The Kenya Agricultural Carbon Project (KACP), developed by the Vi Agroforestry programme, receives mitigation funding from the World Bank’s BioCarbon Fund for soil carbon sequestration and above-ground sequestration in trees. Apart from providing farmers with a small sum of extra cash, the switch to climate-smart agricultural practices has had the additional benefits of increasing crop yields as well as improving farmer’s resilience to climate change. According to a recent World Bank commissioned study, the crop yield increases alone are worth US$ 200-400/ha/year. In KACP, Vi Agroforestry and the BioCarbon Fund has developed the Sustainable Agricultural Land Management (SALM) methodology. A model approach to measuring soil carbon sequestration is being used, which has been approved by the Verified Carbon Standard (VCS) agency. SALM is a public good, free for any organization to use. However, concerns have been raised, notably by the International Agricultural Trade Policy Institute (IATP), about the adequacy of a carbon market approach to financing a shift to sustainable agriculture. This event will also discuss these concerns.

1. The BioCarbon Fund
Land Use Change and
Carbon Markets
Ellysar Baroudy
Agriculture Day, December 3, 2011
Harnessing the carbon market to sustain ecosystems and alleviate poverty

2.  Public / Private Fund
 Dedicated to land use mitigation activities – but hard to draw rigid line as also
adaptation value
 Mainly a compliance fund – purchasing credits from CDM projects – but also
working in voluntary space
 Over 25 projects in the portfolio
 But fund does not only purchase carbon – it helps develop “infrastructure”
needed for transaction
 Develops carbon accounting methodologies
 Develops tools to assist project developers
 Provides technical assistance
Who we are and what we do…

3. Overview of Carbon Market
 Focus on land use – where we are today
Compliance Market (UNFCCC and EU)
What is
allowed:
Kyoto Protocol
(CDM)
Kyoto
Protocol
(JI)
Long-term
Cooperative
Action
(Copenhagen
Accord)
EU-ETS
European
Trading
Scheme
Voluntary
Market
Today Afforestation/
Reforestation
(A/R)
All land
use
N/A N/A AFOLU,
including
A/R,
REDD+, IFM
ALM
Being
discussed
A/R
Croplands
Grasslands
Wetlands
SFM
As above REDD+
Agriculture
(less
advanced)
N/A As above

4. 2004 2005 2006 2007 2008 2009 2010
EU ETS Allowances
Other Allowances
Primary CDM
Other Offsets
Secondary CDM
2010: Overall market stalls
135
0.7
11
31
63
(in billion US$)
144
142

5. A global market driven by the EU ETS
3% 2%
23%
1%
2%
13%
72% 84%
0,0
0,5
1,0
2005 2006 2007 2008 2009 2010
Participationofeachmarket
Others
Primary CDM
Secondary CDM
EUAs

6.  For Markets, it is important to note:
 Regulated market is huge compared with voluntary market
 Voluntary market overall is 0.3% of value of regulated market
 Overall values (2010):
 Regulated market: $142 billion
 Voluntary (total): $393 million
 Voluntary (forestry): $127 million
 The European market is the largest and most significant – but it does not allow
land-based credits
Some numbers…

7. Significant Evolution over Time
 In 2004….
 No market to speak of
 No carbon accounting methodologies
 No specialized auditors
 No guidance on undertaking such projects
 Few capacities for implementation
 In 2011…
 Numerous viable projects: Mainly A/R and REDD+
 Methodologies increasing in number (A/R, REDD, Soil C)
 Much more developed infrastructure: service providers, auditors,
guidance
 Considerations for going from project level to scale (who will
finance?)
 Increasingly more considerations for integration of land-use
activities within a landscape

8. Carbon Markets – Outlook?
 Some positive movement from previous 2 UNFCCC meetings in
specific areas, such as REDD+ (although rules still to be elaborated);
on reforestation and agriculture there have been interesting
development to widen scope
 Uncertainty for UNFCCC agreement remains up to Durban
 Only significant positive market signal beyond 2012 is from EU-ETS,
favorable for ERs from LDCs, but EU-ETS bans land-use credits
 Uncertainty for some national cap and trade legislation (e.g., US,
Japan) that could boost demand for credits from developing
countries
 Some cap and trade schemes in operation favorable to forestry and
agriculture (e.g, New Zealand, Australia)
 Increasing discussion of bilateral agreements but mechanisms are
not clear (e.g., Japan); nor is it clear if there will be linkages for these
system beyond the bilateral deal
 Voluntary market has rebounded and is increasing in volume and
value. Relative to regulated market still small
 However, can anyone foresee a world without CO2 constraints?

9. Huge Environmental & Social Co-Benefits
 Pioneering new financial instrument for sustainable development
 Mitigation and adaptation role with significant local environmental and social benefits
 Important to further incentivize better land management
 Agriculture is an integral part of landscape; leaving it out makes no sense – not from the
mitigation objective, nor from pragmatic implementation
Pre-2005 2010

10. Additional Resources
 WB Carbon Finance Unit: www.carbonfinance.org
Lessons Learned from 10 years of Carbon Finance
Brochure on CDM reform
State and Trends of the Carbon Market
 BioCarbon Fund: www.biocarbonfund.org
Summary of all BioCF projects
BioCF Lessons Learned from Afforestation and Reforestation
Clean Development Mechanism Projects