Chapter 6. Carbon sequestration projects

FIGURE 44 Main benefits of improved soil carbon management at various spatial scales

Source: Izac (1997).

The results obtained in the Senegal and Sudan case studies presented in Chapter 5 were analysed in order to illustrate some economic aspects of CS. Increasing soil C can yield local, national and global benefits. Figure 44 depicts these three levels. It also shows that these benefits can occur on an individual farm as increased crop, timber and livestock yields resulting from increased soil fertility, or in the form of off-farm social benefits on all three levels. On the local level, this second type of benefit constitutes an enhanced land and soil-resource base for future generations. Benefits on the national scale refer primarily to improved food security and agricultural sustainability. On the global level, anticipated benefits from improved soil carbon management are: enhanced biodiversity, increased carbon offsets, and climate change mitigation. Thus, CS in dryland soils could be a win - win situation.

However, as stressed by Izac (1997), caution is required as the costs will be primarily local while the benefits will be local, national and global. From a cost/benefit perspective, it would be rational for farmers to manage their carbon resources with respect to on-farm benefits while ignoring the broad social off-farm benefits. In other words, in the absence of policy interventions and external financial support, local smallholders would use improved management practices at individually optimal levels but at socially suboptimal levels. The following sections provide an overview of the anticipated benefits and costs both from carbon trading (policy intervention) and from direct investment at local level.

Benefits from carbon trading

One of the anticipated benefits for smallholders benefiting in CS schemes is the financial gain that could be achieved from carbon trading. Currently, carbon credit values as set by carbon exchange and trading systems range between US$1 and US$38 per tonne of C (FAO, 2001b).

In order to put the estimated gain from CS into the farmer’s perspective, prices of agricultural products and assumed prices of C as a tradable good were compared for the Senegal and Sudan case studies. In both cases, farmers were assumed to use an improved management practice or an alternative type of land use on all their current croplands (Tables 44 and 45). Total amounts of croplands vary depending on the wealth status of the farming populations studied. Annual increases in C, as estimated by CENTURY, were assumed to generate US$15/ha, resulting in financial gains per group of households. These financial gains were then compared with the average value of food and cash crops that farmers would grow on these lands if no other alternative existed.

TABLE 44
Anticipated economic benefits from carbon trading (1 tonne C = US$15).

HH = households.
Source: Tschakert (fieldwork).

In the Senegal case, average farm sizes in the study villages vary between 3.2 and 15.5 ha, of which 2.8 - 8.9 ha are cultivated (Tschakert, 2004a). If C were sequestered on these lands following the management practices in Table 43, the potential financial gains from carbon trading would range from US$1.4 to US$31 per year. Such gains are expected to be significantly lower for poor households compared with average and rich households. This is because the poor households have less land that could be used for alternative management practices and/or land uses. As Table 44 shows, the maximum annual gains would amount to about US$16 for poor households, US$41 for average households, and US$49 for rich households. A comparison of the expected benefits from carbon trading with the actual value of millet and groundnuts (the main crops in the study area) indicates that the anticipated benefits would range from less than 1 percent to 4 percent of the annual crop values. These values are extremely low and, hence, highly unlikely to represent a sufficient financial incentive for smallholders to participate in a CS programme.

In the Sudan example, similar calculations on the potential economic importance of CS are rather different. Because of the larger farm size and lower economic inputs, CS could play a larger role.

Based on a census of two villages concerning landholdings and agricultural practices (Warren and Khatir, 2003), two categories of households were assumed for the calculation of the economics of CS: a rich household having 5 ha of millet and 2 ha of sesame; and a poor household having 5 ha of millet. If C were sequestered on these lands according to the CENTURY estimations above, the potential economic gain would be as shown in Table 45. At a price of US$15/tonne, the economic gain from converting cultivation to grazing land would be about 17 percent and 4 percent of the crop yield normally obtained by the poor and rich households, respectively. However, when costs and labour required to produce the crop are taken into account, the economic gain from CS is much more significant. A study carried out in a neighbouring region (International Fund for Agricultural Development, 1988) showed that the economic gains from several crops were negative. On average, the study showed that only the income from watermelons and karkade gave a surplus while millet, sorghum, sesame and groundnuts all cost more to produce than the income from selling the produce. This economic comparison indicates that the level at which CS becomes economically important is very low for farmers in the Sudan case study.

TABLE 45
Annual economic gain from adopting land management changes for millet for different price levels of carbon

HH= households
Source: Olsson and Ardö (2002).

The results from the two case studies suggest that the benefits from carbon trading per participating farmer are relatively low. An alternative to small individual cash income that should be considered during project negotiations with local smallholders and designated institutions might be new or improved communal infrastructure, such as schools, wells and health services.

