Center for Russian Environmental Policy




 Sequestration of Greenhouse Gases by
  Forest Belts on Agricultural Lands



...
This investment project was made possible through support provided by the
Institute for Sustainable Communities of Montpel...
Contents


This investment project was made possible through support
provided by the Institute for Sustainable Communities...
Possibilities for Implementing the Project in Other Regions
.................................................................
Introduction
        The global climate warming, which in recent years has been manifested in
full force by unprecedented ...
to industrial enterprises. The enterprises or Carbon Funds acting on behalf of these
enterprises can become investors fina...
The Essence of the Project
       In the process of economic activity, industrial enterprises emit greenhouse
gases in the...
provided by the Institute of Sustainable Communities. The authors discussed
economic, social, and environmental indicators...
Investment Proposal for Voronezh Oblast


Assessment of the Situation

Economic indicators
        Voronezh Oblast was set...
perfect Novovoronezh Nuclear Power Station is located here. Local machine-
building enterprises manufacture products known...
heating convectors. AOOT Meat Plant produces sausages, canned products, meat,
and animal fats.
        In 1998, a higher o...
The problem of building environmentally sustainable agricultural
landscapes while conserving biological diversity is tackl...
make it more efficient, an oblast productivity headquarters and a coordination
board of scientists and experts have been e...
Social indicators

       In addition to the natural wealth and the agroindustrial potential gained over
the post-war peri...
The causes for death of each second individual were circulatory diseases, of
each twelfth accidents, poisoning and traumas...
and other harmful effects of economic activity; and second, ensuring of
improvement and restoration of lands subjected to ...
of the use of these lands, consideration for environmental factors and their
environmental assessment. The case in point i...
proportion among different types of farmland received more attention than at the
federal level. For example, the Law of Vo...
The land tax is a local tax. Within the framework of effective legislation, a
possibility is provided at the level of the ...
Lands covered with wood and shrub vegetation, designated to protect lands
from various adverse impacts, hold a special pos...
maintain the above-mentioned facilities in good order and take measures to
prevent damage thereof. The rules for operation...
Project Content


Sources of finance
  -   Carbon funds.
  -   Environmental funds.
  -   Enterprises interested in greenh...
Project timing schedule

        Table 4. Calendar plan
                                       Period
          Planting o...
-    current outlays (maintaining the forest belts in a viable condition,
            monitoring of the system).
       Ca...
regions, allocated for forest belt planting. Thus, for instance, in Voronezh Oblast,
there is an area of 8720 hectares des...
Table 6. Scenario 1
Рсо2= US $5/t of СО2
    Bank interest, i                             2%           5%             8%  ...
Internal Profit Rate, IPR                      31%           31%           31%           31%
 Profitability index, PI     ...
Incidental benefits

       Agricultural producer’s benefits. When drawing up the project, the
designers calculated additi...
Project’s risks

       The project’s risks can be basically classified into two groups: natural and
economic. Natural ris...
Anticipated Results

Economic
 The project’s principal economic results are as follows:
 - Raising APC productivity and yi...
Possibilities for Implementing the Project in
        Other Regions
        Geographic coverage. The project can be implem...
Appendices
Project’s GIS Support
        Modern geoinformation systems (GIS) represent a new type of integrated
informatio...
(3) Temporary subject layers to analyze intermediary results displayed,
account of dynamics of wood pulp growth or carbon ...
Calculation of Basic Parameters of the Investment Project
Annex Table
 Year    Cost,   Carbon Profit, $/ha   Net profit, N...
А.V. Stetsenko, V.N. Sidorenko, N.V. Luzhetskaya, V.V. Shatailov, and A.V. Kulevsky.
  Sequestration of Greenhouse Gases b...
The essence of the project is in growing forest belts to address problems of
global climate change and prevention of soil ...
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Investment Project

  1. 1. Center for Russian Environmental Policy Sequestration of Greenhouse Gases by Forest Belts on Agricultural Lands Investment Project Moscow 2002
  2. 2. This investment project was made possible through support provided by the Institute for Sustainable Communities of Montpelier, Vermont U.S.A. and the USAID. The opinions expressed herein are those of the author(s) and do not necessarily reflect the views of the Institute for Sustainable Communities or the USAID. Furthermore, the mention of trade names or commercial products does not constitute endorsement or recommendation for use. Authors: Project Manager A.V. Stetsenko, senior researcher, Department of Economics, Lomonosov State University, Moscow, Cand. Sci. (Econ.); V.N. Sidorenko, senior researcher, Department of Economics, Lomonosov State University, Moscow, Cand. Sci. (Econ., Phys.&Math.); N.V. Luzhetskaya, researcher, Department of Law, Lomonosov State University, Moscow; V.V. Shatailov, researcher, Department of Soil Science, Lomonosov State University, Moscow; A.V. Kulevsky, researcher, Department of Computational Mathematics and Cybernetics, Lomonosov State University, Moscow Advisors: V.M. Zakharov, Director of Center for Russian Environmental Policy, RAS Corresponding Member; S.N. Bobylev, Professor, Department of Economics, Lomonosov State University, Moscow. Cover: Voronezh steppe transformed by young forest plantations. In 2001, the authors planted in Druzhba APC, Liski District, 50 hectares of forest belts to exemplify the implementation of the idea proposed. ISBN 5-88971-025-7 © Center for Russian Environmental Policy 2002 © Stetsenko, A.V. 2002 2
  3. 3. Contents This investment project was made possible through support provided by the Institute for Sustainable Communities of Montpelier, Vermont U.S.A. and the USAID. The opinions expressed herein are those of the author(s) and do not necessarily reflect the views of the Institute for Sustainable Communities or the USAID. Furthermore, the mention of trade names or commercial products does not constitute endorsement or recommendation for use..............................2 Introduction.............................................................................5 The Essence of the Project......................................................7 Investment Proposal for Voronezh Oblast ...........................9 Assessment of the Situation .....................................................9 Economic indicators ...............................................................9 Environmental indicators ......................................................11 Social indicators ...................................................................14 Legislation.............................................................................15 Project Content.......................................................................22 Sources of finance .................................................................22 Partnerships..........................................................................22 Project timing schedule.........................................................23 Method of credit reimbursement ...........................................23 Cost-benefit analysis..............................................................23 Incidental benefits ................................................................28 Project’s risks .......................................................................29 Organization experience........................................................29 Anticipated Results.................................................................30 Economic...............................................................................30 Environmental.......................................................................30 Social.....................................................................................30 Legal......................................................................................30 3
  4. 4. Possibilities for Implementing the Project in Other Regions ................................................................................................31 Appendices.............................................................................32 Project’s GIS Support ...........................................................32 Calculation of Basic Parameters of the Investment Project...34 4
