Document of THE WORLD BANK Report No. 39898 - CO PROJECT APPRAISAL DOCUMENT ONA PROPOSED PURCHASE OF EMISSION REDUCTIONS BY THE BIOCARBON FUND IN THE AMOUNT OF UP TO US$ 1.0 MILLION FOR THE COLOMBIA: San Nicolas Carbon Sink and Arboreal Species Recovery Project June 25, 2007 Sustainable Development Department Colombia and Mexico Country Management Unit Latin America and the Caribbean Region CURRENCY EQUIVALENT (Exchange Rate Effective June 1, 2007) Currency Unit = Pesos Colombianos 1950 Pesos Colombianos = US$1 Fiscal Year January 1 - December 31 ABBREVIATIONS AND ACRONYMS A/R Afforestation/Reforestation BCF BioCarbon Fund CAS Country Assistance Strategy CCIG Climate Change Initiatives Grant CDM Clean Development Mechanism CEA Country Environmental Analysis CER Certified Emission Reduction CF Carbon Finance C02e Carbon Dioxide Equivalent COP Conference of the Parties DNA Designated National Authority DOE Designated Operational Entity EIA Environmental Impact Assessment EMP Environmental Management Plan ER Emission Reduction(s) ERPA Emission Reduction Purchase Agreement GHG Greenhouse Gas GWP Global Warming Potential INAP Integrated National Adaptation Project IPCC Intergovernmental Panel on Climate Change IPP Indigenous People Plan LULUCF Land Use, Land Use Change and Forestry MP Monitoring Plan NGO Non-governmental Organization N20 Nitrous Oxide NPV Net Present Value NRM Natural Resource Management NSS National Strategic Study PAD Project Appraisal Document PCF Prototype Carbon Fund PDD Project Design Document SPS Sylvo-pastoral System UNFCCC United Nations Framework Convention on Climate Change Vice President: Pamela Cox Country Manager/Director: Mahktar Diop Sector Director: Laura Tuck Task Team Leader/Task Manager: Walter Vergara COLOMBIA: SAN NICOLAS PROJECT CONTENTS A. STRATEGIC CONTEXT AND RATIONALE .......................................................... 6 1. KEY DEVELOPMENT ISSUES AND GOVERNMENT STRATEGY .................................................. 6 2. RATIONALE FOR BANK INVOLVEMENT ................................................ 9 3. SECTOR ISSUES TO BE ADDRESSED BY THE PROJECT AND STRATEGIC CHOICES ............ 10 4. HIGHER LEVEL OBJECTIVES TO WHICH THE PROJECT CONTRIBUTES ................................... 11 B. PROJECT DESCRIPTION ............................................ 11 1 . PROJECT DEVELOPMENT OBJECTIVE ..................................................12 2. PERFORMANCE INDICATORS .........................................................12 3. PROJECT COMPONENTS .............................................................13 4. SUSTAINABILNrY AND REPLicABELiTY................................................13 5. ALTERNATIVES CONSIDERED AND REASONS FOR REJECTION ............................14 6. MAJOR RELATED PROJECTS SUPPORTED BY THE BANK AND/OR OTHER DEVELOPMENT AGENCIES .............................................................................. 14 7. LESSONS LEARNED AND REFLECTED IN THE PROJECT DESIGN ........................... 14 C. IMPLEMENTATION ................................................ 15 1. INSTITUTIONAL AND IMPLEMENTATION ARRANGEMENTS ............................... 15 2. MONITORING AND EVALUATION OF OUTCOMES/RESULTS ............................................... 15 3. CRMCAL RISKS AND POSSIBLE CONTROVERSIAL ASPECTS ............................................... 17 4. ERPA CONDITIONS AND COVENANTS ................................................ 18 D. APPRAISAL SUMMARY ............................................. 18 1. FINANCIAL ANALYSIS .............................................................. 18 2. ECO N O M IC ........................................................................19 3. TcHNICAL .......................................................................19 4. SOCIAL ...........................................................................20 5. ENVIRONMENT ....................................................................21 6. SAFEGUARD POLICIES ..............................................................21 E. COMPLIANCE WITH BANK POLICIES ................................. 22 ANNEX 1: DETAILED PROJECT DESCRIPTION ........................... 23 ANNEX 2: IMPLEMENTATION ARRANGEMENTS ......................................... 32 ANNEX 3: MASBOSQUES .............................................. 33 ANNEX 4: FINANCIAL ANALYSIS ....................................... 35 ANNEX 5: ECONOMIC ANALYSIS ....................................... 42 ANNEX 6: SOCIAL ANALYSIS .......................................... 48 ANNEX 7: ENVIRONMENTAL ASSESSMENT .............................. 50 3 ANNEX 8: EMISSION REDUCTION PURCHASE AGREEMENT/TERM SHEET ........ 61 ANNEX 9: CALCULATION OF EMISSION REDUCTIONS ..................... 62 ANNEX 10: ENDANGERED POPULATIONS OF ARBOREAL SPECIES .......... 75 ANNEX 11: POPULATION STUDY AND RECOVERY PLAN FOR ENDANGERED ARBOREAL SPECIES ................................................. 81 ANNEX 12: USE OF SOIL IN THE SAN NICOLAS AREA ...................... 84 ANNEX 13: ASSESSMENT OF CARBON SINK RISKS ........................ 86 ANNEX 14: THE COLOMBIAN FORESTRY LAW AND ITS IMPLICATIONS ON THE PROJECT ..........................................................................................90 ANNEX 15: WORLD BANK ACTIVITIES IN THE SAN NICOLAS REGION REGARDING VIOLENCE ................................................................. 97 ANNEX 16: STRATEGY FOR CLIMATE CHANGE ACTIVITIES IN COLOMBIA ..... 98 ANNEX 17. PROJECT PREPARATION AND SUPERVISION .................. 101 ANNEX 18: GENERIC BASELINE AND MONITORING METHODOLOGY FOR AVOIDING DEFORESTATION AND FOREST ENRICHMENT PROJECT ACTIVITIES ....................................................... 102 ANNEX 19: AVOIDED DEFORESTATION ................................ 108 4 PROJECT APPRAISAL DOCUMENT Latin America and Caribbean Region LCSEN Date: June 25, 2007 Team Leader: Walter Vergara Country Director: Axel von Trotsenburg Sectors: Forestry (100%) Sector Director: Laura Tuck Themes: Climate Change (P), Biodiversity (S) Proiect ID: P098615 I Project Financing Data: []Loan []Credit []Grant [] Guarantee [X] Other: Carbon Finance For Loans/Credits/Others: This project does not involve Bank financing. Total Bank Carbon Financing amounts to US$ 2.1 million Proposed terms: $4.05 per ton CO2e; $2.50 per ton C02 non-Kyoto Financing Plan (US$m.) Source Local Foreign Total Cornare 1.4 0.0 1.40 Municipalities 0.13 0.0 0.13 Masbosques 0.33 0.0 0.33 Bio Carbon Fund 0.0 1.0 1.10 Climate Change Implementation Grant 0.0 0.4 0.40 Participating farmers (landowners) 0.05 0.0 0.05 Total 1.91 1. 4 3.31 Borrower: Not applicable Implementing agency: Masbosques; Contact persons: Viridiana Delgado, Patricia Tobon, Oscar Alvarez Address: Via Porvenir Aeropuerto Vereda Barro Blanco, Masora Rionegro - Antioquia, Colombia Estimated disbursements (Bank FY/US$m) for window 1 and 2 FY 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Annual $0.02 $0.02 $0.02 $0.07 $0.17 $0.16 $0.14 $0.15 $0.14 $0.1 $0.16 Cumul ative $0.02 $0.04 $0.06 $0.13 $0.3 $046 $0.6 $0.75 $0.89 $0.98 $1.04 Project implementatiqp period: 2007-2017 Expected effectiveness date: June 2007 Expected closing date: June 2018 Does the project depart from the CAS in content or other o Yes X No significant respects? Does the project require any exceptions from Bank policies? o Yes X No Have these been approved by Bank management? o Yes X No Is approval for any policy exception sought from the Board? o Yes X No Does the project include any critical risks rated "substantial" o Yes X No or "high"? Does the project meet the Regional criteria for readiness for X Yes o No implementation? _ 5 A. STRATEGIC CONTEXT AND RATIONALE 1. Key development issues and government strategy The Global climate is changing rapidly. The 2007 summary for policymakers of the Fourth Assessment Report of the Intergovernmental Panel for Climate Change (IPCC) has ratified the cause and the likely impacts of accelerated warming. For the next two decades a warming of about 0.2 degrees Celsius per decade is projected (for a range of IPCC Special Report on Emission Scenarios (SRES)). The mean surface temperature may increase between 1.8 and 6.4 degrees Celsius during the next 100 years. A change of this magnitude is unprecedented and will result in significant impacts to be felt at a global scale. Along with changes in mean climatic conditions, the biosphere potentially faces irreversible and catastrophic system impacts associated, for example, with the reduction of thermo-haline circulation, the melting of the Greenland ice sheet (Epstein 2005), the subsidence of small islands, increases in intensity of hurricanes (Webster et al. 2005), the elimination of permafrost in Siberia and northern Canada and affect ecosystem integrity. Climate change is the most serious challenge being faced by the global ecosystem and may further accelerate the ongoing processes of land degradation. The (thermo-dynamical) momentum of climate change already locked-in, spells major, in some cases catastrophic ecosystem changes with implications for all, in particular for developing countries and the poor amongst these nations. This is the result of the emissions of the past, largely driven by developed economies and resulting in significant and irreversible damage to ecosystems, world wide. While countries in Latin America are not large users of energy and therefore not large emitters of greenhouse gases, there do exist in the region sizable opportunities to sink carbon in natural ecosystems while protecting remaining forests through reforestation, natural regeneration and avoided deforestation. The development of these carbon sinks, by necessity located in rural areas will benefit local populations and contribute to improvements in income and thus quality of life. The planet is experiencing extinction rates of species unprecedented in human history. The Millennium Ecosystem Assessmentl, MA, reported that changes in biodiversity due to human activities were more rapid in the past 50 years than at any time in human history, and the drivers of change that cause biodiversity loss and lead to changes in ecosystem services are either steady, show no evidence of declining over time, or are increasing in intensity. Under the plausible future scenarios developed by the MA, these rates of change in biodiversity are projected to continue, or to accelerate. Climate impacts are expected to further aggravate the situation. Colombia is particularly vulnerable to the impacts of climate change. The first national communication (NC 1) to the United Nations Framework Convention on Climate Change (UNFCCC) indicates Colombia's high vulnerability to the expected impacts from climate 2 change, identifying high mountain habitats, insular and coastal areas and health as the areas of primary concern. More recently, studies commissioned as part of the preparation of the second communication and others have confirmed and indicated in more detail trends and impacts in Iwww.millenniumassessment.org 2 Primera Comunicaci6n Nacional al UNFCCC. IDEAM. 2001. 