Direct local costs and benefits

Direct benefits for local smallholders are expected to occur at the field level primarily through increased soil fertility and crop yields that, in turn, will contribute to improved livelihood and food security at the national scale (Figure 45). Practices that involve animals for the production of manure can be combined with income generating activities, such as animal fattening and sale, also creating additional incomes. Switching from cropping to alternative types of land uses, such as grasslands and grazing lands, would free up agricultural labour, primarily during the main cropping season. Such gains in time and energy could be used for alternative, income-generating activities in rural and urban areas. Well-managed agroforestry systems are expected to generate incomes from controlled wood harvesting, seeds and the sale of fruit. However, such gains are unlikely to occur in the short term. In the case of N-fixing species, such as Faidherbia albida, positive impacts can also be expected on yields if they can be introduced into the fields.

On the cost side, the use of improved management practices or the shift from one management practice to another might include significant transaction costs. Today, the vast majority of smallholders in drylands are unlikely to have the necessary inputs to implement improved management practices as assumed with CENTURY. Costs at the local level would include the purchase of animals, fodder, agricultural equipment, and labour, depending on the actual resource endowment of smallholders interested in such a CS scheme. Farmers are also likely to demand compensation for foregone production on croplands converted to alternative land uses (grassland and grazing lands) and long-term fallow periods. As, in most cases, at least half of all croplands are used for subsistence crops, such compensation could occur in kind. A detailed cost - benefit analysis carried out for the Old Peanut Basin revealed significant differences in anticipated net benefits for 15 management options in crop-fallow systems, ranging from -US$1 400 to US$9 600/tonne C (Tschakert, 2004a). These differences are primarily the result of: differential resource endowments of farmers; highly unequal first-year investment costs; and maintenance costs over an assumed period of 25 years.

FIGURE 45 Policies affecting household economics and soil-fertility management

In addition to local transaction costs, CS schemes would also involve costs related to project design, implementation, monitoring and verification. Costs for monitoring and verification might be substantial because direct soil sampling at the field level would be required in order to obtain reliable and effective results. As shown by Poussart and Ardö (2002), relatively high numbers of soil samples would be needed to detect differences in soil C with satisfactory confidence. In the case of semi-arid Sudan, at least 100 samples would be needed in order to detect a difference of 50 g C/m2 90 percent of the time, testing at a significance level of 0.05. The value 50g C/m2 corresponds to the average amount that could be sequestered in this area in 100 years. If monitoring and verification were to occur every ten years, the number of samples required would be at least ten times higher. Techniques to use remotely sensed imagery to assess carbon changes from the air exist, but they lack the precision to detect small-scale variation within farms and farming systems.

Given the results from the case studies, it can be concluded that substantial funds from development organizations or carbon investors will be necessary in order to make soil CS projects in dryland small-scale farming systems a reality. The expected benefits are probably insufficient to compensate farmers for costs occurring at the local level. In addition to these purely economic calculations, there is an ethical concern. Expecting local smallholders to adopt management practices at socially and globally optimal levels implies that they would subsidize the rest of society in their respective countries and as well as the global society, especially the large polluters in the North (Izac, 1997).

Thus, institutional arrangements and policy interventions are perceived as crucial to rectifying this situation.

Institutional and policy factors

Policy factors

There seems to be increasing recognition among stakeholders, researchers and policymakers that policies in blueprint format, including broad plans of action and universal solutions to a highly dynamic and diverse rural environment, are insufficient and might be counterproductive. As noted by Scoones and Chibudu (1996), efforts to collect more data and build more impressive models in order to construct a more precise picture of reality will not necessarily yield better policies. Only if the uncertainties and complexities of living in risk-prone dryland environments are taken seriously and are consciously integrated into policy formulation, will superior policies be possible.

If one of the main goals of CS in drylands is to contribute simultaneously to sustainable agriculture, environmental restoration, and poverty alleviation on a large scale and over a longer period of time, a more flexible and adaptive management and policy approach is needed (Tschakert, 2004a). Such a policy approach needs to be based on a more detailed understanding of farming systems. It should generate possibilities to strengthen farmers’ own strategies for dealing with uncertainty while providing the necessary incentives to encourage successful pathways. Mortimore and Adams (1999) offer nine principles for inclusion into a new policy framework, all of which are of relevance for the success of anticipated CS programmes. These principles are:

As a starting point, it is necessary to understand current and historical links between policies and decision-making processes among smallholders. Of most relevance are policies with respect to agriculture, environment, and land-tenure arrangements. Especially in Sahelian countries, the deterioration of basic rural services that has occurred as a result of structural adjustment policies and State disengagement since the 1980s has had major impacts on farming systems. Figure 45 shows the range of policies that are likely to affect crop production, revenues, and soil management decisions at local level.

In addition to agriculture and environment policies, farmers’ decision-making about possible pathways in farming-system strategies is, to a large extent, determined by access to and control over land, usually regulated by both formal and informal land tenure arrangements. It is critical to understand the extent to which official land tenure laws are enforced and, where not, how strong the influence of informal/customary arrangements might be.