  5. 5. Introduction The global climate warming, which in recent years has been manifested in full force by unprecedented typhoons, floods, droughts, and fires, is directly related to increased amounts of greenhouse gases in the atmosphere. These include carbon dioxide CO2, methane CH4, nitrous oxide N2O, and others. In 1992, 154 states signed the Framework Convention on Climate Change in Rio de Janeiro, and in 1997, the Kyoto Protocol was signed. The Protocol binds quantitative commitments of advanced countries (and their domestic enterprises) and countries with transitional economy on the restriction of greenhouse gas emissions in the atmosphere. A number of nations, among them Japan and EU countries, have already ratified the Kyoto Protocol. Russia is in the phase of ratification. The essence of this system is that each country assuming such commitments is granted an allowance for strictly definite amount of greenhouse gas emissions. Allowances may be exceeded, but in such case, it would be necessary to buy out a right for extra emissions from those countries that have not spent theirs in full. Complicated mechanisms are envisaged for triggering this instrument and exercising control over its execution. There are two basic ways to reduce the level of greenhouse gases in the atmosphere. The first one involves reduction of greenhouse gas emissions by industries, while the second one involves binding of greenhouse gases by ecosystems. In the Kyoto Protocol, this is provided for in Article 3.3, where it is proposed to allow for reduced (sequestered) carbon dioxide at the expense of planting the so-called “Kyoto forests” in international transactions. By Kyoto forests are meant ones planted after 1990 specially for prevention of climate change. Another urgent problem of the new millenium is the accelerated degradation of agricultural lands related to erosion-induced thickening of top fertile soils. This problem made itself felt for the first time by famine and drought late in the 19th century. The way to resolve it was found by V.V. Dokuchaev, the founder of soil science. In arid steppes of Voronezh Guberniya, Dokuchaev pioneered planting a system of forest protection belts. Since that time, a principal mechanism for prevention of soil erosion has been planting forest belts to reduce wind and water velocity on slopes thus preventing water and wind erosion. In the latter part of the past century, these ideas of the great Russian scientist started to be implemented in Russia in the Great Plan of Nature Transformation, developed by domestic scientists and adopted by the USSR government. This bore appreciable fruit already in the early 1970s. This project offers a way to address two problems: global climate change and soil degradation. The authors, through the experiment conducted in 2001-2002, substantiated a possibility of planting forest belts of particular species (maximum carbon dioxide absorbers) in the fields, in this way simultaneously fulfilling commitments under the Kyoto Protocol. In such case, the cost of forest belt planting is compensated for by selling greenhouse gas emissions allowances 5
  6. 6. to industrial enterprises. The enterprises or Carbon Funds acting on behalf of these enterprises can become investors financing requisite works. In exchange, they get securities confirming their real sequestration of atmospheric carbon dioxide. The investment project is designed for Voronezh Oblast, since it was a base region for the experiment carried out within the framework of the grant “Dissemination of the Ecologically Sound Landscape Farming System on Agricultural Enterprises”. The authors provide economic, social, and ecological indicators for investors to have an idea of the condition of the region and the laws enabling a possibility to organize shelter belts. In Voronezh Oblast, beginning in 1996, more than 70 projects of ecologically sound landscape farming systems have been developed. They were created to ensure sustainable agriculture, namely: to raise yielding capacity, to prevent erosion, to conserve fertility of soil, and to stabilize agro-ecosystems. The authors analyzed these projects. One project on an ecologically sound landscape system was selected as a specific example for investors and for further study. With existing legislation taken into consideration, a contract was made among the Center for Russian Environmental Policy, agricultural enterprise SPKhK Druzhba, and forestry Davydovsky. In 2001, 50 hectares of forest belts was planted within the framework of this contract. This investment project provides a substantial analysis of costs and benefits, methods of credit reimbursement to investors, and procedure for calculation of attending benefits from its implementation. As part of the project, for some Russian agrarian regions, the needs were specified in agricultural lands to be used for shelter belts. Why are forest belts needed? • Prevention of droughts; • Prevention of water and wind erosion of soil; • Raising of yield capacity; • Conservation of fauna and flora diversity; • СО2 sequestration to reduce the greenhouse effect; • Investor compensates for industrial СО2 emissions. 6
  7. 7. The Essence of the Project In the process of economic activity, industrial enterprises emit greenhouse gases in the atmosphere. There are six greenhouse gases: carbon dioxide CO2, methane CH4, nitrous oxide N2O, hydrofluorocarbons HFCs, perfluorocarbons PFCs, and sulfur hexafluoride SF6. Carbon dioxide is the main greenhouse gas affecting global climate change. Beginning in 2008, signatories to the Kyoto Protocol will organize a global market for trading in greenhouse gas emissions allowances, as well as local intrastate markets. Enterprises emitting greenhouse gases in the atmosphere will be assigned atmospheric emissions limits. In case of reduction of emissions, the enterprise will be able to sell the surplus, whereas in case of exceeding the limit, it will have to pay penalties or buy additional allowances. Increasing one’s allowance on additional greenhouse gas emissions in the atmosphere will be possible through introducing technology innovations, or purchasing allowances on the market, or financing sequestration or reduction of greenhouse gas emissions of a third party (agricultural cooperative, forestry, etc.). This project deals with the resolution of two problems: global climate change and soil degradation. Forest belts located on farming lands and planted after 1990 are classified as “Kyoto forests” (Article 3.3 of the Kyoto Protocol), and, accordingly, their stock of carbon dioxide will be credited against allowance of enterprises. In this project, enterprises or Carbon Funds are offered the cheapest method for enlarging their emissions allowances through the investment in planting forest belts to obtain in exchange securities confirming the real sequestration of carbon dioxide by forest belts. The investor identifies the amount of greenhouse gases to be reduced. The Center for Russian Environmental Policy, using methodologies developed by the authors1, will help select breeds of trees to enable sequestration of the specified carbon dioxide amount and calculate the forest belt area. To calculate the forest belt area, it is necessary to divide the reduced greenhouse gas emissions amount into the amount of carbon dioxide absorbed (sequestered) by the forest belt. One hectare of forest shelter absorbs about 4 tons of carbon dioxide per year. The amount of sequestered carbon dioxide (CO2) essentially depends on the breed of the tree, as well as on the geographic and climatic conditions this tree grows in. More detailed information on this is given in sections “Method of Credit Reimbursement” and “Partnerships”. The investment project was developed for Voronezh Oblast, because it was chosen for experiment within the framework of the grant “Dissemination of the Ecologically Sound Landscape Farming System on Agricultural Enterprises” 1 More detailed description of the procedure to calculate sequestration is given in the book: S.N. Bobylev, O.E. Medvedeva, V.N. Sidorenko, S.V. Soloviova, A.V. Stetsenko, and A.V. Zhushev. Economic Evaluation of Biodiversity. 7
  8. 8. provided by the Institute of Sustainable Communities. The authors discussed economic, social, and environmental indicators for investors to have an idea of the condition of the region and laws enabling a possibility to organize shelter belts. The authors analyzed projects on environmental landscape-consistent farming available in the oblast. One promising project on an ecologically sound landscape farming system was selected as a specific example for investors and for further research, and, with existing legislation taken into consideration, a contract was made. In 2001, 50 hectares of forest belts was planted within the framework of this contract. In this way, the groundwork was laid for actual implementation of the project. When preparing the project, a foundation was laid for handling a geoinformation system and database, and mathematical and economic models were developed for computation of sequestered carbon dioxide stocks. Investors interested in more detailed information for implementation of the project can get it in the Center for Russian Environmental Policy. 8
  9. 9. Investment Proposal for Voronezh Oblast Assessment of the Situation Economic indicators Voronezh Oblast was set up in 1934 as a result of breaking up Central Chernozem Oblast with Voronezh as its center. The predecessor of Central Chernozem Oblast was Voronezh Guberniya (1725-1928). In 1711-1725, Voronezh had been the center of Azov Guberniya. Voronezh Oblast is situated in the south of Central Russia. It borders Ukraine and Rostov Oblast in the south, Belgorod Oblast in the west, Kursk Oblast in north-west, the oblasts of Lipetsk and Tambov in the north, and Volgograd Oblast in the north-east. Area: 52.4 thous. sq. km; population: 2490 thous. people, of which 61.6% urban. Voronezh Oblast is located within the Central Russian Hills (elevation up to 268 m), with Oka-Don Valley in the east. The main rivers are the Don and its tributaries the Khopyor and the Bityug. The oblast soils are predominantly chernozems (black soils). Vegetation: vast forest tracks, primarily oak woods and pine forests, with occasional native steppes (mostly plowed). The characteristic features of the oblast are a big share of rural population and its attractiveness for migrants from the North Caucasus. Over 94% of the population are Russians; it is to be noted that here, there are some territories of compact habitation of Ukrainians, which can be found nowhere else in Russia. A major part of the southern population in Voronezh Oblast classifies themselves as Don Cossacks. Despite the unfavorable birth and death rates, the total number of population is stable, with average male life span among the highest in Russia. The oblast has an advantageous transportation and geographic situation. There are nonferrous metal ore deposits and signs of the presence of diamonds. For cultivation of rich soil, there is big enough rural population that has not lost habits of work. The economic structure in general is quite balanced. In the oblast center, a considerable number of technologically advanced industrial enterprises are focused. The disadvantages are an excessive share of defense plants and irregularity of economic development throughout the oblast. The principal industrial centers are Voronezh, Borisoglebsk, Liski, Rossosh, and Valuiki. The oblast’s main wealth is its chernozem soil, a solid base for highly developed agriculture. The oblast specializes in production and processing of agricultural products, mechanical engineering, and electric power engineering. The most technically 9
