Forestry projects under the clean development mechanism? Modelling of the uncertainties in carbon mitigation and related costs of plantation forestry projects

Afforestation is considered an important option for mitigation of greenhouse gas emissions. Recently, plantation projects have been suggested for inclusion under the Clean Development Mechanism. While considered a cheap option, significant uncertainties make it difficult to determine the (net) carbon benefits and profitability of forestry projects. The current uncertainties about the regulatory framework of the CDM and the environmental and economic performance of plantation forestry could create uncertainties with respect to the additionality of such projects and thus their acceptance under the mechanism. Six plantation forestry projects that were proposed in Brazil have been used as cases to study sources of uncertainty for carbon benefits and economics for such projects. These cases vary widely in terms of productivity and products delivered. A quantitative model for calculating greenhouse gas balances and financial benefits and costs, taking a broad range of variables into account, was developed. Data from the developers of the proposed projects was used as main source material. Subsequently, scenario's were evaluated, containing different and realistic options for baseline vegetation, carbon crediting systems and CDM modalities, fluctuations in product prices, discount rates and carbon prices. The real cost of combined carbon sequestration and substitution for the case projects was below $3 per ton of carbon avoided, when based exclusively on data supplied by project developers. However, potential variations in carbon impact and costs based on scenario options were very large. Different baseline vegetation or adopting a different discount rate cause carbon credits to vary by as much as an order of magnitude. Different carbon crediting systems or fluctuations in (commodity) product prices cause variations up to 200% in carbon credits and NPV. This makes the additionality of such projects difficult to determine. Five of the six case projects seem uneligible for development under the CDM. A critical attitude towards the use of plantation projects under the CDM seems justified.