One of the main concerns of potential investors in CS in drylands is insecure title to land. There is considerable debate as to what land tenure security means to local smallholders and whether or not supposedly insecure titles prevent them from making long-term commitments to and investments in improved land and soil management (Zeeuw, 1997; Kirk, 1999). Results from the Senegal study show that farmers perceive usufruct rights as sufficient to invest in “their” lands, although these lands are officially State-owned (Tschakert and Tappan, 2004). What is considered more important than an official title to the land is the possibility to engage freely and flexibly in long-term land transactions, including free loans, rental agreements and mortgages. Currently, the Senegalese law on land tenure (Loi sur le Domaine National) prohibits any type of transaction as well as non-productive uses of land (fallowing) exceeding the duration of one year. Thus, farmers are less inclined to use management practices with longerterm effects on land they will cultivate for no longer than one year. Where they have the means, they will probably buy fertilizers to extract as much as possible from this land in the short period of time allowed.

Thus, current farming systems have also to be seen as a result of land tenure arrangements. The notion of setting aside land for alternative land-use types (conversion of croplands into grassland or grazing lands, tree plantations, or improved and long-term fallow lands) needs to be understood in this context. The extent to which changes in land-use patterns for large-scale CS activities are feasible will depend on: the degree to which formal tenure arrangements are enforced; the perseverance of customary tenure arrangements; and the flexibility of social networks to circumvent one or the other.

Institutional arrangements

The “principle of subsidiarity” (Scoones and Chibudu, 1996) also needs to be included in a more flexible and adaptive management and policy approach. According to this principle, tasks related to CS programmes will have to be divided between various levels of decision-making. These levels range from institutions at the local level (farmers and farmers’ organizations) to community and district-level institutions and service providers (rural and regional councils, extension services, and research organizations) and up to the national government, State institutions, and international agencies.

A long-term and large-scale CS programme that might include several thousand individual smallholders is unlikely to succeed if all programme decisions are taken following an interventionist, top-down approach. This kind of “macro control” is likely to disillusion local farmers and increase the risk that will opt out of agreements.

A first important step towards institutional integration is to identify already existing local and/or regional institutions that might be best suited to function as a vehicle for an anticipated CS programme. In addition to being trusted by the majority of smallholders, such an institution should be able and willing to: participate in the design of a local/regional programme; ensure the necessary participation of an aggregate of smallholders; guarantee a fair distribution of costs; coordinate monitoring and verification; and channel expected benefits in a most desirable and equitable way (Tschakert, 2004b).

Farmers in the Senegal case study defined the following requirements as key for an institution chosen to organize, mobilize and monitor local farmers participating in a carbon programme:

• capable of making a detailed assessment of all villages within their scope of influence, including all households, their food needs, farming systems, environmental conditions, land availability, and major constraints for agricultural development;

• capable of identifying the most promising as well as feasible land-management options and land-use changes for their land units with and without modifications in agricultural and environmental policies (subsidies and credits) and land-tenure arrangements;

• have sufficient influence to request changes in regional and national policies if considered essential;

• capable of identifying villages and households with a history of innovativeness and commitment (especially in terms of credit reimbursements);

• capable of ensuring a fair distribution of costs and benefits;

• capable of deciding for which purpose benefits and additional funds might be used best (rural infrastructure, environmental monitoring, etc);

• capable of ensuring the fulfilment of commitments by participating smallholders

Carbon accounting and verification

Accounting and verification of the sequestered C is an integral component of a CS project. Accounting implies that all removals by sinks and emissions by sources of CO₂ must be recorded and accounted for. Verification implies that any net removals of CO₂ by sequestration in the soil or in the biomass must be verified through actual measurements.

Verification will usually be carried out by an independent organization. However, continuous monitoring of carbon losses and gains in the farming system must be an integral part of a project for which a designated local institution could be responsible. The overall procedure for verification is that a baseline survey is carried out before any project activities start and after a certain period of time, governed by a project contract. Another survey is carried out to verify any changes in the carbon stock.

Both baseline and follow-up surveys will make use of modelling and stratification as tools for improving the reliability and reducing the costs of surveys, but direct soil sampling will also be required. The number of samples necessary to verify changes in soil carbon stock over time is related to:

a. the spatial variability of the soil carbon stocks in the project area;

b. the minimum change of carbon stock that must be detected;

c. the statistical level of significance that must be obtained.

Table 46 and Figure 46 illustrate an example of the soil sampling required for verification (Poussart and Ardö, 2002). The study included three different but adjacent agricultural fields in the Sudan case study. The fields all had similar natural conditions in terms of soil, relief and climate, but different land-uses. The land use of the three fields were: cultivation of millet since 1996; fallow with trees for more than 20 years; and grazing only for 18 years. Table 46 shows the descriptive statistics for the three fields. Figure 46 illustrates the number of samples required to verify a change in carbon stocks for different levels of detectable difference and different levels of statistical significance.

TABLE 46
Measured soil data for the experimental sites in the Sudan case study

Source: Poussart and Ardö 2002.