  10. 10. perfect Novovoronezh Nuclear Power Station is located here. Local machine- building enterprises manufacture products known far beyond the oblast boundaries: Record television sets, radio sets, IL-96-30 passenger airbuses and other aircraft modifications, power units for space rocket systems and aviation, machine tools, excavators, agricultural equipment, heavy press equipment, and machinery and equipment for defense purposes. Also, chemical and pharmaceutical industries are developed. Table 1. General social and economic situation in Voronezh Oblast in 1998 1998 1998 in 1997 in % against % against 1997 1996 Economic indicators Industrial output, mln. rubles 14653.3 91.8 103.6 Volume of contract work, mln. rubles 1977.6 94.1 87.1 Agricultural output, mln. rubles 2861.7 88.6 х Commercial freight turnover, mln. tons per km 17646.6 89.0 х including rail freight traffic 17239.7 88.5 х Scope of communication services, mln. rubles2 491.6 101.6 136.0 Retail turnover, mln. rubles 11780.0 97.7 92.4 Scope of paid public services, mln. rubles 2492.4 94.8 102.0 The largest industrial enterprises are the Novovoronezh Nuclear Power Station (production of electricity), and AOOT Comintern Tyazhex (cast materials, steel, excavators, and domestic electric appliances). There is a heavy power press plant manufacturing forging presses and spare units for them, automatic and semiautomatic machine-building lines, and mechanical forging and stamping presses. OAO Refractory Plant in Semiluki produces construction bricks, sawn timber, and refractory products. GP Dzerzhinsky Diesel Locomotive Repair Plant manufactures cast materials, welded metal structures, and stampings. The affiliation of ZAO Voronezhkhimfarmvremya Pharmaceutical Production Company produces blood and plasma substitutes, medicinal preparations, papaverine, and drugs for cardiovascular diseases. AOOT Voronezhselmash fabricates sorting machines, grain cleaners, machines for plant breeding, and other agricultural machines. OAO Voronezh Machine Tool Plant manufactures metal- cutting machine tools, whereas TOO Ceramic Plant Production and Commercial Company produces ceramic and glazed tiles. OAO Chemical Machine-Building Plant manufactures air-cooled apparatus, and chemical equipment and spare parts to it. AOOT Boiler Mechanical Works makes cast iron products, radiators, and 2 Relative indices are given in current prices. 10
  11. 11. heating convectors. AOOT Meat Plant produces sausages, canned products, meat, and animal fats. In 1998, a higher output was noted in food industry (by 9.6%) and in production of construction materials (by 5.5%). Facilities of forestry and wood- processing industry ended the year without reduction in output. There increased production of medical equipment, mine loaders (two-fold), door blocks, medications (by 34—36%), prefabricated reinforced concrete structures, low- power motors, chemical equipment, construction lime, ceramic wall tiles, non- metallic constructional materials, and mineral fertilizers (by 5—18%). In 1998, industrial enterprises obtained a profit totaling 747 million rubles. Yet, the share of unprofitable businesses remained high (46%), with the loss totaling 463 million rubles. In 1999, 2900.2 million rubles was invested in the development of economy and social sphere. Power engineering enterprises laid 428 km of power lines, communication facilities put into operation automatic telephone stations for 27.7 thousand urban users and 4.4 thousand rural users, and 55 km of public hard roads was built. In recent years, the individual sector share in agricultural production has grown, with about 45% of produce made by subsidiary farms. The number of farming households in the oblast is 3130, with their overall area of 165.8 thousand hectares. The average land area of one farm is 53 hectares. In the structure of farmers’ agricultural production, there prevails grain crop growing. They gathered a little more than 3 percent of grain and sugar beet and 5 percent of sunflower seeds. The portion of animal breeding produce is not big. Out of the overall volume of the oblast’s produce, farmers produced 0.7% of meat and 0.5% of milk. The gross grain yield made 1669.8 thousand tons. The reduction in grain production volume as compared to the preceding years was on the account of drought-related decline in the level of crop yield and decreased growing areas. Environmental indicators The basis of agricultural production is the use of farming lands. The economic value of different types of agricultural lands is variable. So is their role in ensuring an ecological balance on agricultural landscapes. The use of arable land is generally economically effective. The intensive exploitation of these lands, however, entails noticeable negative environmental impacts. The use of fallow land and low-yield farmland produces the lowest economic result, although it is precisely such lands that are capable of performing stabilizing ecological functions. The aggravation of ecological condition of the lands is due to the disturbed structure of agricultural lands, prevalence of arable lands. 11
  12. 12. The problem of building environmentally sustainable agricultural landscapes while conserving biological diversity is tackled based on the identification of the best proportions in the land management pattern, different types of land. A territory suitable for agriculture should be used as productive farmland – arable land. At the same time, however, natural ecosystems that constitute low-productive lands should be conserved in this territory. In particular, forest protection belts. It is exactly the plots of uncultivated land that prevent the occurrence and development of water and wind erosions as well as soil degradation. They are a habitat for useful fauna. It is not uncommon that endangered plant and animal species inhabit there. Through the conservation and rehabilitation of low-productive lands, it is possible not only to ensure a high ecological balance of the landscape, but also to obtain a higher economic result from the utilization of arable land. Eventually, natural ecosystems promote higher soil fertility. Land resources are basically presented by chernozems (80%). Over 10 years, the arable land area has reduced by more than 200 thousand hectares (almost by 7%), which is explained by its transfer from the agricultural-purpose land status into the purview of the local authorities or made available for citizens’ personal use. Today, the biggest areas belong to agricultural enterprises, organizations and citizens – 4 million hectares (76.7%), and human settlement administrations – almost 688 thousand hectares (13.2%). Forest resources account for 392 thousand hectares, or 7.5%. The negative impact on the state of land resources is exacerbated by the agricultural crisis. Chernozem soils continue degrading. The destructive factor is the crisis-related intensification of “depletive” land management. The fact that humus, the main soil productivity parameter, remains relatively stable is solely explained by its stock built up prior to the early 1990s. There is virtually no compensation for this stock. Over the last decade, the application of organic fertilizers has gone down 2.5 times and mineral ones 8 to 9 times. For five years, no integrated agrochemical cultivation has been done. Liming of acid soils and application of gypsum in alkali soils is exercised in extremely low volumes. Despite the fact that 965.1 thousand hectares experience water erosion and 145.2 thousand hectares experience wind erosion, the scope of agrotechnical, forest-reclamation, and hydraulic engineering steps has been dramatically reduced. Thus, in 1998, only 94.6 hectares of forest protection belts was laid down, with several times less high-water banks and check dams built. The Voronezh Oblast’s large-scale initiative on promoting novel farming systems was backed by the Ministry of Agriculture and Food of the Russian Federation. In each district, base farms were identified to plant forest belts there. Today, there are more than 70 such farms, for which projects on ecologically sound landscape farming systems have been developed. In order to coordinate work and 12