6 these areas. These vulnerabilities find echo in the findings of the IPCC and are being addressed through the implementation of pilot responses under a GEF-funded project.3 Climate Change impacts will affect forest composition and accelerate processes of land degradation. Colombia has about 55,000 species of vascular plants, making it the country with the highest density worldwide. With the rate of increase in surface temperature far outpacing the ability of forest species to migrate to more temperate latitudes, anticipated changes can affect mountain forests in the Andes and impact ecosystem integrity. This will add to the on-going process of land use change, where already approximately 42 million hectares have been intervened and transformed from their original state. Further, anticipated drastic reductions in runoffs from Colombia's high altitude moorlands, and tropical glaciers, caused by their warming and rapid retreat of ice caps will also affect the ability of mountain ecosystems in nearby areas to maintain diversity and provide environmental services. Forest species, especially those useful in construction and furniture, have been driven to such low densities that several emblematic species are near extinction, such as Cariniani pyrifomis (IUCN-CR), Godoya antioquensis and Podocarpus oleofolius. Further, anticipated drastic reductions in runoffs from Colombia's high altitude moorlands, and tropical glaciers, caused by their warming and rapid retreat will also affect the ability of mountain ecosystems in nearby areas to maintain diversity and provide environmental services. Climate impacts will thus exacerbate processes of land degradation and deforestation, in particular in the Andean region. Colombia's emissions of Green House Gas (GHG) are very modest (0.2% of global, with 0.6% of global population). Within these low intensity emissions, opportunities do exist to mitigate emissions in key sectors, including the development of carbon sinks. Opportunities for GHG mitigation are being actively pursued in renewable energy, wastewater treatment and energy efficiency (Jepirachi, Amoya, Rio Frio and Furatena projects). Adaptation measures are also being expl,ored and implemented through the Amoya and the recently approved Integrated National Adaptation Project (INAP). The National Strategic Study4 and the first National Communication estimated that 21% of GHG emissions in the country are due to land use change and that over 40% of the opportunities for GHG mitigation in the country are related to reforestation and afforestation. Yet, so far, only one carbon sink project is in the portfolio and it deals with savannah ecosystems. The region of the valley of San Nicolas is characterized by high levels of poverty. About half of the families have neither access to potable water, nor sanitary installations, and 20% has no access to health services. Also, there is a high percentage of illiteracy in the region, in some municipalities even to up to 50% (municipalities of El Santuario and La Uni6n). The landowners have limited access to credit in order to implement productive alternatives and can not pay for temporary employees to help them cultivate their land. There is also a lack of technical assistance to train landowners on productive and sustainable land uses. 3Colombia: Integrated National Adaptation Project. Project Appraisal Report. Report No. 34058-CO, World Bank 4National Strategy Study for the Optimal Use of the CDM in Colombia, Ministry of Environment, Bogota, April 2000. 7 Government Strategy Colombia is a party to the Convention on Biological Diversity, the Framework Convention on Climate Change and has also signed and ratified the Kyoto Protocol (Law 629 enacted November 30, 2001). The Government has also issued two National Communications to the UNFCCC, which highlight the challenges posed by climate change and outline opportunities for mitigation and carbon sinks in the country. In fact, Colombia has been a leading participant in the discussions on the provisions and regulations of the Clean Development Mechanism (CDM), in the context of the international negotiations under the auspices of the UNFCCC, and has developed a detailed negotiations agenda on items leading to the definition of the rules for the CDM. As part of these activities, the Government has completed, with Bank support, a national assessment for the optimal use of the CDM. The Government has, likewise, taken steps leading to the further development of institutional capacity through: a) the organization of an inter- institutional committee with the support of the Vice-president's office to ensure full coordination on climate change issues; and b) the set up of a climate change office, which has now been in operation for the last three years. On the basis of the studies sponsored as part of the NSS, other inputs and the development of institutional capacity, the Government has defined the main trusts of a National Climate Change Plan, as follows: * Strengthen the capacity to adapt to the anticipated impacts from climate change; * Promote reduction of emissions and increase the sequestration capacity for GHG; * Minimize the adverse impacts on the nation's exports of fossil fuels; * Promote scientific capacity and the availability of information on the impacts of climate change on the nation's economy and ecosystems; and * Promote financial mechanisms for the adoption and funding of response actions. Forestry Law , On April 2006, the Colombian Congress approved a new Forestry Law. The Law seeks to establish legal norms that promote the sustainable development of the Colombian forest sector within the framework of a National Plan of Forest Development, and under the coordination of a new National Forest Council. The Law states that development of the forest sector is of strategic and priority interest for Colombia. The Law introduces the concept of 'vuelo forestal'; this allows a separation of rights to land from rights to timber and has particular application for the development of natural forests. Key aspects of the law include: * The conservation and sustainable management of natural forests and the establishment of forestry plantations on designated soils are considered national priority and of strategic importance for the country's development. * Measures to stop deforestation and illegal logging, as well as the measures to promote sustainable development in the forestry sector have to be adopted and implemented in coordination between the State, the civil society and the productive sectors. * The State will promote the development of the forestry sector in terms of its economic, social and environmental benefits. The development of the forestry sector is regarded as national priority for the peace making process. * Forests and agro-forestry systems fulfill a fundamental function in the production of renewable energy, provision of environmental services, employment generation, national 8 socio-economic development, etc. For these reasons the State will support its development in areas that do not have natural forest coverage. Project eligibility The Clean Development Mechanism (CDM) requires projects to promote sustainable development as defined by host countries. Also emission reductions must be real, measurable and additional. Funding for CDM must not divert funds from existing government development aid programs. As for carbon sinks, under the CDM, eligible activities are restricted to afforestation or reforestation in the first crediting period of the Kyoto Protocol. The proposed project meets the selection criteria of the CDM and the BioCarbon Fund (BCF) and will be amongst the first CO2 (carbon dioxide) emission reduction projects in the sector of Land Use, Land Use Change, and Forestry (LULUCF) in Colombia. The project activities include a reforestation effort in accordance with the UNFCC definitions. As indicated above, Colombia ratified the Kyoto Protocol in 2000 and established a Designated National Authority, DNA, which enables the country to participate in the Clean Development Mechanism. This allows the development of carbon sequestration activities, which can generate Emission Reductions (ERs) to be traded in the international market, once certified. The project will also include the first non- CDM carbon sink activity in the region. Eligibility under the Marrakesh Accords. The area under the reforestation program was degraded before January I", 1990 as required by the Marrakesh Accords in order to be eligible for certification of carbon sinks under the CDM. The project activity will be governed by the forest definition set by the Designated National Authority in Colombia5. The status of land cover was established through remote (LANDSAT) sensing images taken in 1986 and 2000. The entire area to be reforested had originally been covered with highland and lowland tropical forests, which were later turned into pastures and subsequently abandoned. Carbon sinks were estimated using the TARAM (Tool for afforestation and reforestation approved methodologies) model. The detailed estimates were reviewed during project preparation. A monitoring plan has been prepared to measure the carbon sinks during implementation. Non CDM (non-Kyoto activities). The project also includes activities that do not conform to the Kyoto protocol and thus do not require compliance with the Marrakesh accords. These activities focus on avoided deforestation and regeneration of existing forest relicts. The corresponding carbon sinks have also been estimated using a newly developed baseline methodology for avoided deforestation on the project-scale. The monitoring approach is described in Annex 18. 2. Rationale for Bank involvement The GOC and the World Bank have cooperated in the implementation of a comprehensive climate change strategy comprising (see Annex 16): a) strengthening of institutional capacity, through the creation and training of the climate change office with World Bank technical and financial support; b) support to the identification of climate impacts, vulnerabilities and adaptation measures, which is being sought through the recently approved, GEF-funded, 5For afforestation and reforestation project activities the DNA requires a single minimum tree crown cover value of 30 percent. a single minimum land area value of I ha, and a single minimum tree height value of 5 meters. These parameters comply with the guidelines of the Marrakesh Accords and make the project eligible under the Clean Development Mechanism. 