FIGURE 46 Probabilities of detecting differences for different sample sizes

Note: The dotted lines indicate the differences detectable 90 percent of the time with a Kruskal-Wallis test (testing at significance level · = 0.05) for five sample sizes (n = 10, 20, 30, 50 and 100).

Risks and uncertainties for investors and farmers

There are a number of predictable and unpredictable risks associated with CS activities (Bass and Dubois, 2000; FAO, 2002b; Tschakert and Tappan, 2004). These risks seem inevitable in a programme that has a long life span (25 years) and requires a large number of smallholders to participate in order to reach a total amount of C sequestered that is attractive to potential investors. Risks will have to be spread at various levels of decision-making. The efficiency of spreading risks will depend on the institutional strength of each organizational structure, ranging from farmers’ associations to the top level of national governments and international organizations.

Risk of reversal

Gains from certain management practices or changes in land use can be reversed as soon as they are interrupted or abandoned. This might occur either as a consequence of natural hazards or shocks (droughts, wild fires, climate change, etc.) or of farmers’ conscious decision to opt out of an agreed-upon scheme. Factors that discourage or hinder farmers from fulfilling their agreements could include:

• more promising economic alternatives for a piece of land;

• lack of means to continue practices (labour, land and capital);

• more lucrative economic activities outside agriculture;

• lacking confidence in the institutional arrangements set in place;

• insecurity of land-tenure arrangements;

• changes in market prices for agricultural products;

• changes in national and regional policies (e.g. removal of subsidies, changes in land-tenure arrangements, new regulations required by external agencies such as the World Bank);

• changes related to international interventions and carbon-trading schemes.

Inaccuracy of baseline data, monitoring and verification procedures and tools

Imprecise data at the beginning, during, and at the end of a project could underestimate or overestimate the actual benefits that local smallholders and the society as a whole will obtain from sequestration activities. Additional previsions need to be made in order to take account of uncertainties in the carbon storage potential.

Confusion of priorities and goals

Conflicting interests between carbon buyers, sellers and sequesters might undermine a successful project design and implementation. Donors and investors are more likely to focus on carbon-maximizing management practices while local smallholders are more likely to perceive CS as an additional tool in their risk management portfolio with the ultimate goal of improving their adaptive mechanisms in a risk-prone environment rather than carbon balances. This might imply that a specific piece of land receives a combination of carbon-increasing, carbon-stabilizing, and even carbon-decreasing practices alternating during the entire duration of a project, depending on the overall dynamics of the farming and livelihood system in question.

Unsuccessful implementation of an institutional structure

It is unlikely that a project involving a large number of smallholders over a long period of time could operate successfully without a strong, respected and trusted local or regional institution. Such an institution will organize, mobilize and monitor farmers’ participation, and ensure compliance with the project agreement and fair remuneration among all participants. Thus, sufficient time and care will need to be devoted to the selection or creation of such an institution.

Increased inequality among local stakeholders

Projects have a tendency to focus on the most interested, motivated and innovative farmers as potential participants simply because project success rates in the short run are likely to be higher. These farmers are often the ones that have the largest resource endowment and face the smallest risks and, thus, are more likely to adopt new practices. Those who most need the benefits of CS because they are the most disadvantaged and face the highest risks are often left out because they are more reluctant to participate. In order to minimize the risk of increasing inequality among rural populations, this “innovativeness - needs paradox” (Rogers, 1995) will need to be taken into account. If one of the ultimate goals of CS is to improve rural livelihoods, distinct incentives will have to be made available to include the economically weaker groups of farmers (Tschakert, 2004a).

Non-approval of “additional activities” for developing countries

CS in soils is not eligible during the first commitment period (2008-2012) of the KP. Although political pressure to include it at least under the second commitment period is increasing, there is no guarantee that financial support for soil carbon projects will be available through the United Nations Framework Convention on Climate Change (FCCC) in the future.

Planning, designing and managing carbon sequestration projects

In order to plan, design, implement, monitor and manage a CS project, a number of stages of work must be carried out. Figure 47 presents a conceptual model of these stages.

The components in Figure 47 would need to be developed as system models by which different planning scenarios could be tested before implementing projects. In detail, the different components are:

• Biogeochemical analysis of carbon balance (BIAC). The BIAC model, driven by various biophysical variables and remote-sensing data, will yield information on the biophysical potential to increase the storage of soil C, given information on GPP, climate, soils and management.

• Farmers management options for sequestration (FAMOS). This component will be a model of how land and management practices are used in a village framework. The model outlines the likelihood of different groups of farmers to intensify certain portions of their land while putting others into fallow or pasture, depending on a multitude of factors (e.g. labour availability, alternative sources of income, access to credit to cover transaction and opportunity costs, agronomic practices, and land tenure rights). The outputs are the amount of land dedicated to different use, and the rate of conversion.