  13. 13. make it more efficient, an oblast productivity headquarters and a coordination board of scientists and experts have been established. A methodological guide named “Design and Implementation of Ecologically Sound Landscape Systems on Agricultural Enterprises in Voronezh Oblast” has been developed and published. Within the framework of the program on promotion of new farming systems, projects have been developed on planting 8720 hectares of forest belts in addition to the available 11.4 thousand hectares (Table 2). Table 2. Projected planting in Voronezh Oblast Ligneous breeds Hectares Oak 180 Poplar 3360 Birch-tree 2420 Maple 540 Ash-tree 500 False acacia 1130 Pine 350 Elm 240 Total for trees 8720 Bushes (honeysuckle, currant) 280 One pressing problem, which remains unsolved, is air pollution in populated areas, primarily due to motor transport exhaust emissions. The air condition in towns has been for a long time estimated as medium-polluted. According to information provided by the oblast hydrometeorological center and the committee for ecology, the overall pollutants discharge in the atmosphere from all polluters has grown by more than 31 thousand tons (7.1%) to make 439.7 thousand tons. In so doing, emissions from stationary polluters have reduced by 7.2 thousand tons to come to 56.1 thousand tons, whereas ones from mobile polluters have grown by 36.4 thousand tons to come to 373.6 thousand tons. The major polluters are transport agencies (22%), as well as enterprises of food industry (20%) and power engineering (15%). For transport agencies, emissions have increased by 2 thousand tons, whereas for the latter branches they decreased by 1.5 and 1.0 thousand tons, respectively. 13
  14. 14. Social indicators In addition to the natural wealth and the agroindustrial potential gained over the post-war period, an important prerequisite for progress in the oblast is the availability of advanced scientific and technological potential and highly qualified personnel. The leading enterprises, such as Voronezh Airplane-Building Company, Ltd., Voronezh Communication Research Institute, Voronezh Signal Plant, Chemical Automatics Design Bureau, Electric Lamp Plant, and others, have retained R&D and big pilot and design facilities within their structure. On the whole, the economic structure is quite balanced and provided with labor resources. The level of unemployment is Russian mean. The basic drawbacks restraining economy progress are a cutback in production and an excessive share at defense facilities of undemanded high-tech civil productions that suffered most of all from crisis processes and a dramatic decline in solvent demand on their primary products. In terms of the average per capita income, the oblast ranks 36, lagging behind the Russian mean level by 30%. Analysis demonstrated that in 1998, the natural population loss decreased by 4.5% as compared to the previous year and made 21.3 thousand people. The death rate exceeded the birth rate 2.1 times. Table 3. Oblast social indicators in 1998 1998 1998 in % 1997 in % against against 1997 1996 Real disposable cash income 91.2 102.4 Calculated average monthly earnings: nominal (rubles) 670.0 111.7 159.3 real (rubles) 64.2 102.7 Number of people with income below 786.7 131.2 95.4 subsistence minimum (thousand people) (% of the entire population) 31.7 х х Total number of unemployed (thousand 89.3 101.2 99.3 people) Officially registered number of unemployed 18.4 68.1 94.9 (thousand people) Consumer price index for goods and 173.9 124.3 117.9 services Producer’s price index for industrial 125.9 110.1 122.5 products 14
  15. 15. The causes for death of each second individual were circulatory diseases, of each twelfth accidents, poisoning and traumas, of each fifth respiratory diseases. The number of infants died under one year has grown by 6.7%. Sixty-four percent of the population had incomes below the average level; 28.2 percent of cash income fell on 10 percent of the most well-off population and only 2.3 percent fell on 10 percent of the least well-off population. Hence, the income ratio of these population groups was 12.5. The size of subsistence minimum as of December 1998 made 531.7 rubles, having increased by 65.1 percent as compared to December 1997. For 31.7 percent of the population, the average per capita income was below the subsistence minimum. The average monthly earnings made 244 rubles or 67.4 percent of the subsistence minimum. The sum of additional resources needed to raise the earnings of low-income population groups to the subsistence minimum level made 94.8 million rubles or 5.9 percent relative to the total income volume. Legislation Analyzing effective federal legislation and Voronezh Oblast legislation, the authors attempted to find out to what extent the laws enable the implementation of the system of ecologically sound landscape farming. Federal Law on Protection of the Environment, No 7-FZ of 10 January 2002 sets forth general environmental requirements to be observed in agriculture. The essence is as follows: enterprises, associations, organizations, and citizens managing farming are obliged to exercise a set of measures to protect soils, water bodies, forests, flora, and fauna from harmful impacts of spontaneous natural forces, side effects of using sophisticated agricultural equipment, chemicals and amelioration work, and from other factors that deteriorate the condition of the natural environment and, as a consequence, cause damage to human health. Article 8 of Federal Law on Government Regulation of Ensuring Productivity of Agricultural-Purpose Lands, No 101-FZ of 16 July 1998 contains a rule binding individuals that use plots of land to manage production of agricultural products by methods enabling reproduction of agricultural land fertility, as well as precluding or restricting adverse impact of such activity on the natural environment. The above requirements were, to some extent, further specified in the Land Code of the Russian Federation of 28 September 2001 (RFLC). In conformity with i. 1 of Article 12 of RFLC, the use of lands must be exercised by methods enabling conservation of ecological systems, preservation of land capability of being a means of production in agriculture, a foundation for handling economic activity. The aims of land protection are first, prevention of degradation, pollution, littering, 15
  16. 16. and other harmful effects of economic activity; and second, ensuring of improvement and restoration of lands subjected to the above-mentioned adverse effects. Proceeding from these aims, Article 13 of RFLC defines the content of rules for land protection. By Decree of the RF Government No 380 of 8 November 2001, the State Integrated Program on Raising Soil Productivity in Russia was adopted. The program envisages that the realization by landed proprietors, landowners, and land users of steps to improve soil productivity is exercised through the development and implementation of farming and land-use systems. Patterns and projects of land-use systems represent a mechanism for realization of regional programs at the level of districts, land-users, landed proprietors, and landowners. Using these patterns and projects allows implementation of balanced ecologically sound landscape farming systems, as well as agricultural forest improvement, hydroamelioration, soil improvement, and other steps targeted at raising and maintaining soil fertility. The federal targeted program “Development of the Land Reform in the Russian Federation in 1999-2002”, approved by Decree of the RF Government No 694 of 26 June 1999, provides for development of a system of land protection from degradation and other negative phenomena, conservation of degraded lands and their restoration, and regulations on the procedure for transfer of low- productive farmland into other category of land. The Concept of Government Policy in the Field of Public Healthy Diet of the Russian Federation for the Period up to 2005, approved by Decree of the RF Government, N 917 of 10 August 1998, envisages implementation of a series of measures on development of integrated farming systems, creation of high- productive and environmentally balanced agrosystems to enable considerable growth in the yield capacity of agricultural crops and productivity of cattle. Of interest is the National Environmental Action Plan of the Russian Federation for 1999-2001. In this document, it is noted that the condition of Russian lands utilized for economic activity remains unsatisfactory. The depletive agricultural land use under the economic crisis presents, in terms of its consequences, a real threat to Russia’s national security. Especially dangerous for the ecological condition of agricultural lands is the reduction of the general standard of farming and failure to exercise obligatory soil-protection and other environmental steps. The increasing anthropogenic load exacerbates the processes of degradation of agricultural lands. In most of Russia’s main agricultural regions, the tillage share on the territory exceeds environmentally admissible limits leading to aggravated degradation of soil and deterioration of the hydrological regime of water collection basins, decreases the capability of natural complexes to be self- regulatory and to sustain productivity of agricultural lands. To summarize, we could clearly identify the principal legal trends in the sphere of agricultural land use. These trends are associated with the intensification 16