9 Colombia: Integrated National Adaptation Project; and c) support for the development of the CDM which has up to now comprised source reduction activities in the energy and waste management sector. The BCF, a public/private initiative administered by the World Bank, aims to deliver cost- effective emission reductions, while promoting biodiversity conservation and poverty alleviation. In addition to CDM-eligible activities, the BCF also purchases sinks obtained through ecosystem conservation (avoided deforestation), further contributing, to maintain ecosystems and biodiversity. The development of carbon sinks projects in Colombia would complement the World Bank support of carbon emission reductions in the energy and waste management sector (Jepirachi, Amoya, Rio Frio, and Furatena). Through the Project, the Bank contributes to address global climate change, to assist in ecosystem restoration and to alleviate poverty in the San Nicolas valley by supporting the generation of Emission Reductions (ERs) in rural areas by low income populations. Specifically, the project will contribute to improve income of small landowners on a long-term basis as well as to the restoration of ecosystem integrity in mountainous areas that are coming under the impacts of climate change (Bradley, Villie, Diaz and Vergara, 2006). In terms of biodiversity, the project will protect and enrich the biodiversity in the valley of San Nicolas using 8 native species in the reforestation activities and by re-introducing three endangered species. (See Annex 7 for detailed description of species). Reforestation activities in the area will also contribute to safeguard the hydropower potential of the region. Colombia and the World Bank will also be able to use this experience to plan for the future expansion of the carbon sinks elements of the Clean Development Mechanism. Especially the project component avoiding further degradation and deforestation of existing forest ecosystems has a pioneer character. 3. Sector issues to be addressed by the project and strategic choices The project contributes to ending land degradation which is one of the most intractable environmental issues in the country by providing a direct incentive for reforestation in the San Nicolas valley. Over time, the reforestation will contribute to soil recovery and will arrest its impoverishment. The project contributes to reduce GHG and to strengthen the capacity in the use of carbon sink CDM-associated tools. Even though Colombia's GHG emissions are relatively low in the global context, the project will reduce emissions in a sector which is responsible for 21% of the country's GHG emissions. At the same time the project will strengthen the capacity by using a new tool in the country and in a sector which provides 40% of the opportunities to reduce GHG. The project demonstrates how increased species extinction rates can be addressed via the Bio Carbon Fund. Payments for carbon sinks will be used to selectively promote recovery of endangered populations of arboreal species. The project combines funding from the Climate Change Implementation Grant (CC-IG), under the PHRD program, with a separate grant agreement, in association with carbon finance to direct efforts to recover endangered and vulnerable species. The success of this approach may lead to wider, but similar efforts in the region. 10 The project will address poverty in rural areas by creating new and sustainable incomes for low income farmers. Carbon sink incomes will primarily be directed to the local rural communities in the project area. Beyond carbon sink income, the plantation and monitoring process will basically be done by the same local rural communities, thus creating additional jobs in the area of the project. 4. Higher level objectives to which the project contributes The project is consistent with the CAS and the CEA study. In terms of the CAS, the project contributes to environmental sustainability and income for the poor (project beneficiaries are mostly small land holders and forest management activities will engage rural manpower). The CEA shows that land degradation and natural disasters are among the most costly problems associated with environmental degradation. In terms of the consequences of deforestation, the CEA recommends the generation of alternatives to diversify non-timber forest products, improve the livelihoods of forest-dwelling communities, and the fostering of capacity for both indigenous communities and the rural poor to profit from the sustainable and productive uses of forest areas and the implementation of payments for environmental services. The project is in line with these CEA recommendations and will contribute to arrest land degradation while promoting reforestation and in the process contribute to limiting landslides and prevent floods, frequent natural disasters in the region. At the same time the project will improve the income of small landowners, through the sale of non timber (agro-forestry) products and carbon sinks. Colombia's strategy for the use of the CDM. The project responds to Colombia's strategy for use of the CDM as outlined in the NSS study as it supports the implementation of LULUCF projects in Colombia. It also meets the objectives of the Biodiversity strategy in that it seeks to restore endangered or vulnerable arboreal species in their natural habitats. Finally, it meets the goals of the forestry strategy by contributing to reforestation efforts. B. PROJECT DESCRIPTION Project location. The project is located in the valley of San Nicolas, made up of 9 municipalities in the eastern part of the Province of Antioquia, Colombia (See map below). The valley of San Nicolas covers 193,000 hectares. It is on the watershed of the Negro and Nare rivers, which feeds water to several hydroelectric power plants that jointly generate approximately 33% of the electricity demanded in Colombia. 11 Location of project area V- SAN NCAS CPocdep n -- vb.c.- af, of .u 10 aas st~~- COOA &C'flOE 0 - .~ W a. w -),j J;ca-. A* O--;T '10 ne. 44| SAN NEC OLAS mEGIaa4w- 4' - U-LC0Are~ * 000=1C 1. Project development objective The project development objective is to pioneer carbon sinks in Colombia, through afforestation and reforestation, of about 1310 ha of abandoned pastures and through avoided deforestation and induced regeneration in about 1000 ha of remaining forest stands in the valley of San Nicolas. The project also seeks to protect biodiversity through the recovery of endangered and vulnerable local arboreal species. The Project will create a sink for carbon (partly through the planting of endangered and vulnerable species) and in the process improve the income of small landowners, through the sale of timber, non timber (agro- forestry) products, reduce land degradation and contribute to the restoration of ecosystem integrity in the San Nicolas region of Colombia. The project also includes training and capacity building for sustainable forest management, strengthening of social capital and biodiversity protection. By the inclusion of 8 native species for the reforestation activities and a program aimed at the recovery of populations of 3 endangered species, the project will contribute to restore biodiversity in abandoned pastures. The BioCarbon Fund intends to purchase, up to 280,000 tCERs, (Temporary Certified Emission Reductions) from the Project, measured in tons of carbon dioxide equivalent (t CO2e) and up to 80,000 tons of emission reductions (ERs) resulting from avoided deforestation, measured in t C02. 2. Performance indicators * Purchase of up to 280,000 tCERs by the BioCarbon Fund. * Purchase of up to 80,000 t of avoided emissions through avoided deforestation by the BioCarbon Fund. * Reforestation of 1310 ha of abandoned pastures with mostly native species (60%) * Up to five per cent of the reforested land with soil cover made up of native vulnerable and endangered species. 12 3. Project components a) Reforestation Program. The main project activity is the implementation of a reforestation program under which individual landowners voluntarily reforest their land. The program includes the reforestation of 1310 ha from a total of 11,300 ha eligible for CDM (as defined under the Marrakesh Accords) with 10 species out of which only two are exotic non invasive species (Pino tecunumani, Pino oocarpa, introduced more than four decades ago in the region). Native species include Cariniana pyriformis, Cedrela montana, Cedrela odorata, Citrus spp, Cordia alliodora, Persea Americana, Podocarpus oleofolius, and Tabebuia rosea. Especially the endangered arboreal species Cariniani pyrifomis and Podocarpus oleofolius as well as Godoya antioquensis (see component b) add substantial biodiversity value to the project. The forestry management program is a component of a much wider watershed management plan in the area led by CORNARE. Sixty percent of the restored soil cover will be under native species. A training program for the participating community to properly manage, monitor and maintain the carbon sinks is part of this component. b) Reintroduction and strengthening of native vulnerable and endangered populations of arboreal species. In addition, the reforestation program will be complemented with a program to reforest around 5% of the restored lands with native vulnerable and endangered species (Cariniani pyrifomis-RUCN-CR, Godoya antioquensis and Podocarpus oleofolius). This will involve the development of nurseries, planting and monitoring protocols and the actual reintroduction of these endangered arboreal species in the region. This component will be largely supported by a CC-IG, already approved and expected to become concurrently effective with the carbon sink agreement. c) Avoided deforestation and induced forest regeneration. The project will also support the implementation of a program to maintain and promote remaining forest relicts in the Valley of San Nicolas through voluntary participation of individual landowners. The program will focus on the conservation and regeneration of about 1000 ha of existing forest stands with native, locally present species (Cedrela odorata, Tabebuia ssp, Quecus humboltii, and Podocarpus oleofolius). This component will take place in the area of conservation, of the Valley of San Nicolas (See Annex 1). The component will include activities that will directly support rehabilitation of degraded forests and promote maintenance of remaining forest stands through the use of carbon revenues and training. 4. Sustainability and Replicability Carbon Finance provides long term revenues for project execution and monitoring which ensures the sustainability of project activities. The project contributes to improvements in the quality of life of the local population, through the labor and forest product revenues related to the reforestation program as well as a fraction of the carbon revenues as incentive for forest sustainable management. Thus, the local population has an important stake in the success of the project and is strongly behind its implementation. MASBOSQUES is a stable and professional public private sector entity with the support of CORNARE and with enough resources, skills and experience to implement the project. The project is financially viable with carbon revenues and with Comare's participation (see financial annex). The environmental benefits will further strengthen the sustainability of the project through the development of stable forests in the region. The institutional arrangements include the direct participation of the local stakeholders 13 including the farmer community, the municipalities, the regional environmental authority, various NGOs, one university and various private sector organizations. The primary beneficiaries of the project are the local communities and small landowners. Success of the project will open the door to the use of the Kyoto protocol for purposes of recovery and regeneration of forestry systems in the country and illustrate its use as a tool to recover endangered arboreal species. 