Abstract

A sustainable forestry management program undertaken by the Grupo Ecológico Sierra Gorda in the Sierra Gorda Queretana, a semi-tropical area in east central Mexico, will be used to discuss problems and possible solutions associated with submission of an AIJ project to the USIJI. Woodrising Consulting Inc. became involved because this program is an ideal candidate as an AIJ project.

There are many challenges associated with an AIJ project. On the social side, how do you assure that maximum social benefit is attained? From a financial perspective, how do you create an environment that attracts investors? On the technical side, how do you assure that the estimated parameters used in the predictions are valid in the future? From a project design point of view, can you optimize both carbon sequestered and income generated by the project?

Introduction - The Original Non-AIJ Project

Grupo Ecológico Sierra Gorda I.A.P. (GESG) is undertaking an afforestation program in the Sierra Gorda Queretana, east central Mexico. Their program is designed to plant and harvest, in a sustainable manner, fast growing indigenous species on marginal agricultural land. In this way, GESG will generate income for the local populace, and afforest areas of the Biosfera Reserva Sierra Gorda. It is an ideal AIJ project because it stores carbon in standing trees, and wood products of various lifetimes. Burning of wood waste as biofuel also displaces CO2 emissions from fossil fuels used for energy.

GESG’s current program involves planting one million trees per year on a total of 1000 hectares, and the protection of an additional 1000 hectares from grazing animals to allow natural afforestation. The selected sites are on private lands currently used for grazing or corn production. The average tract of land is 1.25 hectares.

The trees are harvested in 3 stages.

1. Thinning: Six years after planting or protection, trees that are malformed will be removed and the wood used primarily for firewood.
2. 1st Harvest: Twelve years after planting or protection, 50% of the total volume of wood will be removed. The wood will primarily be used to produce cellulose.
3. Final Harvest: Eighteen years after planting or protection, 90% of the total volume of wood will be harvested. The majority will go to lumber for building materials and furniture. Enough trees will be left to allow natural afforestation of these lands.

As an AIJ project there are other factors to consider. The AIJ project designer must make modifications so as to:

• attract an investor,
• reduce the risk of leakage,
• optimize and balance benefits for both the investor and landowners, and
• account for uncertainties in predicted carbon sequestered.

Attracting an Investor

What will attract an investor to an AIJ project? Some desirable features include:

• a positive ROR,
• a reliable partner requiring minimal supervision,
• minimal risk of leakage,
• repeatability, and
• rapid carbon sequestration.

• a maximum initial investment,
• a minimum amount of carbon sequestered, and
• a maximum timeframe.

Solution

In our case we found that when converted to an AIJ project the initial investment required by the GESG’s program was quite large. The program was altered to keep the initial investment at ~US$500,000. Three hundred hectares can be planted and three hundred hectares protected with this investment. It is a manageable size and is easily repeatable.

Reducing the Risk of Leakage

Leakage is used to account for loss of carbon during or beyond the life of the project. This can include:

• lands cleared to replace lands taken out of agricultural production (within or outside the project area),
• lands that revert to agricultural production during the project, and
• lands that revert to agricultural production after the project.

Site selection to afforest only marginal agricultural lands, development of agroforestry and community education to improve agricultural production on the more productive lands can help reduce the risk of the first form of leakage. This requires that the project involve more than simple afforestation.

The landowners must have some form of assistance prior to the first harvest and the harvest must occur as early as possible or there is a risk of the second form of leakage. The project has been modified to include a landowner annual income equal to the value of a corn crop (paid in corn or seed) before the first harvest.

The second and third forms of leakage require a large modification to the original program. Forest management must occur at the landowner level so that they have ownership in the project. They must also see value in continuing with the project after its completion. A continuous, sustainable forest management plan with harvesting performed by the landowners can attain this goal. It means a change from periodic, intense, mechanical harvests to much smaller, annual, low impact harvests carried out by the landowner.

Figure 1 shows the difference in the standing biomass caused by the two systems.