• Household economics of carbon sequestration (HECS). This component models the economic performance of a household both with and without CS. The model yields information about how financial inputs and outputs from new land uses might be distributed in households and between households. A first prototype has been developed and tested in Senegal and the Sudan (Olsson and Tschakert, 2002).

• Project management for increasing soil carbon (PROMIS). This model will use data from the models above to simulate the rate at which farmers and villages can be induced to participate in a carbon-sequestering project. It will need additional data on how quickly farmers and villages can be contacted by the project (primarily through existing institutional networks), how many staff and what infrastructure are needed in this process, etc.

• Carbon accounting tool (CAT). Project accounting in terms of sources and sinks of CO₂ is vital. This component will compute the total carbon balance of a project. The data are necessary for defining any contract with investors.

• Sustainability and equity criteria (SEC) filter. As the main objective of the project is to improve the lives of poor farmers, any solutions suggested by other means must be tested against criteria for their contribution or otherwise towards more sustainable and equitable agricultural systems.

FIGURE 47 Conceptual model of the stages involved in planning a carbon sequestration programme

BIAC = biogeochemical analysis of carbon balance, FAMOS = farmers management options for sequestration, HECS = household economics of carbon sequestration, PROMIS = project management for increasing soil carbon, CAT = carbon accounting tool, SEC filter = sustainability and equity criteria.

PHASE I
PROJECT SELECTION

Phase I includes the collection of data necessary for selecting a target area and for modelling various CS scenarios. This process is an iterative dialogue between biophysical and socio-economic inquiries. The iterations might be:

i. Socio-political criteria to select a broad zone of interest: For example, selection of communities in need of development, using criteria such as productivity and income. A major political unit might be selected.

ii. Collection of biophysical data for this zone: Data on soil, rainfall, biomass, etc from database, map and remote-sensing sources. These data should be sufficient to run models of biophysical potential:

• nitiation of models with these data: The biophysical potential to increase soil carbon content is a first prerequisite for a project. This is mainly addressed in the BIAC component of Figure 47.

• Data on land-use categories and distribution (or relative importance): The data for these surveys can come from published sources, remote-sensing surveys, and some ground traverses. These data can then be used with the initial models to produce carbon projections for different land-use scenarios. These scenario models need to be verified with sample data from the ground.

• Preparation of a portfolio of possibilities for land-use change: These possibilities should be ranked according to carbon-sequestration potential. When summed in various combinations and compared with target quantities, such a portfolio provides target figures for proposed types of land-use change.

• Sampling questionnaire surveys to determine the total area of a possible project: The area will depend on the probable number of participants, the rate at which they might join the project, and the mix of land-use changes that may occur: longer fallow periods; total withdrawal of land from cultivation; increase/ decrease in irrigated area; and increase/decrease in use of fertilizers.

PHASE II
SELECTION OF PROJECT AREA AND PERSONNEL

The first process in Phase II is the selection of a particular project area, using the criteria developed in Phase I. Selection will be both political/administrative process and a technical process.

Having selected an area, the next step is to set up a local management committee and a technical team. This close-coupled system must then design the details of a project

PHASE III
PROJECT DESIGN

Recalling that dryland farming systems are diverse, complex and risk averse, the design of a CS project should fit into the farming system and add components that farmers perceive as valuable. It is important for any CS project to provide a range of income opportunities both in farming and non-farming activities (e.g. processing local produce, manufacturing and services). Local value-added processing may be an important component for achieving a range of benefits, e.g. improved terms of trade, income opportunities, reduced transport costs, and provision of useful by-products.

The kind of components which a CS project may offer can be structured as credit facilities and re-compensation facilities for farmers who have signed up for the project and general services to the entire community:

• Credits: Credit facilities should provide fair and equitable credits to farmers for investments that benefit CS, such as tree planting, animals, improved stoves, equipment and buildings.

• Re-compensation: Re-compensation should provide compensation to farmers for production foregone until the incomes from the CS investments are realized.

• Services: Services should allow farmers to adopt CS activities and to reduce risks associated with these activities, such as veterinary services, training and extension, health services, water supply, energy supply, range management, marketing, and liaison with authorities.

A CS programme should ideally be combined with other GHG management activities in order to reduce current and prevent future GHG emissions. Such activities would contribute to the sustainable development of the entire community. Some examples are:

• Provision of electricity to vital social institutions, such as schools, clinics and water supply, possibly provided by solar and wind power. Such devices are economically viable in a longer term, but their implementation must be supported by credit and insurance facilities. Carbon emissions could be reduced if diesel-powered devices were replaced.

• Where quantities of biomass fuel for cooking used in a community exceed the annual re-growth of vegetation, there is a net emission of C. Furthermore the use of crop residues may impoverish the soils. Replacing open fires with improved stoves or by biogas from fermentation of organic waste (such as household waste or animal dung), will reduce CO₂ emissions. Reductions in fuelwood burning can also reduce the hazard of smoke, ranked by the World Health Organization as one of the major hazards to health worldwide.