5. Alternatives considered and reasons for rejection Project alternatives considered include: using land recently deforested (rejected as it would not meet Marrakesh Accords and most likely fail to proof additionality); and exclusive use of plantations with alien but commercial species (rejected as it would not meet the emphasis on ecosystem restoration). Exclusion of non Kyoto activities was also considered. However, non- Kyoto components complement the conservation strategy for the Valley and provide much required relief for remaining forest stands. It will set a precedent with major replication potential throughout the region. Also, the use of endangered species was not originally included in project design. However, addition of this activity was considered of great benefit for local ecosystem integrity and was positively supported by farmers. 6. Major related Projects supported by the Bank and/or other development agencies Linkage with Sylvo-pastoral Approaches to Ecosystem Management Project in Colombia, Costa Rica and Nicaragua (Sylvo-pastoral Project). The project will take advantage of the information and data generated in the Sylvopastoral project whereby producers in degraded pastures are improving land use in their farms as a result of payments for environmental services generated by biodiversity-friendly and carbon sequestering land uses. The project includes growing trees in pastures, introducing live fences, growing fodder banks, sylvo-pastoral and agro-forestry systems, and in some cases planting forests or allowing areas to present early secondary forest growth (regeneration). The project will also take advantage of the experience and the supply of germplasm and trees from the tree farm established in Filandia, Quindio (Colombia) as part of the GEF Conservation and Sustainable Use of Biodiversity in the Andes Region project. Finally, the project is being developed concurrently with the Caribbean Savannah Carbon Sink project and thus a close linkage and cooperation has been established between both operations. 7. Lessons learned and reflected in the project design The Bank's work on climate change in Colombia builds upon opportunities provided under the Kyoto Protocol through sources such as Carbon Finance (CF) and the Global Environment Facility (GEF). Climate Change Mitigation initiatives, supported through carbon finance include: Jepirachi Carbon Offset Project6, Rio Amoya Environmental Services Project,7 The Rio Frio Carbon Offset Project8 , and Furatena Agroindustry Carbon Offset Project9. San Nicolas will be among the first carbon sink projects in Colombia and will thus set a precedent for future carbon sink operations in the country. In terms of methodology, the project supports the development of carbon methodologies and additionality tools for wide application in the country. The project will demonstrate how, besides afforestation and reforestation, the BCF is also a tool to address 6 Project No. P074426, Emissions Reduction Purchase Agreement signed January 27, 2003; 7 Project No. P078220, Emissions Reduction Purchase Agreement signed June 28, 2004. 8 Project No. P088752, Emissions Reduction Purchase Agreement signed June 30, 2005. 9 Project No. P086455, ERPA pending. 14 biodiversity protection and strengthen social capital. San Nicolas will benefit from the strengthened capacity, supported through the IDF for the Colombian Climate Change Office. Previous CDM projects formulated with World Bank assistance in Colombia have demonstrated the need to: a) involve the local community in the ownership of the carbon asset, in the process creating a strong incentive for sustainability; b) ensure financial closure prior to completion of ERPA discussions; c) maximize the use of tools already developed under the CDM to avoid the additional and complex process of registration of new methodologies. Project has incorporated these lessons into its design. C. IMPLEMENTATION 1. Institutional and implementation arrangements The project will be implemented by the Corporation for Sustainable Management of the Forests (hereafter referred as MASBOSQUES), a public-private partnership integrated by the community at large (represented by the grass-root organizations, Juntas de Accion Comunal) municipalities, the regional environmental authority, landowners, the regional association of entrepreneurs (CEO) and two research institutions. It seeks to contribute to the sustainable development in the region by forest activities that combine production of timber and non-timber products. Among the instruments to achieve its objectives, MASBOSQUES promotes markets/systems of payments for environmental services (including carbon sequestration). MABOSQUES has the technical and management capabilities to implement the project. Their staff has the required experience on reforestation and agro-forestry and project management to help implement the project. Other Institutional Support. Masbosques ensured the cooperation of The Federal Swiss Institute for Research and Testing of Materials (EMPA), for the development of the financial model and the review of the markets for forestry and non-timber (agro-forestry) products. Masbosques has also the strong support of CORNARE, the regional CAR, a partner in MASBOSQUES and the regional environmental corporation in the region with a mandate on environmental management, including forestry operations. CORNARE has carried out over 12 studies and projects on reforestation in the province of Antioquia. Under a Climate Change Implementation Grant, secured through a separate Grant Agreement, the project will also count with resources to strengthen the institutional capacity of the local community and provide skills required for proper maintenance of the carbon sink. The grant will be disbursed through CORNARE for the benefit of MASBOSQUES. 2. Monitoring and evaluation of outcomes/results Project supervision will be carried out by the Bank and an independent Designated Operational Entity (DOE). Bank supervision. The Bank will supervise technical and safeguard issues for the project implementation period from the time of ERPA signature. Should any issue arise during supervision, the costs would be covered by the Bank's Carbon Finance Unit (ENVCF). For example, if Bank safeguard policies are violated by the project, carbon payments would be halted 15 immediately and the necessary actions would be taken to reinstate them. This is unlikely to happen given the nature of the project. DOE validation and registration. The project sponsor may assign a CDM-accredited DOE and pay directly for the validation of the project. Alternatively, the BCF may pay and deduct the cost from carbon fund payments. Once the project is validated the DOE verifies emission reductions, certifies them as appropriate, and requests the CDM Board to issue Certified Emission Reductions accordingly. The verification will be performed periodically until the end of payments. These costs are considered part of the supervision costs and will be paid directly by the project sponsor or by the BCF and deducted from carbon fund payments. Summary of monitoring methodology. The monitoring methodology of the reforestation activities includes the following elements: Step 1: The overall performance of the proposed A/R CDM project activity is monitored, including the integrity of the project boundary and the success of forest establishment and forest mnanagement activities. Step 2: Stratification of the project area is monitored periodically as the boundary of the strata may have to be adjusted to account for unexpected disturbances, changes in forest establishment and management or because two different strata may become similar enough in terms of carbon to justify their merging. Step 3: Baseline net GHG removals by sinks are not monitored in this methodology. The ex-ante estimate is "frozen" on a per area-unit basis for the entire crediting period. Step 4: The calculation of ex-post actual net GHG removals by sinks is based on data obtained from permanent sample plots and methods developed in IPCC GPG-LULUCF to estimate carbon stock changes in the carbon pools and increase of project emissions due to fossil fuel consumption and nitrogen fertilization. Step 5: Leakage due to vehicle use for transportation of staff, seedlings, timber and non-forest products, as a result of the implementation of the proposed A/R CDM project activities is monitored. Step 6: Leakage due to displacement of employees from the project area to other areas, the increased use of wood posts for fencing and the displacement of fuel-wood collection outside the project boundary is monitored. Step 7: A Quality Assurance/Quality Control plan, including field measurements, data collection verification, data entry and archiving, as an integral part of the monitoring plan of the proposed A/R CDM project activity, to ensure the integrity of data collected and improve the monitoring efficiency. The baseline net GHG removals by sinks do not need to be measured and monitored over time. However, the methodology checks and re-assesses the baseline assumptions if a renewable crediting period is chosen. This methodology uses permanent sample plots to monitor carbon stock changes in living tree biomass pools. The methodology first determines the number of plots needed in each stratum/sub-stratum to reach the targeted precision level of ±10% of the mean at the 95% confidence level. GPS is used to locate plots. b) Monitoring arrangements for avoided deforestation activities: 16 A distinct generic methodology for measurement of carbon sinks through avoided deforestation has also been developed. While this methodology is not required to follow the process under the Kyoto protocol or the Marrakesh accords, it has been drafted envisaging that the corresponding approval process will be in place at some time in the future. The application of the methodology to the project activity is part of Annex 9. 