International Workshop “REDD after Copenhagen – The Way Forward” Nairobi, Kenya 1-3 March, 2010Luis Salgado Econ. Jorge TorresProject Manager Technical Unit HeadÉcoRessources Carbone SFM BAM SAC
Peru supports the implementation of “nested approach” and acombination of markets and funds mechanisms for REDDfinancing.This has stimulated private and public organizations to promoteREDD initiatives in different types of land tenures (forestconcessionaries, protected areas, indigenous lands,conservation concessions, etc.).Most of the initiatives are located in Madre de Dios region(south east of Peru) where a major road, that will join Brazil withAsian markets, is being built.Up to now, only a forest concession has got CCB Gold and isplanning to sell offsets in CCX market.
Brazil nut tree grows naturally in tropical rainforests of Madre deDios.Peru represents around 10% of total market, after Brazil andBolivia. The activity is seasonal (Jan-Mar).BN production areas are conceded for 40 years periods, withareas of 1000 hectares in average. There are around 1000concessions (1 million of hectares), what makes this activity veryimportant for the local economy.Families dedicated to this activity are mostly poor rural thatevery year in rainy season go into the forest to collect the pods,after being funded by exporting companies or intermediaries, inan agreement that implies a commitment for their product.
As a consequence of the construction of the Inter-oceanicroad, internal migration has grown significantly, increasing thethreat of deforestation on the concessions, mainly foragricultural or cattle ranching purposes.Slash-and-burn practices are common in Peruvian Amazon as acheaper way to clear the forest land.In that context, SFM-BAM has achieved an agreement with BNharvesters federation to develop a REDD project.The agreement establishes that the company will invest at least1 million dollars in the first 18 months and an amount to bedefined for the following 30 years.
The strategy is based in:(i)the improvement of incomes perceived by BN harvesters fromtheir main activity and(ii)The improvement of their capacity to protect theirconcessions from external risks.A BN processing and exporting facility will be implemented forharvesters associated to the project (owners of 70% of shares).Allowing them to receive a higher prices and participate inprofit distribution.BN harvesters will own 30% of net incomes from CO2 sales.Other components are organizational strengthening, technical& legal advisory, forest enrichment, training and a plan toprevent fires and invasions, among others.
ELIGIBILITY:In Peru, there is scarce information about deforestation ratesand trends and what exists comes from different sources, donewith different methodologies, not compatible.It implies that for a same region and year, there are differencesin deforested area. For this reason, SFM-BAM has promoted aconsortium with participation of main institutions (includinggovernment at its different levels) that is developing an agreedmeth to generate land use maps, with the highest technicalstandards.The meth should be in accordance with national definition offorest and the results for most recent year will be confirmed withfield assessment.
PROJECT ACTIVITYThe strategy of the project is based on the principle thatdeforestation is caused by agricultural expansion of smallproducers and limited capacity of BN harvesters to protect theirarea. BN harvesters will increase the profitability of theiractivities from the following sources: • Export price against local market price • Participation in profits of processing plant • Participation in net incomes from carbon sales • Incomes from reforestation componentPermanence will be guaranteed from: • Other forest resources exploited • Control and vigilance plan
ADDITIONALITYBased on a combination of barrier and financial analysis, weneed to demonstrate that BN activity does not generateenough conditions to avoid the expansion of agriculture andcattle ranching activities without the inclusion of carbonincomes.We will calculate incomes of concessionaries in with / withoutproject scenarios.We will demonstrate that BN harvesters by their own wouldn’thave been able to implement this level of investment,necessary to break the circle of subsistence-low added value.And, complementarily, that this investment is not enoughprofitable for any private company without the carbonincomes.
BASELINE SCENARIOSince its creation, MDD has been an isolated region (beforeroad paving). For this reason, historical deforestation ratecannot be considered reliable for future trend.A modeling baseline scenario is being developed based onmaps produced under the consortium umbrella and results ofthis work also will be validated with local actors (includinggovernmental agencies) and expert review in order to producea unique agreed baseline scenario.As required by methodologies, results will be validated with arecent year map and input variables will be monitored in orderto analyze, in the future, if predictions are within an acceptablemargin of error.
Preliminary results show that deforestation is best explained witha cost-benefit approach than with a demographic growthapproach.