• In a GEF-funded pilot project in Sudan, it was found that up to 50 percent of the quantity of fuelwood could be saved by using improved clay stoves (UNDP, 1999). The stoves were manufactured locally from local material (mud-dung paste). They used less fuel for the same result, and shifted sources from trees and branches to plant litter. The stoves were adopted by 90 percent of the households. Table 47 indicates the effect on fuelwood consumption in these households.

TABLE 47
Average fuelwood consumption from households in the Sudan pilot project before and after adopting the improved stoves

Source: UNDP (1999).

The total annual consumption of fuelwood in the project area dropped from 1 836 tonnes to 432 tonnes between 1995 and 2000. Labour formerly used in fuel collection became available for productive use in agriculture and off-farm activities.

PHASE IV
PROJECT IMPLEMENTATION

In this phase, the necessary infrastructure for a functioning project needs to be established. A crucial part of this will be to create the necessary linkages between the international arena, where policies are formulated and where decisions are taken, and the national/local arena where the project is being implemented. In the international arena, C is generally seen as a tradable commodity, valued in monetary terms, while at the local level it is seen as a biophysical entity that has many different functions and is valued in many ways (Figure 48). A carbon fund, such as the BioCarbon Fund or the Community Development Carbon Fund (see below) might function as the required link between the local and international arenas.

FIGURE 48 Conceptual frame for linkages between the international and local arenas

PHASE V
MONITORING AND MANAGEMENT

Monitoring and adjustments must be an integral part of any CS project. A local management committee or an entrusted local/regional institution will have to play a critical role in this phase of a carbon project. Through adjustments and continuous negotiations, it will have to ensure that all elements of a carbon contract are fulfilled, including number of participating farmers, selected management options, fair distribution of credits and compensation, equal access to services, etc. Efficient monitoring will also require a control case (“business-as-usual scenario”) to which the effects of adopted management options or altered land-use patterns can be compared. Such a control case could be based on empirical and controlled experiments (control plots) that should be fairly simple, yet representative for the project area and carefully described. The purpose is to have controlled reference areas where it is possible to document what actually happens to soil C/soil fertility while implementing certain strategies. These experiments could be a type of “management truth”, also maintained by a selected project/local management committee.

Policy and funding framework for carbon sequestration and poverty alleviation in drylands

The idea of CS for poverty alleviation is based upon the fact that carbon management can be seen as the centre of several international regimes. The FCCC stated as its main objective: “stabilization of greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system”. The subsequent CCD is concerned that extensive land degradation in drylands in specified areas, which might otherwise be productive, has been rendered unsuitable to meet the needs of the population. This process of land degradation also means that C otherwise stored in these ecosystems has been lost and added to the atmosphere in the form of GHGs (mainly CO₂ and CH₄). Thus, the CCD and FCCC with the KP share a common goal: the proper management of C. Moreover, land-use change, agriculture and forestry activities recognized by the KP are also closely linked to the CCD and CBD, although the KP does not explicitly address its relation with these.

The FCCC was itself constructed with issues of desertification in the minds of the Parties’ negotiators. The Preamble recalls:

“the pertinent provisions of General Assembly resolution 44/172 of 19 December 1989 on the implementation of the Plan of Action to Combat Desertification,” a forerunner to the CCD. The Parties further recognized that: “countries with... arid and semi-arid areas or areas liable to floods, drought and desertification, and developing countries with fragile mountain ecosystems are particularly vulnerable to the adverse effects of climate change”.

More significantly, under Articles 4.8 © and 4.8 (e), the Parties to the FCCC are to: “give full consideration to what actions are necessary..., including actions related to funding, insurance and the transfer of technology, to meet” the developing countries’ specific needs arising “from the adverse effects of climate change,... especially on:... (c) countries with arid and semi-arid areas..: [and].. (e)countries with areas liable to drought and desertification[.]”

A more broadly worded FCCC requirement, which could be interpreted to be effective in bringing together the more diverse activities contemplated under the CCD, is Article 4.1 (d) and (e): all Parties shall:

• (d) Promote sustainable management, and promote and cooperate in the conservation and enhancement, as appropriate, of sinks and reservoirs of all greenhouse gases not controlled by the Montreal Protocol, including biomass, forests and oceans as well as other terrestrial, coastal and marine ecosystems;

• (e) Cooperate in preparing for adaptation to the impacts of climate change; develop and elaborate appropriate plans for coastal zone management, water resources and agriculture, and for the protection and rehabilitation of areas, particularly in Africa, affected by drought and desertification, as well as floods[.].

Thus, the CCD and the FCCC are linked and this connection provides a conceptual basis for fulfilling compatible goals.

The Clean Development Mechanism of the Kyoto Protocol

The KP provides one mechanism that can potentially provide an avenue for agricultural CS programmes involving developing countries of the kinds discussed in this report: Article 12, often referred to as the Clean Development Mechanism (CDM).