3. Critical risks and possible controversial aspects Risk Mitigation Failure to secure Individual legally binding agreements will be completed prior to planting commitments with in specific project areas. individual landholders Eligibility under Project is being designed to carefully meet eligibility criteria. Marrakesh accords is not proven Carbon sinks do not meet Current estimates are based on TARAM model, which is going to be the estimates. standard tool for the ex-ante estimation of forestry CERs in future BioCF LULUCF projects. The tool is currently certified by an independent third party. Numerous species and The number of species involved is a balance between the desire to promote systems considered under and induce biodiversity and the need for simplicity. Agro-forestry systems project imply complexity will be selected by the landowners from a short menu of options for which of nursery techniques, financial viability has been assessed. management and harvest approaches for which technical knowledge might not be available. Sinks are not permanent The project seeks permanence through the selection of systems that will and or there is leakage also produce local benefits in the forms of forest products (fruits, high quality furniture wood.) Payments will be made after verification of carbon sinks. Sources of leakage and measures proposed to be implemented to monitor and account the leakage will be outlined Social conflict affects Wide agreement reached with the local community to address local needs project area. Sustained in the course of seeking the project objectives reduces the likelihood of participation of social unrest in the area. Project is strongly supported by local community beneficiaries. which is also the primary beneficiary, thus guaranteeing its long-term support. Limited experience of MASBOSQUES has secured agreements with ECOSECURITEES, ENPA MASBOSQUES. and CORNARE to strengthen its core skills. CORNARE is fully Commitment from committed to the development and ultimate success of the project and CORNARE forms part of MASBOSQUES. New forestry law affects A legal analysis of the new law has been conducted. The Law provides the viability of the project greater certainty of investment for projects of the kind contemplated here. Art 25 emphasizes that products of forest plantations established by individuals on private property remain private property; property of forest plantations performed for the State with the participation of private agents will be regulated by the terms of their respective contracts. Art 29 requires, inter alia, that agro-forestry, plantation forests, and sylvo-pastoral enterprises financed by the sale of environmental services in the framework of a multilateral agreement must obtain approval of a Plan of Establishment and Forest Management from the competent authority. Art 17 35, the State guarantees not to modify forest contracts for a period of 20 years to give security to investments. Avoided deforestation The BioCarbon Fund has committed to compensate the carbon sinks activities fail to be obtained through avoided deforestation independent of their recognition recognized under the under the CDM. Clean Development mechanism Deforestation is not abated The project will only pay against measured carbon sinks. or forest regeneration fails to occur. 4. ERPA conditions and covenants Carbon finance is not part of the World Bank's lending program. There will be no regular loan or grant disbursement. The Bank as trustee of the BioCarbon Fund will make direct payments in accordance with the ERPA. The generic ERPA table of contents is included as Annex 7. The CCIG will be managed through a separate grant agreement. D. APPRAISAL SUMMARY 1. Financial analysis Financial analysis for the CDM (Kyoto) Component (IRR: 64%; NPV (10%): US$ 1.3 million) The IRR of the project is 62% and the NPV (10%) is US$ 1.1 million with carbon revenues and the 36% and USD 0.5 million without carbon revenues. Project revenues come from the sale of timber, non timber products, agricultural produce and carbon sinks. The project will also benefit from a Climate Change Implementation Grant of US$400,000 to be disbursed during the first three years of project operation. Without Cornare's participation and carbon revenues the project would not be feasible. Project area 1310 ha Type 1 and 2 45% Distribution of Carbon landowners Credits Cornare 40% Masbosques 15% Initial Investments USD 1.5 (NPV, 10%) Cornare USD 1.04 m (NPV, 10%) Masbosques USD 0.23 m (NPV, 10%) Financing/Donations/Equity CCIG (Component C) USD 0.16 m (NPV, 10%) Landowners USD 0.04 m (NPV, 10%) Municipalities USD 0.1 m (NPV, 10%) O&M cost (Operating and USD 1.6 m (NPV, 10%, until 2017) carbon cost) Timber and non timber USD 1.9 m (NPV, 10%, until 2017) Revenues products -Carbon revenues USD 0.55 m (NPV, 10%, until 2017) Extraordinary revenues USD 0.2 m (NPV, 10%) NPV without Carbon 6 % - USD 0.7 m Revenues 10 % - USD 0.5 m 18 15% -USD0.3 18 6% - USD 1.4 m NPV with Carbon Revenues 10 % - USD 1.1 m 15% - USD 0.8 m IRR without Carbon 36% Revenues IRR with Carbon Revenues 62% 2. Economic. An economic analysis concludes that the project benefits all participants and stakeholders. The detailed analysis is included in Annex 5. 3. Technical. Under the first component, the Project seeks to establish, on abandoned pastures, forestry, agro- forestry and sylvopastoral systems and secure their sustainable management, with active community participation. The project boundary is composed of 6,134 discrete areas, grouping disperse farmers with eligible land and willingness to participate in the project. It is estimated that the actual net anthropogenic GHG removals by sinks of the proposed project will be approximately 210.000 tons (t) of C02e (carbon dioxide equivalent) in a 10-year period (starting in 2007 and ending in 2017). The BCF will purchase up to ERs 280.000 t C02e by 2017 at $4.05 per ton. Baseline and Additionality. Project activity will be implemented in areas that historically have remained as abandoned pastures. This ecosystem has a very small amount of stock of carbon and a stable or declining trend in GHG removals. The baseline and additionality analysis have shown that without the project activity, those areas will remain without arboreal soil cover. The project activity will not be the baseline mainly because of the following barriers: Technological barrier: the landholders do not have the knowledge necessary to carry out reforestation activities that would maintain a long-term carbon sink. Financial barrier: The participating landowners, particularly the low income landowners, do not have the financial resources to invest in the project. Carbon revenues provide a financial incentive for the maintenance of the carbon sink. Economy of scale barrier: The average and disperse size of areas prevents without the grouping effect of carbon finance, the organization required to jointly maintain and protect the reforested plots. A historical detection analysis of the ecosystem shows (Annex 1 and 2) that the pastures have not recovered unaided. Satellite images show that project areas were in pastures in year 1986 and in year 2000, as well as at the present moment. This analysis confirms the momentum to maintain the current status quo in the absence of carbon finance. For monitoring of changes in carbon pools, the monitoring methodology uses a stratified random sampling approach with nested permanent sample plots. Plots will measure onsite parameters for estimating changes in carbon pools. The onsite measurement of parameters are based in standard forest inventory procedures (Brown (1997), MacDicken (1997), Marquez et al. (2000), Vine & Sathaye (1997), Vine et al. (1999), IPCC (2003, p. 4.103). 19 For effective monitoring of project activities, the methodologies foresee field visits. The field visits include the control of data such as the area effectively planted each year for each system as well as the execution of the management plan (system planted, thinning, amount of fertilizer applied etc). These activity data complement the data from the plots measurements and is used to estimate the actual net GHG removals by sinks of the project. The methodology also includes the monitoring of the data necessary to estimate the emissions by the use of synthetic and organic fertilizers and transport due to the implementation of the project activities. This estimation is based on IPCC emissions factors applied to the actual performance of the project in terms, for example, of the total quantity of fertilizer applied. It also provides criteria for excluding non significant emissions from those sources. Finally, the monitoring methodology proposes the collection of data relevant to the documentation of any carbon leakages. A detailed description of the baseline methodologies is included in Annexes 9 & 18. 4. Social. The project can only be developed with the active participation of the farmers from San Nicolas. The project scope is the direct result of'years of interaction with and participation of the local community. The forestry plan was drafted in the course of a well designed and executed consultation process, during the last 20 months, with the communities in the area of the project. The communities are represented in the institutional arrangements for implementation of the project. MASBOSQUES itself is the result of a participatory process that includes several institutions, municipalities and local organizations. The project was developed by CORNARE, which enjoys a very good reputation in the region. The project is expected to improve the income of small landowners, through the sale of non timber (agro-forestry) products, directly contributing to income improvements and quality of life of the involved community. MASBOSQUES through the assistance of UNALMED has undertaken a socio-economic characterization of the local farming community, identifying the following types of landholders: * Agricultural worker: temporal worker without land. * Employee: permanent worker without land. * Low income farmer or peasant: peasant with land that in addition works as a temporal agricultural worker. No more than 3 ha. * Medium income farmer or peasant: peasant with land that can work only with his family in his land. More than 8 ha. High income fanner or peasant: peasant with land that can hire additional workers to work in his land. More than 8 ha. * Rural Businessman: landowner that has land, employees and also other business. Land tenure and Project Participants. The project will be implemented by low and medium income farmers. The individual land owners are required to provide MASBOSQUES with valid and binding arrangements that entitle MASBOSQUES to the carbon sink income and commit individual participants to the reforestation schemes. Individual agreements will be in place prior to implementation of project activities on the respective parcels. Under the agreements the landholders commnit to the maintenance of the reforested systems. The process of selection of participants was open and transparent. The criteria employed were: a) technical (compliance of the participant's land with the definition of forest area by the Ministry; participant's land identified as of forest aptitude, as per land zoning by CORNARE; participant's land that met the conditions of lack of soil cover by 1990 as per Landsat images); and b) legal: clear title with no 20 encumbrances; "libertad y tradicion" certificate from the office of land records and willingness to participate through the signing of the participation agreement. Community participation. CORNARE and MASBOSQUES have conducted an extensive community consultation process in the context of the development of the Management Plan for the San Nicolas valley and consequently of the formulation of the carbon sink project. The community consultation has taken 21 months from the start of the process. The community participated in the original forest inventory and in capacity building workshops. The process of selection of participants led to further community participation. MASBOSQUES is an association made up by the local community with the support of CORNARE. Annex 6 includes a more detailed social analysis. Direct Social Benefits The project will benefit around 6,000 families; and is expected to generate income from the reforestation activities. The direct social benefits are: * Improved income and higher valuation of lands * Consolidation of institutional links and Training in forest-management activities * Promotion of the communities capacity for management and negotiation * Formulation of a territorial planning process in a participatory manner * Creation of direct and indirect employment and new products for the local market * Reduction of pressure on natural forests as wood sources. * The establishment of agroforesty systems will improve the food safety inside the region. 