  17. 17. of the use of these lands, consideration for environmental factors and their environmental assessment. The case in point is the promotion of ecologically sound landscape farming; development of landscape systems based on the most rational combination of agricultural and other lands, and establishment of scientifically substantiated standards for each environmental zone; identification of ecologically allowable limits of the tillage share on the territory; environmentally- friendly farm managing enabling higher productivity of agricultural land and restoration of natural complexes. Such policy is to promote building environmentally balanced agricultural landscapes and farming systems. Article 22 of LC classifies as agricultural-purpose lands ones that are purposefully used in agricultural production for exercising various kinds of activity as specified above. These are lands made available for farming needs, i. e. farmlands, which are now used in agriculture, and lands designated for these purposes. The above-mentioned territories must be beyond the limits of settlements. Agricultural-purpose lands are divided into two basic categories. Their major part is farmland, i.e. lands used as a means of production. The other category constitutes lands used as a territorial basis for location of intrafarm roads and service lines. On these lands, there may be closed water bodies or structures used for production, storage and primary processing of agricultural products, i.e. real property facilities to serve immediate agricultural needs. Lands covered with wood and shrub vegetation, designated to protect lands from various adverse impacts, hold a special position. On one hand, they are utilized as a means of production for growing this sort of vegetation, but on the other hand, as a territorial basis for its location. In compliance with i. 1 of Article 79 of RFLC, farmland, depending on its natural properties and economic expediency of utilization for the purposes of plant or cattle breeding, is classified into the following categories: farmland, hay land, pasture, fallow land, and land occupied by perennial plantations (gardens, vineyards, etc.). By agricultural-purpose lands are meant ones located beyond the limits of settlements and made available for agricultural needs as well as ones designated for these purposes. The agricultural-purpose lands are subdivided into farmlands, lands occupied by intrafarm roads, service lines, or wood and shrub vegetation to enable protection of lands from negative (adverse) natural, anthropogenic and technogenic phenomena, closed water bodies, as well as buildings and structures used for production, storage and primary processing of agricultural products. Legislation does not prohibit transfer of one type of farmlands into another. However, the transfer of farmlands from one type into another is not properly regulated by the federal land legislation. In legislation of the Subjects of the Russian Federation, the issue of optimal 17
  18. 18. proportion among different types of farmland received more attention than at the federal level. For example, the Law of Voronezh Oblast on Land Management No 22-II-OZ of 27 November 1997, sets forth in Article 1 development of a set of measures to ensure the best proportion of farming lands and to improve the amelioration system, as well as to conserve and raise soil productivity as a major line in the land management. In conformity with Article 4, in the process of land management enabling reproduction of soil productivity as well as conservation and improvement of natural landscapes, a set of design and survey works should be conducted for agricultural enterprises, cooperatives, and peasant farms on design of intrafarm land management (ecologically sound landscape farming systems) including erosion-protection steps. These works are aimed at organization of rational use and protection of lands with account for economic interests of their proprietors while observing proper conditions and regime of land use. In order to make up for the deficiency in federal land legislation, special statutory acts were adopted at the level of the RF Subjects to regulate the procedure for transfer of one type of farmland into another: Decree of the Voronezh Oblast Administration on the Procedure for Transfer of Farming Land of Oblast Agricultural Organizations into Other Lands No 978 of 14 October 1998 (with alterations of 16 August 1999); Decree of the Government of Sverdlovsk Oblast on the Provisional Procedure for Transfer of Valuable Farmlands into Less Valuable Farmlands No 730-p of 22 August 1997; Decree of the Government of the Republic of Mordovia on Approval of the Regulations on the Procedure for Transfer of Low-Productive Unused and Irrationally Used Farmlands of Agricultural Organizations, Peasant Farms, Subsidiary Farms, Industrial Enterprises and Establishments Engaged in Agricultural Production into Other, Less Valuable Lands No 502 of 4 October 1999. Article 65 of RFLC sets forth a principle of payment for the use of land regardless of what title a natural person or a legal entity has to use the plot of land. The RF Law on Payment for Land of 11 October 1991 (revision of 31 December 1999) provides for a system for regulation of payment for land. There is also Instruction of the RG Ministry for Taxes on Enforcement of the Law of the Russian Federation on Payment for Land No 56 of 21 February 2000. The prime objective of payment for land is to encourage rational use, protection, and development of land, as well as to raise productivity of soil. Legislative bodies in the RF Subjects, proceeding from the average size of tax on one hectare of arable land and cadaster assessment of farmland, establish concrete rates of land tax depending on the group of soils of arable land, as well as perennial plantations, hay land, and pastures. Minimum rates of land tax on one hectare of arable land and other agricultural lands are established by legislative bodies of the RF Subjects. The sum of land tax may be adjusted depending on the location of payer’s land. 18
  19. 19. The land tax is a local tax. Within the framework of effective legislation, a possibility is provided at the level of the RF Subjects, to differentiate rates of land charges in order to encourage, within certain limits, building of ecologically optimal structure of farmland through increasing the economic value of forest protection belts and other types of land. In Voronezh Oblast, a number of statutory acts are in effect to regulate relations with respect to organization and operation of the ecologically sound landscape farming system. In particular: - The Law of Voronezh Oblast of 25 May 1995 on Regulation of Land Relations in Voronezh Oblast; - The Law of Voronezh Oblast of 27 November 1997 on Land Management; - The Law of Voronezh Oblast of 27 November 1997 on State Land Cadaster in Voronezh Oblast; - Decree of the Administration of Voronezh Oblast on Implementation of Environmental (Ecologically sound landscape) Farming Systems in the Oblast; - Decree of the Oblast Duma of 2 October 1997 No 151-P-OD on the Regulations of Forestry Management in Forest Protection Belts on Agricultural-Purpose Lands in Voronezh Oblast. The Regulations of Forestry Management in Forest Protection Belts on Agricultural-Purpose Lands in Voronezh Oblast were developed in conformity with the Laws of the Russian Federation on Protection of the Natural Environment, on Special Protection Areas, and on Amelioration, as well as the Forest Code of the Russian Federation and other federal and oblast statutory acts. The Regulations set forth a procedure for managing forestry in forest protection plantations on agricultural lands in Voronezh Oblast. The forest protection plantations on agricultural-purpose lands in Voronezh Oblast (hereinafter, plantations) include - all types of forest belts; - plantations on slopes and bottoms of ravines and gullies; - protection plantations on sands and lands unsuitable for cultivation; - other protection wood and shrub vegetation. Territories occupied by protection plantations, due to their environmental role, are classified as special protected areas of oblast significance. For them, the Regulations set forth a special forestry management regime. Decrees of local authorities on issues related to utilization of forest plantations must not contradict to these Regulations. The procedure for forestry management envisaged in these regulations is binding for legal entities and natural persons, including owners, users and lessees of agricultural-purpose land with above-mentioned plantations regardless of the form of ownership. 19
  20. 20. Lands covered with wood and shrub vegetation, designated to protect lands from various adverse impacts, hold a special position. On one hand, they are utilized as a means of production for growing this sort of vegetation, but on the other hand, as a territorial basis for its location. Lands covered with wood and shrub vegetation, designated to protect lands from adverse natural, anthropogenic, and technogenic phenomena (shelter belts) have a special legal regime defined in forest legislation and the laws on land amelioration. In compliance with Article 134 of RFLC, wood and shrub vegetation, located on agricultural-purpose lands, is designated for protecting lands from adverse natural, anthropogenic, and technogenic phenomena through the use of soil-protection, water-regulation, and other properties of forest vegetation. Cutting of wood and shrub vegetation located on agricultural lands should ensure improvement of the state of this vegetation. It is admissible to cut wood and shrub vegetation for remediation, sanitary, restoration, renewal and some other purposes. Issues relating to creation of such forest plantations are regulated by the Federal Law on Amelioration of Lands. Article 2 of the Law defines land amelioration as radical improvement of lands through the arrangement of hydraulic-engineering, improvement, chemical, erosion-protection, forest- reclamation, agrotechnical, and other amelioration-related steps. Article 5 of the Law emphasizes one type of land amelioration – agricultural forest reclamation. Agricultural forest reclamation consists in arranging a set of amelioration steps to ensure radical improvement of lands through the use of soil-protection, water-regulation, and other properties of forest protection plantations. The Federal Law on Amelioration of Lands (Article 10) regulates issues of ownership of amelioration systems and detached hydraulic engineering facilities. In compliance with the RF civil legislation, they may be in private, state, municipal, and other forms of ownership. Plots of land, classified according to the established procedure as amelioration lands, are made available and withdrawn for conducting amelioration steps in conformity with the RF land legislation (Article 26). Plots of land bordering on lands (being) ameliorated can be used for ensuring amelioration of lands by right of restricted use of an alien plot of land (servitude) in compliance with the RF land legislation. According to Article 27 of the Law on Amelioration, acceptance for operation of amelioration systems, detached hydraulic engineering facilities and forest protection plantations is exercised according to the procedure established by the federal executive body in charge of agriculture. Citizens and legal entities operating amelioration systems, detached hydraulic engineering facilities, and forest protection plantations, are obliged to 20
