZ million tCO2e
Actual
Emissions
Country B million AAUs
Allowances
Country A
Country B

18. $ Country A Country B Surplus Allowances 2008-2012
Country B million tCO2e
Actual
Emissions
NZ million AAUs
Allowances
NZ million tCO2e
Actual
Emissions
Country B million AAUs
Allowances
Country A
Country B

19. $ Country A Country B Surplus Allowances 2008-2012
Country B million tCO2e
Actual
Emissions
NZ million AAUs
Allowances
NZ million tCO2e
Actual
Emissions
Country B million AAUs
Allowances
Country A
Country B

20. $ Country A Country B Surplus Allowances 2008-2012
Country B million tCO2e
Actual
Emissions
NZ million AAUs
Allowances
NZ million tCO2e
Actual
Emissions
Country B million AAUs
Allowances
Country A
Country B

21. $ Country A Country B Surplus Allowances 2008-2012
Country B million tCO2e
Actual
Emissions
NZ million AAUs
Allowances
NZ million tCO2e
Actual
Emissions
Country B million AAUs
Allowances
Country A
Country B

22. $ Country A Country B Surplus Allowances 2008-2012
Country B million tCO2e
Actual
Emissions
NZ million AAUs
Allowances
NZ million tCO2e
Actual
Emissions
Country B million AAUs
Allowances
Country A
Country B

23. $ Country A Country B Surplus Allowances 2008-2012
Country B million tCO2e
Actual
Emissions
NZ million AAUs
Allowances
NZ million tCO2e
Actual
Emissions
Country B million AAUs
Allowances
Country A
Country B

24. $ Country A Country B Surplus Allowances 2008-2012
Country B million tCO2e
Actual
Emissions
NZ million AAUs
Allowances
NZ million tCO2e
Actual
Emissions
Country B million AAUs
Allowances
Country A
Country B

25. $ Country A Country B Surplus Allowances 2008-2012
Country B million tCO2e
Actual
Emissions
NZ million AAUs
Allowances
NZ million tCO2e
Actual
Emissions
Country B million AAUs
Allowances
Country A
Country B

26. $ Country A Country B Surplus Allowances 2008-2012
Country B million tCO2e
Actual
Emissions
NZ million AAUs
Allowances
NZ million tCO2e
Actual
Emissions
Country B million AAUs
Allowances
Country A
Country B

27. $ Country A Country B Surplus Allowances 2008-2012
Country B million tCO2e
Actual
Emissions
NZ million AAUs
Allowances
NZ million tCO2e
Actual
Emissions
Country B million AAUs
Allowances
Country A
Country B

28. $ Country A Country B Surplus Allowances 2008-2012
Country B million tCO2e
Actual
Emissions
NZ million AAUs
Allowances
NZ million tCO2e
Actual
Emissions
Country B million AAUs
Allowances
Country A
Country B

29. In Compliance In Compliance Country A Country B
Country B million tCO2e
Actual
Emissions
NZ million AAUs
Allowances
NZ million tCO2e
Actual
Emissions
Country B million AAUs
Allowances
Country A
Country B

30. Clean Development Mechanism (CDM)
Future REDD+ (?)
NZ million AAUs
Allowances
NZ million tCO2e
Actual
Emissions
No emissions cap
Developed Country
Developing Country

31. Clean Development Mechanism (CDM)
Future REDD+ (?) $
NZ million AAUs
Allowances
NZ million tCO2e
Actual
Emissions
No emissions cap
Developed Country
Developing Country

32. Clean Development Mechanism (CDM)
Future REDD+ (?) $
NZ million AAUs
Allowances
NZ million tCO2e
Actual
Emissions
No emissions cap
Developed Country
Developing Country

33. Clean Development Mechanism (CDM)
Future REDD+ (?) $
NZ million AAUs
Allowances
NZ million tCO2e
Actual
Emissions
No emissions cap
Developed Country
Developing Country

34. Clean Development Mechanism (CDM)
Future REDD+ (?) $
NZ million AAUs
Allowances
NZ million tCO2e
Actual
Emissions
No emissions cap
Developed Country
Developing Country

35. Clean Development Mechanism (CDM)
Future REDD+ (?) $
NZ million AAUs
Allowances
NZ million tCO2e
Actual
Emissions
No emissions cap
Developed Country
Developing Country