5. Environment The project is not expected to result in negative environmental impacts. Expected environmental benefits include: global emission reductions, development of tools and methodologies for the development of carbon sink projects in the country, restoration of ecosystem integrity, re- introduction of species under critical status and reduction of extinction, sustainable forest management, strengthened biodiversity protection and maintenance of environmental services (water and carbon retention in soils) in the project area. All reforestation activities will be undertaken under a careful protocol (see Annex 7), to reduce any negative impact on soil compaction, existing natural stands or soiling of surface waters. The protocol will be supervised by MASBOSQUES. 6. Safeguard Policies The project is expected to trigger Environmental Assessment (OP/BP 4.01), and Forests (OP/BP 4.36) Operational Policies. The forestry policy is triggered by projects with the potential to impact the health and quality of forests or the rights and welfare of people and their level of dependence upon or interaction with forests; or aim to bring about changes in the management, protection or utilization of natural forests or plantations. The proposed project will implement a forest management program, reforesting an area of approximately 1310 ha and avoided deforestation on an area of approximately 1000 ha. In addition to the forest management program, the project will support the reintroduction and strengthening of native vulnerable and endangered populations of arboreal species. The project will also bring about changes in the current management practices of forests and contribute to the enrichment of remaining forest relicts. 21 Natural Habitats (OP/BP 4.04) is triggered by the intention to restore soil cover with arboreal species under endangered and critical status. The recovery of germ-plasm, seed collection and generation of nursery stock required careful management to prevent any further impacts on the remaining populations of the target species. No use of biocides is considered under the project. Table 1: Applicability of Safeguard Policies to the Precious Wood Project Policy Applicability Environmental Assessment (OP 4.01, BP 4.01, GP 4.01) Yes Natural Habitats (OP 4.04, BP 4.04, GP 4.04) Yes Forestry (OP 4.36, GP 4.36) Yes Pest Management (OP 4.09) No Cultural Property (OPN 11.03) No Indigenous Peoples (OD 4.20) No Involuntary Resettlement (OP/BP 4.12) No Safety Dams (OP 4.37, BP 4.37) No Projects in International Waters (OP 7.50, BP 7.50, GP 7.50) No Project in Disputed Areas (OP 7.60, BP 7.60, GP 7.60) No OP = Operational Policy, BP = Best Practice, GP = Good Practice, OPN Operational Policy Note, OD = Operational Directive E. COMPLIANCE WITH BANK POLICIES This project complies with all World Bank policies. ter rra Lu a Tuck M iop k er Sector Director Act try Director 22 ANNEX 1: Detailed Project Description 1. Objective The project development objective is to pioneer carbon sinks in Colombia, through reforestation of about 1310 ha of abandoned pastures and through avoided deforestation and induced regeneration in 1000 ha of remaining forest stands in the valley of San Nicolas. The project also seeks to protect biodiversity through the recovery of endangered and vulnerable local arboreal species. The Project will create a sink for carbon (partly through the planting of endangered and vulnerable species) and in the process improve the income of small landowners, through the sale of timber, non timber (agro-forestry) products, reduce land degradation and contribute to the restoration of ecosystem integrity in the San Nicolas region of Colombia. The project also includes training and capacity building for sustainable forest management, strengthening of social capital and biodiversity protection. By the inclusion of 8 native species for the reforestation activities and a program aimed at the recovery of populations of 3 endangered species, the project will contribute to restore biodiversity in abandoned pastures. The BioCarbon Fund intends to purchase, up to 280,000 tCERs, (Temporary Certified Emission Reductions) from the Project, measured in tons of carbon dioxide equivalent (t CO2e) and up to 80,000 tons of emission reductions (ERs) resulting from avoided deforestation, measured in t CO2. 2. Location As the Project boundary is made up of discrete areas of land, it is. necessary to locate them in a Geographical Information System. The region where the Project activities will be implemented is the San Nicolas Valley and is located between 50 48' 51" and 6° 24' 19" North and between 750 07' 09" and 750 34' 03" East and sums approximately 193,000 hectares of 9 municipalities. The project region is part of the East branch of the Central Andean chain mountain in Colombia. In San Miguel Peak, the Central Andean Chain Mountain is bifurcated into the east and the central branches, separated by the MedellIn or Porce River Valley. The East branch is dominated by the Rio Negro high plateau, which has a moderately plain topography that includes a series of rounded hills. The main sceneries found in the region are the mountains and hills. Present environmental conditions of the area, including a description of climate, hydrology, soils, ecosystems, and the presence of rare or endangered species and their habitats: San Nicolds Region is comprised by the watershed of Rio Negro and parts of the watersheds of the rivers Nare, North Samand and Buey-Arma. Rio Negro watershed, with an approximately 842 square kilometers, produces the water for domestic use for a population of more than 250,000 habitants in the municipalities of Rionegro, Guarne, Marinilla, El Santuario, El Carmen de Viboral, El Retiro, San Vicente, La Ceja and La Uni6n. After crossing those municipalities, Rio Negro River is repressed in a chain of five consecutive dams which generate 33% of the country energy. 23 Fig 1 Location of the project region in the country: PROJECT "ALTERNATI.E FNIANCIAL AW0OEL FOR SUSTAINABLE FOREST WNAGEMENT NV CONCEPCION SAN MCOLAS NORTH GIRARDOTA 4 7 . ALEJANDRIA 11A LU. COPA CA BA NA ' C A ' BELLO MEDELLIN a o AE S ato-- Allocation ENVIGAD\ GRANADA r South Amnerica MONTEBELLO Colombia ABEJORRA SAN NICOLAS REGION Aiwloqu-a SONSON wF AGREBAENT016 1998 . ,-- ZONES . - Roads ForestAptitude CORNARE Regior - Riers - Urban Areas no Protection : Municipal Borders 24 Fig 2. Location of the Project boundary in the Project region. SAN NICOLAS REGION HTH iw SAN *ENTE AE4RTO . EL S4-ARO EL CtEI EL F#1RO LA 90O Project Area - ES9PPYANA Muipal Border - Urban Areas Source: Project GIS Climate The area has the following climates: Humid Cold (FH)10, Very Humid Cold (FMH), Medium Humid (MH) and Medium Very Humid (MMH). The average annual temperature in the high plateau zone is 17°C and in the rest of the area decreases gradually as the altitude increases. Precipitation The annual average precipitation in the project region varies between an annual precipitation of 2.500 mm to 3.500 mm in the south of the San Nicolas Valley. The precipitation has a two- mode regime; the months of higher precipitations are March to May and September to November, separated by two dry seasons. Geology The region is classified in the geology category known as "batolito antioquefno". Soil origin mainly is from volcanic ashes. The main landscape in the region is mountains, and in a less degree low hills. The main erosion process in the area is generated by the water superficial runoff, which produces little channels of erosion that, if they are not controlled, can transform 0 The codification correspond to Spanish initials. 25 into eroded channels. The sectors with erosion evidence are those hills, and in a less degree, mountains which have been exploited with intensive agriculture and without adequate soil conservation practices. Ecosystems: According to Holdrige (1978) classification for vegetation formation, the project region includes the following formations: bh-MB, bmh-MB, bp-MB, bmh-PM, bp-PM. The following table shows the main vegetation present in the project region in year 2000. Table 1. Land use in ear 2000 in roject re ion Unmanaged Pastures 18,543 1,642 20,185 Forest (secondary 15,723 3,539 19,263 growth) -__ _ _ _ __ _ _ _ _ _ Constructions 32 32 Managed Pastures 1,310 1,310 Water areas 7 7 Natural Forest 6,597 4,042 10,639 Planted Forest 6,499 6 6,505 Permanent crops 1,192 377 1,568 Scrublands 9,911 764 10,675 Seasonal crops 1,304 38 1,342 Shadows 213 231 444 Total 61,331 10,638 71,969 Specifically, the project area is made up of abandoned pastures. This category is constituted by native or introduced pastures which have not been in management practices, and therefore they present weeds and low growth. These factors affect the load capacity, type of cattle and consequently, its productivity. The presence of weeds and in some cases invasion of pteridium aquilinum ("helecho marranero"), contribute to their low productivity and poor soil conditions. There are no species of particular interest or value present in the areas where the afforestation and reforestation activities will be implemented. The following photographs depict the landscape characteristic of the project area. 26 Figure 3. Current typical landscape in the San Nicolas Valley (project area). Figure 4. Land use patterns in the San Nicolas Valley. Light cream color is abandoned pastures, light and dark green correspond to forest relicts (source: Plan de Manejo del Valle de San Nicolas, CORNARE, 2004) 2. - M Bosqte ua ntev y muy wgerv Basqute nat secundanii Fbsruia bap jsacoe PF4 ass no rinaeacios inAtheuSan iolas Past manelades Nubes y sores r - Pttacion foresal . - CutB pemnaniere - Cuiovo transeano 27 Forest types in the Valley of San Nicolas The land use plan of CORNARE indicates several forest types in the area of conservation of the valley. These are: The Highland Zone. Composed of: * Primary forests and forests with low levels of degradation (BN1) * Forests with intermediate levels of degradation (BN2) * Forests in an early successional stage or high levels of degradation (BN3) Lowland Zone. Composed of: Primary forests and forests in a late successional stage (BN1) • Forests in an intermediate successional stage (BN2) * Forests in an early successional stage (BN3) While this is a formally designated conservation area, the remaining forest relicts are fragmentary and continuing extractive activity would further impair the sustainability of the environmental services provided. Under these conditions, and on the basis of the inventory of forests already undertaken by CORNARE with assistance from the Universidad Nacional and the Botanical Garden, the project regeneration activity will: a) support regeneration of existing forest areas; b) provide incentives in the form of carbon revenues and training to deter further deterioration; and c) identify activities that