7. Project-Based Activities

69. An LULUCF project can be defined as a planned set of activities aimed at reducing greenhouse gas emissions or enhancing carbon stocks that is confined to one or more geographic locations in the same country and specified time period and institutional frameworks such as to allow net greenhouse gas emissions or enhancing carbon stocks to be monitored and verified. Experience is being gained in Activities Implemented Jointly (AIJ) and other LULUCF projects that are under initial stages of implementation in at least 19 countries.

70. Assessment of the experience of these projects is constrained by the small number, the limited range of project types, the uneven geographic distribution, the short period of field operations to date, and the absence of an internationally agreed set of guidelines and methods to establish baselines and quantify emissions and uptake. Generally, these projects do not report all greenhouse gas emissions or estimate leakage, and few have independent review.

71. However, through the experience of LULUCF projects aimed to mitigate climate change, it is possible in some cases to develop approaches to address some of the critical issues (seeTable 5).

72. There are 10 projects aimed at decreasing emissions through avoiding deforestation and improving forest management, and 11 projects aimed at increasing the uptake of carbon-mostly forest projects in tropical countries (see Table 5). [5.2.2]

73. Methods of financial analysis among these projects have not been comparable. Moreover the cost calculations do not cover, in most instances, inter alia, costs for infrastructure, monitoring, data collection and interpretation costs, opportunity costs of land and maintenance, or other recurring costs, which are often excluded or overlooked. Recognizing the different methods used, the undiscounted cost and investment estimates range from $US 0.1-28 per ton of carbon, simply dividing project cost by their total reported accumulated carbon uptake or estimated emissions avoided, assuming no leakage outside the project boundaries. [5.2.3]


74. Project-level financial analysis methods are widely used and fairly standardized in development assistance and private investment projects. But they have yet to be consistently applied to, and reported for, LULUCF projects aiming at mitigating climate change. Guidelines for developing methods of financial analysis may be needed in the future. [5.2.3]

75. LULUCF projects aiming to mitigate climate change may provide socioeconomic and environmental benefits primarily within project boundaries, although they may also pose risks of negative impacts. Experience from most of the pilot projects to date indicates that involvement of local stakeholders in the design and management of project activities is often critical. Other factors affecting the capacity of projects to increase carbon uptake and avoid greenhouse gas emissions and to have other benefits include consistency with national and/or international sustainable development goals, and institutional and technical capacity to develop and implement project guidelines and safeguards. [2.5.2, 5.6]

76. The accounting of changes in carbon stocks and net greenhouse gas emissions involve a determination that project activities lead to changes in carbon stocks and net greenhouse gas emissions that are additional to a without-project baseline. Currently there is no standard method for determining baselines and additionality. Approaches include determining project-specific baselines or generic benchmarks. Most AIJ projects have used a project-specific approach that has an advantage of using better knowledge of local conditions yielding more accurate prediction. A disadvantage is that project developers may choose scenarios that maximize their projected benefits. Baselines may be fixed throughout the duration of a project or periodically adjusted. Baseline adjustments would ensure more realistic estimates of changes in carbon uptake or greenhouse gas emissions but would create uncertainties for project developers. [5.3.2, Table 5-4]

77. Projects that reduce access to land, food, fiber, fuel, and timber resources without offering alternatives may result in carbon leakage as people find needed supplies elsewhere. A few pilot projects have been designed with the aim of reducing leakage by explicitly incorporating components that supply the resource needs of local communities (e.g., establishing fuelwood plantations to reduce pressures on other forests), and that provide socioeconomic benefits that create incentives to maintain the project. Due to leakage, the overall consideration of the climate change mitigation effects of a project may require assessments beyond the project boundary, as addressed in paragraph 49. [2.3, 5.3.3]

78. Project accounting and monitoring methods could be matched with project conditions to address leakage issues. If leakage is likely to be small, then the monitoring area can be set roughly equal to the project area. Conversely, where leakage is likely to be significant the monitoring area could be expanded beyond the project area, although this would be more difficult when the leakage occurs across national boundaries. Two possible approaches could then be used to estimate leakage. One would be to monitor key indicators of leakage, and the second would be to use standard risk coefficients developed for project type and region. In either case, leakage could be quantified and subsequently changes in carbon stock and greenhouse gas emissions attributed to the project could be reestimated. The effectiveness of these two approaches is untested. [5.3.3]

79. LULUCF projects raise a particular issue with respect to permanence (see paragraph 40). Different approaches have been proposed to address the duration of projects in relation to their ability to increase carbon stocks and decrease greenhouse gas emissions, inter alia: (i) They should be maintained in perpetuity because their "reversal" at any point in time could invalidate a project; and (ii) they should be maintained until they counteract the effect of an equivalent amount of greenhouse gases emitted to the atmosphere. [5.3.4]

80. Several approaches could be used to estimate the changes in carbon stocks and greenhouse gas emissions of LULUCF projects: (i) estimating carbon stocks and greenhouse gas emissions at a given point in time; (ii) estimating the average changes of carbon stocks or greenhouse gas emissions over time in a project area; or (iii) allowing for only a part of the total changes in carbon stocks or greenhouse gas emissions for each year that the project is maintained (e.g., tonne-year method). The year-to-year distribution of changes in carbon stocks and greenhouse gas emissions over the project duration varies according to the accounting method used. [5.4.2, Table 5-9]

81. LULUCF projects are subject to a variety of risks because of their exposure to natural and anthropogenic factors. Some of these risks particularly pertain to land-use activities (e.g., fires, extreme meteorological events, and pests for forests), while others are applicable to greenhouse gas mitigation projects in both LULUCF and energy sectors such as political and economic risks. Risk reduction could be addressed through a variety of approaches internal to the project, such as introduction of good practice management systems, diversification of project activities and funding sources, self-insurance reserves, involvement of local stakeholders, external auditing, and verification. External approaches for risk reduction include standard insurance services, regional carbon pools, and portfolio diversification. [5.3.5]

82. Techniques and tools exist to measure carbon stocks in project areas relatively precisely depending on the carbon pool. However, the same level of precision for the climate change mitigation effects of the project may not be achievable because of difficulties in establishing baselines and due to leakage. Currently, there are no guidelines as to the level of precision to which pools should be measured and monitored. Precision and cost of measuring and monitoring are related. Preliminary limited data on measured and monitored relevant aboveground and below-ground carbon pools to precision levels of about 10% of the mean at a cost of about US$1-5 per hectare and US$0.10-0.50 per ton of carbon have been reported. Qualified independent third-party verification could play an essential role in ensuring unbiased monitoring. [5.4.1, 5.4.4]

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