Land Use, Land-Use Change and Forestry

Other reports in this collection How Should Projects with Shorter Time Frames Be Treated?

Once the minimum project duration has been defined, it is also important to decide how to treat projects that have a shorter duration than the minimum required time frame. The options can be divided into two main approaches:

  • Full liability: In the event of reversal of GHG benefits, projects should return an amount of credits equal to the total amount of GHGs released. This approach is consistent with the stock change method, which consists of giving credits to projects as carbon is fixed and removing credits if stocks of carbon diminish. In essence, this approach does not recognize the temporal value of carbon storage. This is the only method possible if it is decided that projects have to be run in perpetuity.
  • Proportional liability: Projects should be debited an amount of credits proportional to the difference between the minimum required time frame and the actual project duration (the "period of noncompliance'). This method is applicable only if a finite minimum project duration is adopted. If a minimum time frame of 100 years is adopted, for instance, a plantation project that is harvested at 60 years (assuming that all carbon is released to the atmosphere) would be liable for not maintaining carbon stocks for the last 40 years of the required time frame. Different methods have been proposed for calculating this proportional liability:
    • Linearly-Dividing the period of noncompliance by the required time frame. In the foregoing example, the project would have to return 40 percent of the credits it earned/claimed.
    • Ton-year based-Calculating the liability based on the ton-year approach (Fearnside et al., 2000; Moura-Costa and Wilson, 2000).
    • Adjusted for time preference-Using any of the methods described above but applying discount rates to reflect time preference (see Chapter 2).

The choice of method for dealing with liability is linked with methods chosen for accounting for GHG benefits and when credits are given to projects (see Section 5.4).

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