would further contribute to sustain the integrity of the area research, training, development of alternative sustainable management techniques. Regeneration of existing forest stands: The regeneration activity, which comprises enrichment as well as an avoided deforestation aspect, will take place on 1019 ha in the following forest types and corresponding land areas: Total BN1 High Land 267 BN2 High Land 752 Total 1019 ha 3. Activities Project components a) Forest Management. The main project activity is the implementation of a forest management program (developed through a participatory process) through which individual landowners voluntarily and partially forest their land. The program consists of the reforestation of about 1310 ha from a total of 11,300 ha eligible for CDM (as defined under the Marrakesh Accords) with 10 species out of which only two are exotic non invasive species (Pino tecunumani, Pino oocarpa, introduced more than four decades ago in the region). The forestry management program is a component of a much wider watershed management plan in the area, led by CORNARE. Under the program, about 7,500 ha of highlands will be reforested using plantations and agro-forestry systems, 28 while about 1000 ha of lowlands will be reforested using agro-forestry systems. Sixty percent of the total cover will be under native species. b) Reintroduction and strengthening of native vulnerable and endangered populations of arboreal species. In addition, the forest management program will be complemented with an effort to populate 5% of the restored lands with native vulnerable and endangered species (Cariniani pyrifomis-IUCN-CR and Podocarpus oleofolius). This will involve the development of nurseries, planting and monitoring protocols and the actual reintroduction in the region of these endangered arboreal species. c) Avoided deforestation and induced forest regeneration. The project will also support the implementation of a program to maintain and promote remaining forest relicts in the Valley of San Nicolas. This pilot program will focus on the conservation and regeneration of about 1000 ha of existing forest stands with native, locally present species (Cedrela odorata, Tabebuia ssp, Quecus humboltii, and Podocarpus oleofolius). This component will take place in the area of conservation, of the Valley of San Nicolas. The component will include activities that will directly support rehabilitation of degraded forests as well as support to prevent deforestation, mainly through the use of carbon revenues and training. In the enrichment planting activities none of the planted tree species is assumed to be harvested before the end of the project life time. Regional Impact. The project takes place in a limited area of the Valley of San Nicolas. However, if successful it will have a wide replicability in the Antioquia Province, where similar ecosystems, under the very same challenges, exist. The provision of incentives created through the application of the new forestry law and the monetization of climate impacts may create the conditions for wide replication of the project in the province and by extension in other areas of the country. The project will contribute to the recovery of lost environmental functions in the San Nicolas Valley, caused by soil degradation, lost water regulation, and loss of soil cover and will also contribute to the recovery of endangered species. When fully implemented, the project area will offer a contrast to business as usual conditions and serve as a catalyst for wider regional efforts that may lead to ecosystem restoration. Role of the Management Plan. The project activities were identified as part of the management plan (Plan de Ordenamiento) for the Valley of San Nicolas, developed by CORNARE with the technical assistance of EMPA and ITTO. The Management Plan provided the requisite baseline data and information. It also provides a comprehensive vision for the future of the Valley. However, without the project it is unlikely that the specific activities would have been developed in a timely fashion if not at all. The project is fully consistent with this management plan. The Management Plan is now in the project files. Scope of the Climate Change Implementation Grant: The scope of the CCIG grant is to support the implementation of the project, the first carbon sink project in the country, to be developed under the CDM guidelines of the Kyoto protocol through 29 the BioCarbon Fund. The grant will also assist with the development of institutional capacity. The grant will support the implementation of the following activities: Reintroduction and strengthening of native vulnerable and endangered populations of arboreal species as carbon sinks (US$ 188,000): This component will finance the collection of seeds, the development of nursery stock and greenhouses and tools for propagation of native vulnerable and endangered species (Cariniani pyrifomis-IUCN-CR Endangered arboreal species and Podocarpus oleofolius) to be used as part of the carbon sink under the San Nicolas project. Deliverables/Outputs . Seedlings for reforestation of 500 hectares, with Cariniani pyrifomis, Godoya antioquensis and Podocarpus oleofolius. Cariniani pyriformis has a CR rating under the World Conservation Union (IUCN). The successful implementation of this program would bring back these species under critical status to the region and reduce its chance of extinction as a result of its use as a carbon sink for purposes of Greenhouse gas mitigation. . Training and capacity building for individual farmers, towards sustainable forest management, marketing of timber and non-timber products and strengthening social capital and biodiversity protection, promoting climate awareness and use of carbon finance. Training for monitoring and verification of carbon sinks and monitoring of the sinks for the first two years of operation (US$ 200,000). This component will finance: training and capacity building towards sustainable forest management, strengthening social capital and biodiversity protection, promoting climate awareness and use of carbon finance for rural communities participating in the project. Training and extension services will also be provided in the use, generation and marketing of non-timber products. Development of fire prevention skills and training on preventive measures against landslides will be provided to minimize the risk of permanence of the carbon sinks. Training will be done in the form of workshops and field activities. This component will also finance training for monitoring and verification of actual carbon sinks and the actual monitoring costs during the first two years of operation. 30 Fig 5. Historical detection analysis for areas eligible under the Marrakesh Accords. First graph shows the extent of degradation registered in 1986, the second shows the situation in 2000, based on LANDSAT images. 1986 2000 CQases de Uso del Susio B- 2 t DB.q. e *u*ttl .dta. a.tdo rJ Pm Pato.m- e - o. CM dtmdf. U c e - P.vot;-mdouo -m9u..nidtmeaeW C Cued Vmee.t. R b Be.qmt stem teemedmm en inside - SVCeto de u,. -1 Fltr.e.e,O DoesedlA Com-e m y I. te m Pee Pttm s jom.ejd- NS Nobm y-mbete 31 ANNEX 2: Implementation Arrangements Institutional arrangements. The project will be implemented by the Corporation for Sustainable Management of the Forests (hereafter referred as MASBOSQUES), a public- private partnership integrated by the community at large (represented by the grass-root organizations, Juntas de Accion Comunal) municipalities, the regional environmental authority, landowners, the regional association of entrepreneurs (CEO) and two research institutions. It seeks to contribute to the sustainable development in the region by forest activities that combine production of timber and non-timber products. Among the instruments to achieve its objectives, MASBOSQUES promotes markets/systems of payments for environmental services (including carbon sequestration). MASBOSQUES has the technical and management capabilities to implement the project. Their staff has the required experience on reforestation and agro-forestry and project management. Other Institutional Support. Masbosques has ensured the cooperation of The Federal Swiss Institute for Research and Testing of Materials (EMPA), for the development of the financial model and the review of the markets for forestry and non-timber (agro-forestry) products. Finally, it has the strong support of CORNARE, the regional CAR, a partner in MASBOSQUES and the regional environmental corporation in the region with a mandate on environmental management, including forestry operations. CORNARE has carried out over 12 studies and projects on reforestation in the province of Antioquia. MASBOSQUES will sign the ERPA with the World Bank as Trustee of the BCF and use the revenues for purposes of project implementation. It will also be the recipient of the services to be contracted or procured under the CCIG through UNDP. MASBOSQUES will nominate a full time project coordinator and liaise with the participating community. The reintroduction of endangered species will be done under contract with a third party, yet to be selected. Marketing Plan. The project will result in the production of agricultural products, including timber and non-timber products. The economic and financial analysis already reflect the market prices and income derived from the anticipated agricultural and forestry products. The Valley of San Nicolas has already established lines of commerce and market for traditional agricultural products and the area under the project, once recovered will integrate itself into the existing market channels. In effect, the project is adding land that becomes productive to land that is already under productive use. Under the CC-IG grant additional training and capacity building will be channeled to strengthen the capacity and negotiations skills of local farmers. 32 ANNEX 3: Masbosques MASBOSQUES Corporation is a non-profit PPP that works in the construction of a sustainable forest management strategic vision. It arises as one of the results in the project Alternative Financial Model for Sustainable Forest Management in San Nicolas, Colombia sponsored by Autonomous Corporation for the rivers Negro and Nare -CORNARE-, Swiss Federal Laboratories for Material Testing and Research -EMPA-, and International Timber Trade Organization -ITTO-. MASBOSQUES aims to share the abilities, experience and creativity of its partners to bring to communities the possibility to participate in the environmental services trading through the use of natural resources, according to Clean Development Mechanism CDM under the Kyoto Protocol. Mission: To promote conservation, sustainable use, and restoration of the forest resources and their associated resources, promoting projects that contribute to the integration and competitiveness of the productive chain, and developing mechanisms for environmental services payment. Vision: Being a recognized organization at local, national and international level because of its high efficiency and trust degree. Objective: To build an interdisciplinary work system that allows promoting sustainable forest management in the region through projects and the implementation of the Clean Development Mechanism according to United Nations framework on climate change which have been ratified by the Colombian government. Thus it seeks to support the creation, encouraging, development and funding of entities that include innovations in infrastructure, research and technology applicable in national production, environmental and natural resources management, aiming for forest conservation and sustainable livelihoods. Individual project participants are those that meet the criteria established under the Marrakesh Accords, in terms of eligibility of their parcels, as well as have a clean title to the land and are willing to participate in a timely fashion (prior to signing of the ERPA). No willing farmer meeting the above criteria has been denied participation in the project. 