  21. 21. maintain the above-mentioned facilities in good order and take measures to prevent damage thereof. The rules for operation of amelioration systems and hydraulic engineering facilities, as well as the rules for maintenance of forest protection plantations are established by the federal body and executive power in charge of agriculture as agreed upon with the special authorized government agency for environmental protection, special authorized government body in charge of control of the use and protection of water resources, the federal body in charge of land resources and land management, the special authorized body of forestry control, and other government agencies concerned. The rules for operation of amelioration systems and hydraulic engineering facilities, as well as the rules for maintenance of forest protection plantations are obligatory for all citizens and legal entities. The Law on Amelioration (Article 30) sets forth conditions that must be met to ensure protection of amelioration systems, hydraulic engineering facilities, and forest protection plantations. Thus, construction on lands (being) ameliorated of projects or arrangement of other works not designated for amelioration of lands, must not deteriorate water, air or nutritive regimes of soil on lands (being) ameliorated, or hamper the operation of amelioration systems, hydraulic engineering facilities, and forest protection plantations. Any activity on lands (being) ameliorated should be carried out in conformity with requirements of special authorized government bodies in the field of land improvement. Construction and operation of communication and power lines, pipelines, roads, and other facilities on ameliorated lands should be carried out upon agreement with special authorized government agencies in the field of land improvement. One line in the implementation of the Kyoto Protocol and UN Framework Convention on Climate Change is a full-scale account in the carbon balance of forests and forest protection plantations on agricultural lands; attraction of investments into Russia given a guarantee of targeted use of these resources for projects on sustainable development to ensure energy efficiency and saving, alternative use of energy, reforestation and afforestation based on strict observance of principles of sustainable forest use and raising of farming efficiency. In some countries, domestic allowance trading has already begun; in particular, in the Unites States, sulfur dioxide emissions allowance trading is being successfully implemented. In Great Britain, trading in greenhouse gas emissions allowances has been arranged. The European Union has made a decision to commence internal trading in greenhouse gas emissions allowances in 2005. 21
  22. 22. Project Content Sources of finance - Carbon funds. - Environmental funds. - Enterprises interested in greenhouse gas emissions reduction and in acquisition of “carbon” allowances. - Banks. - Environmental-image-conscious enterprises. Partnerships Project participants: The Investor, advancing credits for planting forest belts, obtains in exchange a right to dispose additionally arising “carbon allowances”, i.e. rights for extra greenhouse gas emissions. The Agricultural Production Cooperative (APC), making available an area for planting forest belts, improves the yielding capacity on its agricultural lands and fulfills its obligations while taking care of soil fertility. Forestries (Leskhozes), on a contractual basis, plant forest belts and take care of trees for a definite period of time depending on a particular breed. The Center for Russian Environmental Policy acts as an agency concluding contracts on planting forest belts; approves their breeds and calculates the area of forest belts needed for the investor to sequester a definite amount of carbon dioxide; executes securities confirming additional reduction of greenhouse gases by the investor; tracks growths and falls of securities value on the “carbon market”; conducts monitoring of planted shelter belts; helps the investor hold promotion actions aimed at improving the investor’s environmental image. The Center has prepared a package of typical contracts with APCs and forestries, which is essential for the implementation of the project. To calculate costs, benefits, and other parameters of the investment project, it is necessary to multiply parameters given in tables 3—7 by areas of forest belts planted. 22
  23. 23. Project timing schedule Table 4. Calendar plan Period Planting of forest belts Spring Additional planting of Autumn of the first year or plants spring of the second year Taking care of forest Spring of the eighth and belts seventeenth years Monitoring Every year Method of credit reimbursement Credits are to be repaid by documentary and nondocumentary securities enabling reduced costs involved in financing of the right to greenhouse gas emissions in the process of industrial production. Credits are expected to be redeemed as carbon is sequestered by forest belts, i.e. as respective securities are emitted. Cost-benefit analysis The project foresees the following benefits: - forest belts absorb the greenhouse gas (СО2) from the atmosphere; - sustainable agriculture; - higher soil productivity; - higher yield capacity3; - protection of soil from water and wind erosion. The project involves the following expected costs: - capital input (forest belt planting); 3 Raising yield capacity in agricultural enterprises, in which ecologically sound landscape farming is implemented; according to estimation, additional revenues Druzhba APC (Liski District) is to obtain for initial 6 years of the application of the ecologically sound landscape farming system will make 557 million rubles (in 1991 prices). Consequently, the system development expenses will pay back on the 7th year after planting. 23
  24. 24. - current outlays (maintaining the forest belts in a viable condition, monitoring of the system). Capital input was calculated based on the cost of planting 50 hectares of forest belts in Druzhba APC, Liski District of Voronezh Oblast. The computation was supported by the Institute of Sustainable Communities as part of the project “Dissemination of the Ecologically Sound Landscape Farming System on Agricultural Enterprises”. Planting expenses are given in Table 5. It is not by accident that we chose the calculation of costs per one hectare. The investor may choose any amount of the greenhouse gas to be reduced within a certain period of time. The Center for Russian Environmental Policy, depending on the investor’s demands, calculates the area, needed to sequester the requisite amount of carbon dioxide for definite time, and the costs involved (according to Table 5). Current expenses to maintain the forest belts in a viable condition and monitoring of the system will make 3 US dollars per one hectare a year. Each 8th and 17th year, it will be necessary to bear expenses related to taking care of forest plantations (cleaning/planting) at the rate of US $50. The investment project shows costs of planting 1 hectare of forest belts (Table 5). The investor (industrial enterprise), depending on current atmospheric emissions of carbon dioxide, identifies the need in acquisition of greenhouse gas emissions allowance. The Center for Russian Environmental Policy will help to make quite exact calculation of expenses needed for emissions compensation by planting forest belts. In so doing, the Center will enable a tailor-made project. This book will help to make first approximation calculations. To this end, the amount of greenhouse gas emissions to be cut must be divided into the amount of carbon dioxide sequestered by the forest belt. By way of example, Appendix Table 1 is presented to illustrate carbon stocks in ton/hectare for one tree species typical of Voronezh Oblast. One hectare of forest belt absorbs annually about one ton of carbon4. The amount of removed carbon dioxide is defined by multiplication of the carbon volume by 3.66 (molecular weight of carbon dioxide, CO2, as compared to the carbon atom, C). Consequently, one hectare of forest belt removes about 4 tons of СО2. The amount of sequestered carbon dioxide depends on the breed and age of the tree, geographic and climatic conditions the tree grows in. The methodology for carbon dioxide sequestration by forests was developed by the International Forest Institute and first published by the Center for Russian Environmental Policy in 19955. Table 12 provides examples of areas, both in Voronezh Oblast and in other 4 More detailed description of the procedure to calculate sequestration is given in the book: S.N. Bobylev, O.E. Medvedeva, V.N. Sidorenko, S.V. Soloviova, A.V. Stetsenko, and A.V. Zhushev. Economic Evaluation of Biodiversity. 5 A.S. Isaeva, G.I. Korovina, D.G. Zamolodchikova, et al. Environmental Problems of Carbon Dioxide Removals by Means of Reforestation and Afforestation in Russia (Analytical Survey). Moscow, Center for Russian Environmental Policy, 1995. 153 p. 24