36. Clean Development Mechanism (CDM)
Future REDD+ (?) $
NZ million AAUs
Allowances
NZ million tCO2e
Actual
Emissions
No emissions cap
Developed Country
Developing Country

37. Clean Development Mechanism (CDM)
Future REDD+ (?) $
NZ million AAUs
Allowances
NZ million tCO2e
Actual
Emissions
No emissions cap
Developed Country
Developing Country

38. Clean Development Mechanism (CDM)
Future REDD+ (?) $
NZ million AAUs
Allowances
NZ million tCO2e
Actual
Emissions
No emissions cap
Developed Country
Developing Country

39. Clean Development Mechanism (CDM)
Future REDD+ (?) $
NZ million AAUs
Allowances
NZ million tCO2e
Actual
Emissions
No emissions cap
Developed Country
Developing Country

40. Clean Development Mechanism (CDM)
Future REDD+ (?) $
NZ million AAUs
Allowances
NZ million tCO2e
Actual
Emissions
No emissions cap
Developed Country
Developing Country

41. Clean Development Mechanism (CDM)
Future REDD+ (?) $
NZ million AAUs
Allowances
NZ million tCO2e
Actual
Emissions
No emissions cap
Developed Country
Developing Country

42. Clean Development Mechanism (CDM)
Future REDD+ (?) $
NZ million AAUs
Allowances
NZ million tCO2e
Actual
Emissions
No emissions cap
Developed Country
Developing Country

43. Clean Development Mechanism (CDM)
Future REDD+ (?) $
NZ million AAUs
Allowances
NZ million tCO2e
Actual
Emissions
No emissions cap
Developed Country
Developing Country

44. Clean Development Mechanism (CDM)
Future REDD+ (?) $
NZ million AAUs
Allowances
NZ million tCO2e
Actual
Emissions
No emissions cap
Developed Country
Developing Country

45. Clean Development Mechanism (CDM)
Future REDD+ (?) $
NZ million AAUs
Allowances
NZ million tCO2e
Actual
Emissions
No emissions cap
Developed Country
Developing Country

46. Clean Development Mechanism (CDM)
Future REDD+ (?) $
NZ million AAUs
Allowances
NZ million tCO2e
Actual
Emissions
No emissions cap
Developed Country
Developing Country

47. Clean Development Mechanism (CDM)
Future REDD+ (?) $
NZ million AAUs
Allowances
NZ million tCO2e
Actual
Emissions
No emissions cap
Developed Country
Developing Country

48. Clean Development Mechanism (CDM)
Future REDD+ (?) $
NZ million AAUs
Allowances
NZ million tCO2e
Actual
Emissions
No emissions cap
Developed Country
Developing Country

49. Demand $ Supply If REDD Market Mechanism
Clean Development Mechanism (CDM)
Future REDD+ (?)
Demand
If REDD Market Mechanism $
NZ million AAUs
Allowances
NZ million tCO2e
Actual
Emissions
Supply
No emissions cap
Developed Country
Developing Country

50. $ Clean Development Mechanism (CDM) Future REDD+ (?) Developed Country
Only Points of Obligation can play compliance trading
Clean Development Mechanism (CDM)
Future REDD+ (?)
You can play in the voluntary market
I’m not a Point of Obligation but I want to play carbon trading $
NZ million AAUs
Allowances
NZ million tCO2e
Actual
Emissions
No emissions cap
Developed Country
Developing Country

51. Demand Voluntary Carbon Market
Entities seeking Carbon Neutrality or Corporate Social Responsibility (CSR)
This is a different league with different rules – but anyone can play

52. Voluntary Carbon Market
Demand
Entities seeking Carbon Neutrality or Corporate Social Responsibility (CSR)
This may be for brand differentiation – e.g. “Our wine is carbon neutral”
Grove Mill winery in Marlborough produced the world’s first carbon neutral wine

53. Voluntary Carbon Market
Demand
Entities seeking Carbon Neutrality or Corporate Social Responsibility (CSR)
How does work?
Three Steps:
1. Measure carbon footprint
2. Reduce carbon footprint
3. Buy carbon offsets (carbon units) for residual emissions you were unable to eliminate

54. Voluntary Carbon Market
Demand
Entities seeking Carbon Neutrality or Corporate Social Responsibility (CSR)
How does work?
Three Steps:
1. Measure carbon footprint
2. Reduce carbon footprint
3. Buy carbon offsets (carbon units) for residual emissions you were unable to eliminate