LEAKAGEAs many REDD initiatives are in progress in this region, we areplanning to work with regional government and projectdevelopers to design and implement a REDD regional program,in accordance with standards’ technical requirements.CARBON STOCKSField forest inventory will be carried out and databases will beused as input for biomass equations to estimate carbon stocksin project area.Satellital images and field assessment will be combined tomonitor, using the methodology officially agreed, the annualdeforested area in order to compare it with baseline forecast.
LEGAL ISSUESA long term agreement has been agreed between BNharvesters federation and SFM-BAM were SFM-BAM commit aninvestment in exchange of a participation in BN processingcompany and the carbon trading rights.Complementarily, the Federation has signed another contractwith each concessionaire where he transfers its rights over thecarbon stock from his concession.MARKETSProject is planning to be validated under VCS and CCBAstandards.
Tambopata National Reserve and Bahuaja Sonene NationalPark are two natural protected areas, that are part of biologicalcorridor Vilcabamba-Amboro.The areas cover a surface of 1.366.106 hectares, from which540.244 ha where offered for private administration using aninternational call for proposals.Traditionally, Peruvian State has been responsible of theadministration of their protected areas, usually by implementingan office with forest guards patrolling the boundaries (normallywith limited resources).
The private administration is a new mechanism designed by thePeruvian Government where non-profit organizations can signcontracts with the Government and administrate the protectedarea using the incomes generated by different environmentalservices.There is an implicit acknowledge that private actors can play arole, as they have experience in accessing to extra fundsand/or they can achieve a higher performance.In this case, a local NGO obtained the highest score, thanks tothis innovative financial mechanism, and has signed a contractwith SFM-BAM for 7 years with option to increase to 20 years.The proposal includes a US$ 5.2 millions support to finance theproject activities during the first 7 years and around US$ 0.5millions per year (to be agreed with the Government) for thenext 13 years in exchange of carbon trading rights.
PROJECT ACTIVITYAs many of the protected areas, they are inhabited. Pre-existing activities as logging were suspended when the areawas given. Only a few BN concessions (very controlled) and anecotourism lodge are allowed. Indigenous groups are alsoallowed to hunt and harvest forest products for non-commercial purposes.Nevertheless external pressure is higher over time. Illegal goldmining, illegal logging and agricultural expansion from migrantsare the main threats.In that sense, the project strategy is focused on finding andpromoting, between families who live in buffer zone, economicactivities based on sustainable use of natural resources.It is complemented with extra resources to install control pointsand rivers and road patrols .
ADDITIONALITYEven though, there are voices who claim that legally protectedareas should not be eligible for REDD, it’s clear in most of ourdeveloping countries, that laws are not enough to keep themfree from deforestation.A weak enforcement and subsistence needs of neighborpopulation make unlikely that scenario.Modeling analysis show that protected areas slow but don’tstop deforestation.Specifically, mining activity is already occurring in MalinowskyRiver, a natural frontier of Tambopata Reserve.
LEGAL ISSUESA contract has been signed between the PeruvianGovernment and SFM-BAM, where trading rights of carbonoffsets will be transferred for a 20 years period, as soon as alegal framework allows the State to do that.This agreement will continue even if the administration contractbetween the Government and the local NGO is not renewed.In the agreement, there is a pre-condition that the legalframework will be in place during first year and that the taxesassociated to this activity will not put in risk the feasibility of theactivity.
• In a sub-national approach, it is key the coordination betweenprivate and public players to create consensus onmethodological issues. Multiple results will affect negatively thecredibility of the system.• REDD eligibility criteria should include the creation ofalternative sources of incomes for deforestation agents and notstrictly protection actions. Even more, this should be part ofcosts and not part of profit shares.• Stopping deforestation is an ethical issue and all playersshould be allowed to participate and conditions must becreated to allow it. Historically, governments have been unableto design effective tools.
• Probably, the main advantage of market approach is that itforces project developers to design effective strategies;otherwise, they will fall in an unwanted bankruptcy. This isprobably to best incentive to do their best effort to stopdeforestation.• The role of the Government should be focused on creatingthe conditions to allow small landowners to access REDDopportunities, to monitor that leakage and baseline scenariosare adequately measured and land cover maps are wellgenerated.