  25. 25. regions, allocated for forest belt planting. Thus, for instance, in Voronezh Oblast, there is an area of 8720 hectares designated for planting. The total costs of planting and care of one hectare of forest belt make up 282 US dollars. The maintenance costs on the 8 th and 17th years are discounted and reduced to the costs at the onset of the project, and included in the overall expenses. The planting costs on the 1st year after beginning of financing comprise the cost of planting material, preparation of soil, depreciation of equipment, and workers’ wages (Table 5). Table 5. Calculation of costs to create 1 hectare of protection forest belts on lands of agricultural enterprises in Liski District, Voronezh Oblast6 Type of expenditure Amount, rubles Cost, USD Transportation expenses, fuels and lubricants 350 11 Planting material 3450 109 Payment for work 2880 91 Preparation of soil for planting 250 8 Maintenance of forest plantations 2000 63 Total for 1 hectare 8930 282 The estimates for basic parameters of the investment project (scenarios 1— 5) given below are calculated in US dollars for one hectare. To obtain the main project parameters with particular area of forest belts to be planted taken into account, it is necessary to multiply these per hectare estimates by the land area. Depending on the potential price in 2008, the project foresees different payback periods as given in tables 6—10 and discussed in five scenarios. Starting from the time of payback, calculated for each of the five scenarios in tables 6—10, the forest belts will bring in a pure “carbon” profit. 6 The computations are based on standard flow charts of the Voronezh Labor Standard Research Laboratory. 25
  26. 26. Table 6. Scenario 1 Рсо2= US $5/t of СО2 Bank interest, i 2% 5% 8% 10 % Net present value, NPV 102 12 Payback period (years) 17 21 32 unprofita ble Internal Profit Rate, IPR 6% 6% Profitability index, PI 0.31 0.039 Table 7. Scenario 27 Рсо2= US $10/t of СО2 Bank interest, i 2% 5% 8% 10 % Net present value, NPV 569 347 205 138 Payback period (years) 8 10 11 11 Internal Profit Rate, IPR 17 % 17 % 17% 17 % Profitability index, PI 1.74 1.14 0.71 0.49 Table 8. Scenario 3 Рсо2= US $15/t of СО2 Bank interest, i 2% 5% 8% 10 % Net present value, NPV 1036 682 454 347 Payback period (years) 5 6 6 6 Internal Profit Rate, IPR 27 % 27 % 27% 27 % Profitability index, PI 3.16 2.24 1.57 1.23 Table 9. Scenario 4 Рсо2= US $20/t of СО2 Bank interest, i 2% 5% 8% 10 % Net present value, NPV 1503 1018 704 556 Payback period (years) 4 5 5 5 Internal Profit Rate, IPR 36% 36% 36% 36% Profitability index, PI 4.59 3.35 2.44 1.98 Table 10. Scenario 5 Рсо2= US $50/t of СО2 Bank interest, i 2% 5% 8% 10 % Net present value, NPV 4305 3030 2201 1807 Payback period (years) 3 3 3 3 7 Calculation of basic parameters of the investment project for scenario 2 at РСО2= US $10 and i=10% is given in Appendix Table 1. 26
  27. 27. Internal Profit Rate, IPR 31% 31% 31% 31% Profitability index, PI 13.14 9.96 7.63 6.43 Minimal price of 1 ton of removed carbon dioxide (СО2) at a 10% discount rate is 7 US dollars. 27
  28. 28. Incidental benefits Agricultural producer’s benefits. When drawing up the project, the designers calculated additional benefits related to higher yield capacity of crops. The calculation was based on Goscomstat (the State Committee for Statistics) data on Voronezh Oblast for 1999. The plant production calculated per 1 hectare of cropped land made US $155/hectare. Owing to forest belt planting (according to O.G. Kotlyarova)8, by the ninth year after planting forest belts, the yield capacity will go up by 19.6—31.2%. To calculate minimal accidental benefits, some assumptions were made. A 15-m wide forest belt frames a 400 m x 1000 m field. The forest belt has a positive effect not only on these 40 hectares, but on the adjoining area as well. The overall territory, on which the forest belt produces a positive effect, is 120 hectares for the forest belt area of 4 hectares. The growth in yield capacity was assumed linear for 10 years followed by stabilization. The estimate was at least US $30/hectare extra for crops at market prices on agricultural produce a year. Total discounted accidental benefits calculated per 1 hectare are presented in Table 11. Table11. Total discounted accidental benefits Bank interest, i (discount rate, %) 2% 5% 8% 10 % Total discounted accidental benefits from 11.1 7.7 5.6 4.5 higher yield capacity (thous. US $/hectare) Period of project payback due to raising 3 3 4 4 yield capacity (years), without СО2 taken into account Investor’s benefits. Improving the company’s image. Today, one can see labels of environmentally sound goods not only on food staffs, but also on industrial products, such as computers, automobiles, etc. This means that the producers invest in environmental steps, for instance, forest planting. This environmental mechanism is already effective in the world, especially in countries possessing free territories suitable for planting forests. 8 Kotlyarova, O.G. and Kotlyarova E.G., Forest Amelioration in Landscape-Consistent Farming Systems / Agricultural Forest Reclamation: Problems, Methods of Decision, and Prospects. Volgograd, VNIALMI, 2001, pp. 118-120. (See table Dynamics of Crop Yield Capacity in Eastern Areas of Belgorod Oblast for 1981-2000) 28
  29. 29. Project’s risks The project’s risks can be basically classified into two groups: natural and economic. Natural risks include destruction or damage of forest belts resulting from fires, illnesses and cattle bite on forest plantations. Economic risks are associated with variation of the world market price of one ton of carbon. Analysis results for this risk are presented in scenarios 1—5. One most important risk is a forest belt loss as a result of a fire, illness, drought, or destruction by insects or (in the first 5 years) cattle. These risks could be reduced on account of responsibility to be born within first 5 years, in conformity with the agreement (contract), by the leskhoz that plants forest belts and additional trees in place of fallen ones. Then, the functions of protection from negative effects go to the APC on the territory of which the forest belts were planted. Fire risks in forest belts are significantly lower than in forest tracks due to the fact that forest belts are far apart and have a 7—10 times more elongated shape. Therefore, on occurrence of fire, no large shelter belt area is likely to be burnt out. Organization experience Under the aegis of the Center for Russian Environmental Policy, a survey of pioneering developments was published on addressing the carbon dioxide problem: how to ensure sequestration of industrial CO2 emissions by means of large-scale forest planting in Russia. The proposals on actions targeted at carbon dioxide removal by afforestation, which were prepared by Russia’s prominent experts in the field of forestry, aroused international interest at the World Conference on Climate Change in Kyoto (Japan) in 1997. The Center for Russian Environmental Policy (CREP) organized and held Round Table meetings on raising the economic value of natural resources within the framework of the project “Priorities for Russian Environmental Policy: from the Federal Center to Regions”, which has been implemented for two years and is supported by the MacArthur Foundation, the Mott Foundation, The Trust for Mutual Understanding, and the Round Table of Russian Environmental Organizations; CREP issues the bulletin “Towards a Sustainable Russia”; CREP took part in the preparation for the workshop “Participation of Russia in the Prevention of Global Climate Change”. The workshop’s outcome was the establishment of the general stand of Russian NGOs towards the Sixth Round of negotiations of the Parties to the UN Framework Convention on Climate Change. In 2001, planting of forest belts was exercised on 50 hectares of land in Druzhba APC, Liski District, Voronezh Oblast. 29
  30. 30. Anticipated Results Economic The project’s principal economic results are as follows: - Raising APC productivity and yield capacity; - Raising economic efficiency of agriculture; - Raising the value of lands belonging to agricultural enterprises (LPCs); - Reducing investor’s (investors’) environmental expenses on account of acquisition of “carbon allowances”; - Raising the value of investor’s products on account of improvement of the environmental image (environmental reputation). Environmental The project’s environmental benefits are: - Reduced water and wind erosion of soils; - Reduced drought intensity at the expense of creation of a favorable microclimate for crops; - Creation of migration ways for animals and birds under agricultural landscape conditions; - СО2 removals. Social The project’s social benefits are: - Raising the investor’s status in the eyes of the public; - Raising the social and political status of the administration of the oblast, in which this investment project is implemented; - Arranging recreation zones to promote public health; - Changing the population’s attitude to protection of the environment. Legal The project’s institutional benefits are: - Creating precedents of disseminating positive practices associated with the ecologically sound landscape farming in agricultural enterprises; - Improving land management in the region; - Creating an environmental and legal mechanism for soil protection in conformity with effective federal and regional legislation. 30