The CDM is the only one of the three flexible mechanisms that explicitly addresses developing countries. The purpose of the CDM is to assist developing countries in achieving sustainable development and at the same time to assist developed countries in fulfilling their commitments under the KP. However, in the first commitment period of the KP, there is an important restriction for inclusion of CS in the CDM. This is that the eligibility of land use, land-use change and forestry project activities is limited to afforestation and reforestation (Article 12, Paragraph 3b and Article 3). Their treatment in future commitment periods will be decided as part of the negotiations on the second commitment period. It also necessary to decide on how to treat the storage of belowground C.

Another characteristic of the CDM, restricting its application to many drylands of developing countries, is the complicated procedures for CDM projects and the required scale of projects. Most CDM projects have been very large, too large in fact for the often poor institutional capabilities of some African countries. However, there was an important modification to the CDM statutes in January 2003. This now allows small-scale and bundles of small-scale CDM projects. It also includes simplified requirements for baseline surveys and the monitoring of project achievements.

Simplified baseline and monitoring methods have been defined for 14 small-scale CDM activities grouped into three types of projects as shown below:

• Type (i) projects: renewable energy projects with a maximum output capacity equivalent of up to 15 megaWatts (or an appropriate equivalent). Eligible activities are:

  A. Electricity generation by the user/household;

  B. Mechanical energy for the user/enterprise;

  C. Thermal energy for the user;

  D. Electricity generation for a system.

• Type (ii) projects: energy-efficiency improvement projects that reduce energy consumption, on the supply and/or demand side, by up to the equivalent of 15 gigaWatt hours per year. Eligible activities are:

  E. Supply-side energy-efficiency improvements - transmission and distribution activities;

  F. Supply-side energy-efficiency improvements - generation;

  G. Demand-side energy-efficiency programmes for specific technologies;

  H. Energy-efficiency and fuel-switching measures for industrial facilities;

  I. Energy-efficiency and fuel-switching measures for buildings.

• Type (iii) projects: other projects that both reduce anthropogenic emissions by sources and directly emit less than 15 kilotonnes of CO₂ equivalent annually. Eligible activities are:

  J. Agriculture;

  K. Switching fossil fuels;

  L. Emission reductions in the transport sector;

  M. CH₄ recovery.

Although none of these project types today include land use, land-use change and forestry operations (LULUCF) and the use of soils as a sink, there is strong international pressure from many actors to include these as eligible activities under the CDM.

Even with the present restrictions on the inclusion of LULUCF activities, the smallscale activities might be integrated successfully with sequestration projects.

Based upon several United Nations environment conventions, there are a number of important funding opportunities that could potentially assist in implementing CS programmes for poverty alleviation. The most important conventions that are addressed are the FCCC, CBD and CCD.

Carbon Funds

In 2002, worldwide trading of credits in GHG emissions tripled to about 67 million tonnes of CO₂. However, only 13 percent of these credits involved developing countries. In order to increase the potential for developing countries to participate in this trade, the World Bank has recently created two carbon funds specifically aimed for projects in developing countries. However, these funds are based on the rules of the CDM and are ultimately dependent on the CDM as the international body for recognition and certification. The target of both funds is small-scale projects in the least-developed countries. Both funds comprise a mix of public and private funding and each have a target of US$100 million.

BioCarbon Fund

The BioCarbon Fund was launched in November 2002 and scheduled to become operational in autumn 2003 and run for 18 years (Newcombe, 2003). The fund is intended to provide funds for carbon-sink projects through various landscape-management activities, such as the activities described in this report. The BioCarbon Fund should be seen as a learning opportunity for post-pilot projects on how to implement, monitor and verify CS schemes and also to test the permanence of the stored C. It is estimated that the BioCarbon Fund will comprise less than 4 million tonnes of CO₂, which is much less than the 1 percent stipulated by the CDM. In spite of its relatively small amount of C, it has the potential to result in substantial investments in drylands.

The BioCarbon Fund will implement projects in two different “windows”. The first will be fully compliant with the present CDM requirements, i.e. restricted to afforestation and reforestation. The second window will implement activities that are currently not eligible for KP-compliant carbon credits. This includes LULUCF and soil-sink activities.

Another contentious issue in the CDM is the possibilities of obtaining credits for avoided deforestation. There are currently no credits available for this type of activity. However, the second window of the BioCarbon Fund might well provide opportunities for exploring them.

The Community Development Carbon Fund

The Community Development Carbon Fund (CDCF) was announced by the World Bank in April 2003, and is similar in many respects to the BioCarbon Fund. The main difference is that the CDCF will not invest in carbon sinks but in emission reductions. The main underlying principle is that each project must lead to improvements in the material welfare of the community or communities involved in it.

Projects under the CDCF need to comply with the CDM principles mentioned above. However, projects that do not comply with these principles might be proposed and can be considered for funding by the Executive Board. Examples of the types of goods and services that may be provided in a project by the CDCF are: electricity for schools, health clinics, workshops, potable water, teaching and medical services. In most cases, the project sponsor will provide the benefits directly or through contracting a third-party provider.

