Costs And Funding Of Forestry Cdm Project Development

Cost ranges for steps in a project identified in Figure 2.4 total between $100 000 and $250 000. Costs need to be met long before the project generates CERs, which could take two years (UNEP Risoe, 2008a). Larger projects achieve economies of scale, while small-scale projects of less than 8000 CERs per year are presented with slightly fewer administrative hurdles.

The first projects in the CDM forestry project pipeline have been promoted and funded mainly by the World Bank through its BioCarbon Fund (see Table 2.3 and Box 2.2) and large NGOs, whose aim is to fund rural development activities with multiple environmental and socioeconomic benefits. Using the first tranche of $53.8m from the BioCarbon Fund, The World Bank has already signed several ERPAs. In fact the main buyer of forestry CERs is the World Bank, with a fixed price of around $4.00. At

BOX 2.2 FINANCING FORESTRY PROJECTS UNDER THE CDM: THE BIOCARBON FUND OF THE WORLD BANK

Since 2004 the BioCarbon Fund has supported the development of marketable LULUCF projects under the CDM that deliver benefits to poor areas likely to suffer the greatest impacts from climate change and that protect and enhance local and global environments. A first tranche raised $53.8 million from governments and private enterprise. The application of this fund is expected to result in 19 emission reduction purchase agreements. A large proportion (37 percent) of these are in sub-Saharan Africa, in contrast to the carbon market as a whole to which Africa contributed only 3 percent of transactions (BioCarbon Fund, 2008).

The BioCarbon Fund has been at the cutting edge of development of methodologies which are now in the public domain. Importantly, it has also shown with purchase agreements how projects can be implemented with concrete results. Moreover, the Fund has developed methodologies for activities not covered by the CDM such as avoided deforestation, and is exploring and piloting forest management, sustainable agriculture and revegetation activities. Such experience will be invaluable in the postKyoto negotiations centering on expanded rules for forestry.

the end of 2008 there was no competition from other buyers in the markets for forestry CERs, and the price remained static.

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