IPCC Fourth Assessment Report: Climate Change 2007
Climate Change 2007: Working Group III: Mitigation of Climate Change Monitoring

For project monitoring, there is now an extended guidance available (IPCC, 2006; USDOE, 2005). Monitoring costs depend on many variables, including the project complexity (including the number of stakeholders involved), heterogeneity of the forest type, the number and type of carbon pools, and GHG to be monitored and the appropriate measurement frequencies. There is a trade-off between the completeness of monitoring data and the carbon price that can be achieved: monitoring costs can sum up an important share of a project’s transaction costs. Proper design of the monitoring plan is, therefore, essential for the economic viability of forestry projects. If project developers can demonstrate that omitting particular carbon pools from the project’s quantification exercise does not constitute an overestimate of the project’s GHG benefits, such pools may be left outside the monitoring plan. Options for scaling up

Despite relative low costs and many possible positive side-effects, the pace with which forest carbon projects are being implemented is slow. This is due to a variety of barriers. Barriers can be categorized as economic, risk-related, political/bureaucratic, logistic, and capacity or political will (the latter barrier also occurring in industrialized countries; Trines et al., 2006). One of the most important climate-related barriers is the complexity of the rules for afforestation and reforestation project activities. This leads to uncertainty among project developers and investors. Temporary accounting of credits is a major obstacle for two reasons: (1) The future value of temporary CERs depends on the buyer’s confidence in the underlying project. This may limit investor interest in getting involved in project development. (2) The value of temporary CERs hinges on future allowance price expectations because they will have to be replaced in future commitment periods. Furthermore, EU has deferred its decision to accept forestry credits under its emissions trading scheme. Even if EU decided to integrate these credits, this would come too late to take effect in the first commitment period because trees need time to grow. Given the low value of temporary CERs, transaction costs have a higher share in afforestation and reforestation than in energy mitigation projects. Simplified small-scale rules were introduced in order to reduce transaction costs, but the maximum size of 8 kilotonnes of average annual CO2 net removal limits their viability.

For forestry mitigation projects to become viable on a larger scale, certainty over future commitments is needed because forestry needs a long planning horizon. Rules need to be streamlined, based on the experience gathered so far. Standardization of project assessment can play important roles to overcome uncertainty among potential buyers and investors, and to prevent negative social and environmental impacts.