  31. 31. Possibilities for Implementing the Project in Other Regions Geographic coverage. The project can be implemented in all Russian agricultural regions. The most effective and economically attractive seems to be the dissemination of the project in southern regions of Russia’s European part (forest-steppe and steppe zones). This is explained by the availability of vast farmland, the dominance of the agroindustrial complex in the economic structure, favorable climatic conditions for plant growth, the necessity of maintaining soil productivity (prevention of soil erosion, improvement of water regime in these territories, etc.), and other accidental benefits. Within the framework of this study, oblast and republican authorities confirmed their need in creating forest belts in these regions. Data on forest belt areas are given in Table 12. Table 12. Potential areas for planting forest belts in some regions9 Region Area, hectares Voronezh Oblast10 8720 Republic of Buryatia 500 Belgorod Oblast 10400 Kaliningrad Oblast 1500 Volgograd Oblast 500 9 See Appendices. 10 In this region, the area is given for various cities and towns (Table 2). 31
  32. 32. Appendices Project’s GIS Support Modern geoinformation systems (GIS) represent a new type of integrated information systems, which, on one hand, include data processing procedures of many existing automatic systems, and, on the other hand, possess specific features of data arrangement and processing. Transition to automatic procedures for creating and handling electronic maps using GIS has a number of advantages: • improvement of precision of cartographic information; • reduction of labor input in fabrication of products; and • raising of labor productivity at the expense of automation or elimination of some operations The methodological basis for GIS data processing is digital locality simulation combining processes of primary information collection, simulation and updating, as well as document processing and formation. The state-of-the-art technological facilities allow automation of field and laboratory works. Aerial and satellite photographs constitute remarkable substrates for digital representation of GIS data: they contain coordinates together with images. For the purposes of this project, we used satellite photographs (courtesy SCANEX) of Voronezh Oblast and Liski District. One such photo is presented on the back flyleaf. It shows the river Don and the Druzhba farmland, with 50 hectares of new forest belts protecting the fields. Using the Mapinfo software shell, satellite photographs were linked with available cartographic materials to generate electronic maps allowing transition from the all-Russia level to the level of oblast, district, individual economy (APC Druzhba), and down to one plantation or a group of forest protection plantations. On the APC Druzhba maps, there can be seen 50 hectares of forest belts planted as part of the project. In parallel with this effort, a database was built to store information for each plantation: administrative identity, type of forest plant, date of planting, area, tree breed, state of vegetation, etc. The resulting electronic map is arranged as a multitude of layers (covers). The layers are built based on a combination of spatial objects (or a data set) having common properties or functional features. For such maps, three layer types were used as follows: (1) Layers of topographic, little-changed objects (administrative borders, water bodies, built-up territories, forests, etc.); (2) Topographic layer carrying information about planted forest plantations (area of forest belts, their location, configuration, species of planted trees, etc.). This layer is updated by adding data on new plantations, fellings, fires, etc., or changes in the state of existing forest plantations; 32
  33. 33. (3) Temporary subject layers to analyze intermediary results displayed, account of dynamics of wood pulp growth or carbon removals. Data may be processed either interactively or automatically. Using a system of filters or preset parameters, the objects belonging to the layer may be simultaneously scaled, moved, copied, or written in a database. In other cases (for other modes), it is possible to prohibit editing or viewing of the layer objects. By clicking the mouse directly on the map, one can choose either an individual forest plantation or a group of forest plantations and obtain full information about them. Through a system of inquiries about various criteria (breed, age, area, type, etc.), a sample of forest plantations is created corresponding to this inquiry. Using a mathematical model and special calculation techniques, it is possible to identify a growth in wood pulp for selected forest plantations for a given period of time. On that basis, the amount of sequestered carbon can be computed. Then, the efficiency of steps taken can be calculated using an economic model. The data obtained can be presented, depending on the user’s desire, as a series of maps, tables, or diagrams and printed on a paper carrier. The electronic map provides a mobile data model allowing one to set the composition, volume and form of the displayed data as desired by the user. The resulting information is analyzed, and, whenever necessary, appropriate steps are developed. Real-time modes are the basis in electronic map technologies. In the future, when various regions are switched to the project, it is projected to unite data on these regions within a single information system tracking input data and enabling fast response to changes. Consequently, the use of GIS technologies allows creation of a single information space both vertically and horizontally. In addition, they provide a possibility of fast and dynamic representation of data, predictions for a specified period of time, and assessment of economic efficiency of steps taken. 33
  34. 34. Calculation of Basic Parameters of the Investment Project Annex Table Year Cost, Carbon Profit, $/ha Net profit, NPV, $/ha Investment Discoun Cost of CO2, $/hectar stock, t/ $/ha s $/ha t rate,% $/t ha Years 2003 250 0.00 $ - $ -250.00 $ -227 250 10% 10,00 0 2004 3 1.27 $ 46.32 $ 43.32 $ -191 1 2005 3 1.27 $ 46.32 $ 43.32 $ -159 2 2006 3 1.27 $ 46.32 $ 43.32 $ -129 3 2007 3 1.27 $ 46.32 $ 43.32 $ -102 4 2008 3 1.27 $ 46.32 $ 43.32 $ -78 5 2009 3 1.27 $ 46.32 $ 43.32 $ -56 6 2010 3 1.27 $ 46.32 $ 43.32 $ -36 7 2011 50 1.27 $ 46.32 $ -3.68 $ -37 21.20 8 2012 3 1.27 $ 46.32 $ 43.32 $ -20 9 2013 3 1.86 $ 68.08 $ 65.08 $ 2 10 2014 3 1.86 $ 68.08 $ 65.08 $ 23 11 2015 3 1.86 $ 68.08 $ 65.08 $ 42 12 2016 3 1.86 $ 68.08 $ 65.08 $ 59 13 2017 3 1.86 $ 68.08 $ 65.08 $ 75 14 2018 3 1.97 $ 72.18 $ 69.18 $ 90 15 2019 3 1.97 $ 72.18 $ 69.18 $ 103 16 2020 50 1.97 $ 72.18 $ 22.18 $ 107 9.89 17 2021 3 1.97 $ 72.18 $ 69.18 $ 119 281.09 18 2022 3 1.97 $ 72.18 $ 69.18 $ 129 PI, dml 19 2023 3 1.97 $ 71.96 $ 68.96 $ 138 0.49 20 2024 3 1.97 $ 71.96 $ 68.96 $ 147 21 2025 3 1.97 $ 71.96 $ 68.96 $ 155 22 2026 3 1.97 $ 71.96 $ 68.96 $ 162 23 2027 3 1.97 $ 71.96 $ 68.96 $ 168 24 2028 3 1.88 $ 68.66 $ 65.66 $ 173 25 2029 3 1.88 $ 68.66 $ 65.66 $ 178 26 2030 3 1.88 $ 68.66 $ 65.66 $ 183 27 2031 3 1.88 $ 68.66 $ 65.66 $ 187 28 2032 3 1.88 $ 68.66 $ 65.66 $ 191 29 2033 3 1.75 $ 64.20 $ 61.20 $ 194 30 2034 3 1.75 $ 64.20 $ 61.20 $ 197 31 2035 3 1.75 $ 64.20 $ 61.20 $ 200 32 2036 3 1.75 $ 64.20 $ 61.20 $ 202 33 2037 3 1.75 $ 64.20 $ 61.20 $ 204 34 2038 3 1.64 $ 60.10 $ 57.10 $ 206 35 2039 3 1.64 $ 60.10 $ 57.10 $ 208 36 2040 3 1.64 $ 60.10 $ 57.10 $ 209 37 2041 3 1.64 $ 60.10 $ 57.10 $ 211 38 2042 3 1.64 $ 60.10 $ 57.10 $ 212 39 2043 3 1.51 $ 55.12 $ 52.12 $ 213 40 2044 3 1.51 $ 55.12 $ 52.12 $ 214 41 2045 3 1.51 $ 55.12 $ 52.12 $ 215 42 2046 3 1.51 $ 55.12 $ 52.12 $ 215 43 2047 3 1.51 $ 55.12 $ 52.12 $ 216 44 2048 3 1.44 $ 52.70 $ 49.70 $ 217 45 34
  35. 35. А.V. Stetsenko, V.N. Sidorenko, N.V. Luzhetskaya, V.V. Shatailov, and A.V. Kulevsky. Sequestration of Greenhouse Gases by Forest Belts on Agricultural Lands Printed from a master layout prepared by the Center for Russian Environmental Policy. Signed for printing: 15 August 1992. Size: 210×148. Offset paper, 80g/sq.m. 2 printer’s sheets. Circulation: 1000 copies. Reform Press Publ. Layout, design and preprint made by authors. Cover: A. Stetsenko and V. Shatailov ©, 2002 Stetsenko, A.V., Sidorenko, V.N., Luzhetskaya, N.V., Shatailov, V.V., and Kulevsky, A.V. P 89 Sequestration of Greenhouse Gases by Forest Belts on Agricultural Lands: In- vestment Project. Moscow, Center for Russian Environmental Policy, 2002. – 32 p. ISBN 5-88971-025-7 This Project is meant for potential investors to finance planting of forest belts within the framework of the Kyoto Protocol in order to prevent global climate change. The authors offer a package of docu- ments, which they developed and tested practically, to be used for making arrangements with land users and other interested parties. 35
  36. 36. The essence of the project is in growing forest belts to address problems of global climate change and prevention of soil degradation. Forest belts, planted on agricultural lands to protect soil from wind and water erosion and to raise yield capacity, simultaneously function as absorbers of greenhouse gases. Hence, the cost of shelter belt planting will be compensated for by selling of greenhouse gas emissions allowances to industrial enterprises. Enterprises or Carbon Funds acting on behalf of these enterprises will become investors financing planting of forest belts. In exchange, they get securities confirming real reduction of carbon dioxide. Using methodologies developed by the authors, the area is calculated of forest belts requisite for sequestration of a definite amount of atmospheric carbon dioxide. The project presents interest for business community, carbon funds, environmental foundations, as well as everyone interested in problems of climate change, environmental protection, and sustainable development. Center for Russian Environmental Policy 26 Vavilov St., Moscow 117808, Russia Phone: +7 (095) 952 3007. E-mail: ecopolicy@ecopolicy.ru Stetsenko, A.V.: phone: +7 (095) 4314757; e-mail: astetsenko@mtu-net.ru 36

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