55. Voluntary Carbon Market
Demand
Entities seeking Carbon Neutrality or Corporate Social Responsibility (CSR)
How does work?
Three Steps:
1. Measure carbon footprint
2. Reduce carbon footprint
3. Buy carbon offsets (carbon units) for residual emissions you were unable to eliminate

56. Voluntary Carbon Market
Demand
Entities seeking Carbon Neutrality or Corporate Social Responsibility (CSR)
How does work?
Three Steps:
1. Measure carbon footprint
2. Reduce carbon footprint
3. Buy carbon offsets (carbon units) for residual emissions you were unable to eliminate

57. Voluntary Carbon Market
Demand
Entities seeking Carbon Neutrality or Corporate Social Responsibility (CSR)
How does work?
Three Steps:
1. Measure carbon footprint
2. Reduce carbon footprint
3. Buy carbon offsets (carbon units) for residual emissions you were unable to eliminate

58. { { Demand Voluntary Carbon Market
Entities seeking Carbon Neutrality or Corporate Social Responsibility (CSR)
How does work?
Three Steps:
1. Measure carbon footprint {
Energy efficiency Clean technology Behaviour change
2. Reduce carbon footprint
Someone else’s emission reduction {
3. Buy carbon offsets (carbon units) for residual emissions you were unable to eliminate

59. { { Demand Voluntary Carbon Market Carbon Neutral
Entities seeking Carbon Neutrality or Corporate Social Responsibility (CSR)
How does work?
Three Steps:
1. Measure carbon footprint {
Energy efficiency Clean technology Behaviour change
2. Reduce carbon footprint
Someone else’s emission reduction {
3. Buy carbon offsets (carbon units) for residual emissions you were unable to eliminate
Carbon Neutral

60. { { Demand Voluntary Carbon Market Carbon Neutral
Entities seeking Carbon Neutrality or Corporate Social Responsibility (CSR)
How does work?
Three Steps:
1. Measure carbon footprint {
Energy efficiency Clean technology Behaviour change
2. Reduce carbon footprint
Someone else’s emission reduction {
3. Buy carbon offsets (carbon units) for residual emissions you were unable to eliminate
Carbon Neutral

61. { Supply Voluntary Carbon Market
Voluntary carbon projects seeking financial support for voluntary climate friendly projects
e.g. REDD projects
Someone else’s emission reduction {
3. Buy carbon offsets (carbon units) for residual emissions you were unable to eliminate

62. { Supply Voluntary Carbon Market
Voluntary carbon projects seeking financial support for voluntary climate friendly projects
e.g. REDD projects
Tropical rainforest carbon is the most popular in the voluntary carbon market
When you protect a rainforest carbon reservoir you also protect biological diversity and other ecosystem services
Someone else’s emission reduction {
3. Buy carbon offsets (carbon units) for residual emissions you were unable to eliminate

63. Voluntary Carbon Market
Why
Standards?
Voluntary Carbon Market
Transaction Volumes by Standard Used 2007
CCB – Climate Community and Biodiversity Standard
There are many different voluntary carbon market standards
Well suited to REDD
Projects that simultaneously address climate change, support local communities and conserve biodiversity.

64. Voluntary Carbon Market
Why
Standards?
Voluntary Carbon Market
We need standards to safeguard against carbon cowboys
Wanna buy some carbon credits real cheap?

65. Voluntary Carbon Market
Why
Standards?
Voluntary Carbon Market
A robust quality assurance process will prevent me from selling junk carbon
Take a look at my voluntary carbon forestry project

66. Market Instruments Voluntary Market Compliance Market
Quality Assurance Standards
Voluntary Market
Compliance Market
UNFCCC CDM Executive Board
UNFCCC REDD Executive Board ?
Various Voluntary Standards
These standards issue carbon credits only when the carbon is Measurable, Verifiable, and Additional
Necessity for Measuring Reporting & Verification (MRV) capability

67. Market Instruments Fund Instruments REDD Readiness
Quality Assurance Standards
Fund Instruments
Quality Assurance Standards
World Bank Forest Carbon Partnership Facility (FCPF)
Asian Development Bank
Bilateral Grants (e.g. EC, UK, Norway, GTZ, Australia)
UNFCCC REDD Fund (?)
Strategy, Policy, Planning
Capacity Building (e.g. MRV)
Build Reference Scenario
Buy REDD units
REDD Readiness