The Global Environment Facility

The GEF is a joint funding programme established by developed countries to meet their obligations under various international environment treaties. The GEF has allocated US$4 000 000 000 in grants and leveraged an additional US$12 000 000 000 in cofinancing from other sources to support more than 1 000 projects in more than 140 developing nations and countries with economies in transition. There are six focal areas of the GEF: biodiversity, climate change, international waters, ozone, land degradation, and persistent organic pollutants. The projects that are funded and implemented through the GEF are governed by the operational programmes (OPs). As of March 2003, there are 14 operational programmes through which the GEF provides grants. Eleven of these reflect the original focal areas of the GEF: four in the biodiversity focal area, four in climate change, and three in international waters. The most relevant OP in relation to CS as described in this report is the OP12 Integrated Ecosystem Management. It encompasses cross-sectoral projects that address ecosystem management in a way that optimizes ecosystem goods and services in at least two focal areas within the context of sustainable development.

The OP12 is aimed specifically at initiating projects where synergies between three of the GEF focal areas (biodiversity, climate change and international waters) and land degradation can be obtained. This may include two or more of the following benefits:

a. conservation and sustainable use of biological diversity, as well as equitable sharing of benefits arising from biodiversity use;

b. reduction of net emissions and increased storage of GHGs in terrestrial and aquatic ecosystems;

c. conservation and sustainable use of waterbodies, including watersheds, river basins, and coastal zones;

d. prevention of the pollution of globally important terrestrial and aquatic ecosystems.

The expected outcomes of GEF-supported projects should also include:

a. creation of an enabling environment: appropriate policies, regulations, and incentive structures are developed to support integrated ecosystem management;

b. institutional strengthening: the capacity of institutions to implement integrated ecosystem management approaches is strengthened through training and logistical support;

c. investments: investments are made, based on integrated ecosystem approaches and stakeholder partnerships, to simultaneously address local/national and global environmental issues within the context of sustainable development.

In order to reach the above-mentioned benefits of both categories, the GEF defines a number of activities that are eligible for funding within GEF-funded activities, these come under three categories:

a. Technical assistance, including: surveys of different kinds; development and modification of policies; human resource development; development of mechanisms for conflict resolution; and development of public/community/ private sector partnerships.

b. Investments, for purposes such as: rehabilitation of rangelands to restore indigenous vegetation and improve water management; rehabilitation of forested watersheds or floodplains; integrated management of coastal ecosystems; and development of measures to control pollution to prevent degradation of habitats and minimize public health risks.

c. Targeted research, such as: development of integrated natural-resource management systems; and development of innovative and cost-effective integrated ecosystem management approaches.

Activities supported by the GEF are always collaborative arrangements with public and private partners, including NGOs. The activities should also support a broader development plan of the country or region where they are implemented.

Adaptation Fund

The establishment of the Adaptation Fund was decided at the sixth session of the Conference of the Parties to the FCCC (COP6). According to this decision, the Adaptation Fund will:

• be established under the GEF as a trust fund;

• finance the implementation of concrete adaptation projects in non-Annex I Parties, including the following adaptation activities: avoidance of deforestation, combating land degradation and desertification. Projects will be implemented by the implementing agencies of the United Nations.

• receive finance generated by the share of proceeds on the CDM in the order of 2 percent of certified emissions reductions - and by other sources of funding. COP6 invited Annex I Parties to provide this additional funding.

• be managed by the CDM Executive Board, under the guidance of the COP/MOP.

Such guidance will be given by the COP/MOP on programmes, priorities and eligibility criteria for funding of adaptation activities.

Prototype Carbon Fund

The Prototype Carbon Fund (PCF) has three primary strategic objectives:

• High-quality emission reductions: to show how project-based GHG emission reduction transactions can promote and contribute to sustainable development and lower the cost of compliance with the KP;

• Knowledge dissemination: to provide the Parties to the FCCC, the private sector, and other interested parties with an opportunity to “learn-by-doing” in the development of policies, rules and business processes for the achievement of emission reductions under the CDM and Joint Implementation (JI);

• Public - private partnerships: to demonstrate how the World Bank can work in partnership with the public and private sectors to mobilize new resources for its borrowing member countries while addressing global environmental problems through market-based mechanisms.

TABLE 48
Possible sources of funding for carbon sequestration multifocal programmes in drylands

The PCF will pilot production of emission reductions within the framework of JI and the CDM. The PCF will invest contributions made by companies and governments in projects designed to produce emission reductions fully consistent with the KP and the emerging framework for JI and the CDM. Contributors, or “Participants” in the PCF, will receive a pro-rata share of the emission reductions, verified and certified in accordance with agreements reached with the respective countries “hosting” the projects.

A purely carbon-market approach is unlikely to be successful for drylands. A multifocal approach is required where other aspects such as sustainable development, desertification, biodiversity and food security are also considered. Funds under other conventions could also be used to fund CS programmes in drylands (Table 48).