Accounting for Uncertainties

Afforestation AIJ projects are viewed as relatively complicated. They are long term and require numerous assumptions that have uncertainties. How do these uncertainties affect the prediction of sequestered carbon? How can the investor be assured of the amount of carbon promised? What variables affect the prediction most and so warrant time and expense to reduce the uncertainty?

Solution

GORCAM has been modified to include sensitivity analysis (Bird and Pedraza, 1997) . Now each parameter in GORCAM is given three values; a 10%, best, and 90% guess. These represent minimum, mean and maximum of each variable (table 1) . With these, a tornado diagram, that displays the influence of a single variable on the final estimate, is created (figure 2).

The tornado diagram demonstrate which variables have the greatest effect on carbon prediction. It indicates where monitoring is needed. Note that, after growth rate, the most important variables are related to the harvest. They are: Initial year of harvest, % of harvest to decay, Volume harvested, and % of harvest to very short-lived products. Roots & Litter and Soil sequestration rates have a less significant effect on predicted carbon sequestration. Clearly, it is more important to assure that the wood is used for the predicted uses.

Figure 3 shows a probability distribution of the predicted carbon sequestered. Instead of quoting a value of carbon sequestered, now a mean and standard deviation can be stated. In our project the standard deviation is ~ 11% of the mean. We suggest that the investor is credited for 75% of the mean (36,750 MgC), as he is virtually guaranteed this amount. The remaining carbon can be credited to the Non Government Organization (NGO). It can act as a performance incentive since after completion of the project it can be sold.

Optimizing Benefits for both Investor and Landowners

There are two somewhat opposite measures to optimize. The landowners need income, whereas the investor wants carbon. How does one design the project to maximize both, especially when the value of carbon is not known?

Solution

Besides sharing the carbon we also advocate sharing revenues 50/50 after payout of the initial investment. Two objective functions;

Two variables in the project can be modified by the project designer. They are Initial year of harvest, and Volume harvested. Figure 4 shows values of equations 1 and 2 versus Initial year of harvest at different carbon values. Equation 1 suggests that the harvest should start in year 9. Equations 2 show that until the value of carbon reaches ~$100/MgC the harvest should start as early as possible. Without a known value of carbon we have used equation 1 in our project design.

Figure 5 shows values of equation 1 and 2 versus Volume harvested for different carbon values. We have made the assumption of sustainability (harvest < 4.9 MgC/ha/yr.). Equation 1 is independent of the value of carbon and suggests that the harvest should be as large as possible. Equation 2 shows that the harvest should be as large as possible until the value of carbon is ~$100/MgC

CONCLUSION

This paper has shown how an existing afforestation program has been redesigned to accommodate the requirements of AIJ. We have altered the program in order to minimize leakage and keep the initial investment at ~$500,000. In this way we hope it is more attractive to an investor. We have optimized the program to assure both maximum landowner NPV and the amount of carbon sequestered (without knowledge of the value of carbon). We have determined where monitoring is most important and have addressed uncertainty by not promising all the carbon sequestered. This has the double benefit of assuring the investor of his purchase (carbon) and leaves carbon for the NGO as an incentive and potential source of income.

The predicted carbon sequestered and NPVs for the new project and an equivalently-sized original project are listed below.

REFERENCES

1. Bird, D.N. and Pedraza Muñoz, R. (1997) The sensitivity of predicted carbon sequestered by a sustainable forestry management project - an example from the Sierra Gorda Queretana, Mexico, to be presented at Air & Waste Management Annual Meeting.
2. Marland, G., Schlamandinger, B., and Leiby, P. (1997) Forest/biomass based mitigation strategies: does timing of carbon reductions matter?, in press.
3. McNamee, P. and Celona, J (1990) Decision Analysis with SuperTree, The Scientific Press, San Francisco, 324 pp.
4. Schlamandinger, B. and Marland, G. (1996) The role of forestry and bioenergy strategies in the global carbon cycle, Biomass and Bioenergy, 10: 275-300

Table 1: Input Parameters to GORCAM

Back to Woodrising Consulting Inc.'s Homepage

Last updated: 07-Jun-97

This webpage was written and designed by D. Neil Bird.
1997 Copyright © Woodrising Consulting Inc.. All rights reserved