33 CORPORATION FOR THE SUSTAINABLE FOREST MANAGEMENT MASBOSQUES eI e i;OG A-N l CAmDosed by aCllWBdFKI I Ia With the support of local comimunities, MASBOSQUES implements a Regional Forest Management Plan, provide technical support and training, trade environmental services and handle funding through trusting model. Within the activities the corporation works are: * Forestland and degraded land rehabilitation, agro-forestry, timber plantations (at smnall and middle scale) and land restoration through biological corridors and enrichment plantations. * Trading environmental services in international markets: Clean Development Mecha'nism and Volunteers Markets. * Trading wood and non wood products in national and international markets for the creation of new economic circuits. W Technical support and advisory for local communities through participative workshops * Awareness of sustainable forest management in rural communities. 34 ANNEX 4: Financial Analysis Overview The project has three components: The main project activity is the implementation of a forest management program (developed through a participatory community process) through which individual landowners voluntarily and partially forest their land. The second component includes the reintroduction and strengthening of native vulnerable and endangered populations of arboreal species on approximately 5% of the restored lands. The native vulnerable and endangered species include Cariniani pyrifomis-IUCN-CR, Endangered arboreal species and Podocarpus oleofolius. This will involve the development of nurseries, planting and monitoring protocols and the actual reintroduction in the region of these endangered arboreal species. This component will be largely supported by a Climate Change Implementation Grant (CC-IG), already approved. The third component includes avoided deforestation and induced forest regeneration. Under this component the implementation of a program to maintain and promote remaining forest relicts in the Valley of San Nicolas will be supported. The program will focus on the conservation and regeneration of about 7300 ha of existing forest stands with native, locally present species (Cedrela odorata, Tabebuia ssp, Quecus humboltii, and Podocarpus oleofolius). The project will be implemented by the Corporation for Sustainable Management of the Forests (hereafter referred as MASBOSQUES). MASBOSQUES will sign the ERPA with the World Bank as Trustee of the BCF and use the revenues for purposes of project implementation. MASBOSQUES will also be one of the recipients of the services to be contracted or procured under the CC-IG through Cornare. MASBOSQUES will nominate a full time project coordinator and liaison with the participating community. The reintroduction of endangered species will be done under contract with a third party, yet to be selected. In addition to Masbosques the project has three more actors that play a role for the financial analysis of the project. These actors are the land owners, CORNARE, and the municipalities. The role of each actor is analyzed in the financial analysis. Financial analysis: Financial analysis summary and assumptions (2007 - 2017) Project area 1 1310 ha Type I and 2 landowners 45% Distribution of Carbon Credits Comare 40% Masbosques 15% Initial Investments USD 1.5 (NPV, 10%) Financing/Donations/Equity Comare USD 1.04 m (NPV, 10%) Masbosques USD 0.23 m (NPV, 10%) CCIG (Component C) USD 0.16 m (NPV, 10%) Landowners USD 0.04 m (NPV, 10%) 35 Municipalities USD 0.1 m (NPV, 10%) O&M cost (Operating and USD 1.6 m (NPV, 10%, carbon cost) until 2017) Timber and non timber products USD 1.9 m (NPV, 10%, until 2017) Revenues Carbon revenues USD 0.55 m (NPV, 10%, until 2017) Extraordinary revenues USD 0.2 m (NPV, 10%) 6%-USDO.7m NPV without Carbon Revenues 10 % - USD 0.5 m 15% - USD 0.3 m 6%-USD 1.4m NPV with Carbon Revenues 10 % - USD 1.1 m 15% -USD0.8 m IRR without Carbon Revenues _36% IRR with Carbon Revenues 162% Assumptions The analysis is based on results obtained from financial projections and covers a period of 11 years until 2017. The project implementation period is expected to be more than 19 years. The Bio Carbon Fund will purchase carbon revenues until 2017 (tenor of the ERPA). The role of each actor involved in the project is as follows: Corporacion MASBOSQUES: Will donate 16% of the initial investment of the project, and will receive 15% of the carbon revenues. CORNARE: Will donate 66% of initial investment of the project and will receive 40% of the carbon revenues. Municipalities: Will donate 6% of the initial investment of the project. Landowners type 1: 70% (885 ha) of the total area of the project will be implemented in lands owned by low income landowners. They will not contribute to initial investment but they will cover the totality of the operational costs of the forestry systems implemented on their lands. They will receive the totality of the wood and non-wood revenues generated by the forestry systems and 45% of the carbon revenues generated in their lands. Landowners type 2: 30% (383 ha) of the total area of the project will be implemented in lands owned by medium to high income landowners. They will contribute with half of the initial investment and the totality of the operational costs of the forestry systems implemented on their lands. They will receive the totality of the wood and non-wood revenues generated by the forestry systems and 45% of the carbon revenues generated in their lands. As the component C of the Climate Change Implementation Grant (CC-IG) will cover part of the initial investment costs, it was considered as a donation. On the other hand, as the component B of the CC - IG will cover some operational costs, it was considered as 36 extraordinary revenue in the financial analysis. Similarly, the EMPA-I lO donation, which will cover baseline formulation and validation costs, was treated as extraordinary revenue to the project. Actor Contribution Revenue Land Owners: 100 % of O&M cost - 45% of Carbon Revenues Type 1: < 6 ha 4% of initial investments - Sale of Timber and Non- Type 2: > 6 ha timber products. MASBOSQUES 16 % Donation for the initial investment - 15% of Carbon Revenues CORNARE 66% Donation for the initial investment - Social benefits for the community - Creation of Trust fund with 40% of carbon revenues for future reforestation and restoration projects and as financial buffer Municipalities 6% Donation for the initial investment - Social benefits for the community The financial analysis was undertaken for the total aggregate of the project as well as for each type of landowner involved. Cash Flow Initial Investment The initial investments include machinery, equipments, building, fences, site preparation, fertilization, soil preparation, seeding and planting. The total amount of the initial investment is US$ 1.5 million (NPV, 10%), distributed over the first four years of the project. The initial investments are covered by donations from CORNARE, MASBOSQUES, Municipalities and part of the PHRD Grant for monitoring and research (See table below). Equity is provided by the landowners type 2. FinancinR/DonationslEquitv(in NPV) Donations CORNARE 1.37 66'. Grant C componenl 0.20 10 ' Municipalities 0.13 6 MASBOSQUES 0.33 16( Equity Source. Landowner type 2 contnbution 0.05 3'. Initial investments (in million USD) 37 IniL;al kwestments (including taxes if any): NPV, 10°o Land purchase $0.00 Machinery f Equipments $0.23 Buildings / Fences / Site preparation $0.74 Fertilization, Pesticides $0.07 Soil prep., Seedhng, Planting $0.34 Others: Annual Mondoring $0.11 TOTAL $1.48 Planting schedule and initial investments per year PLANTING SCHEDULE rHectaeas I 2007 2008 2009 93 93 93 47 47 47 158 158 158 116 116 0 93 - 93 0 O&M Cost and Revenues The O&M cost as well as the Initial Investment were calculated based on a social cartography study and a market research concluded in 2001. Data was updated according to the inflation rate in 2006. An average exchange rate of 2300 $/US$ was used. The O&M cost include clearing, replanting, fuel, transport, repairs, maintenance, harvesting and administration, as well as qualified and unqualified labor. The Project has four main incomes: Timber products,, non- timber products, carbon revenues, and extraordinary incomes through the PHRD grant. With regard to timber products, the revenues are relatively low in the first 10 years of project implementation but are increasing considerably between the 1 1'h and 20'h year of implementation. In the calculation of incomes from timber and non-timber products, the assumptions were very conservative assuming a factor of 80% in the wood prices. The products included in the non-timber (agro-forestry) incomes are listed in the table below. These products were chosen because they are the easiest and the most profitable to commercialize according to the opinion of the communities. Some of them can be used for auto consumption. A12ro-forestrv Products Products ARuacate 8 2 Limonl 3 Lulo-l 4 hachafrutoX 5 Borojo 6 Buanaban 7 Zapote 8 ICafial 9 Platano 38 10 Cafe I I Zapote 12 Frijol 13 Maiz 14 Yuca Permanence: Carbon Stocks in San Nicolas Project 160000 ERPA 140000 . 1 20000 - | 100000 - ma N 80000 -; ~ 60000 40000 20000 . 0 1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 Year The non-timber (agro-forestry) and timber (forestry) activities will continue to generate incomes beyond the ERPA period. An average stock of approximately 100,000 t C will be maintained after the ERPA is fulfilled, based on the planting schedule and the appropriate harvest schedule under the project, and following the requirements for sustainable forest management. The individual agreements signed between MASBOSQUES and the landowners will seek viability beyond the ERPA period to strengthen the sustainability of the activities initiated under the project. Financial Indicators The IRR of the project is 62% and the NPV(10%) is US$ 1.1 million with carbon revenues and the 36% and USD 0.5 million without carbon revenues. Analysis per type of landowner For the land owners type 1 the NPV (10%) is approximately US$ 1 million . Their total revenues are US$ 2.4 million (NPV, 10%) and O&M cost amount to US$ 1.4 million (NPV, 10%). 39 Landowners type 1: NPV Discount Rate 7.00% S1,166,607 10 00% $957,206 15.00% S699,347 18.00% S584,422 NPV O&M S1,399,645 Revenues $2,356,851 Revenues Wood $1,135 Revenues no-Wood $1,856,081 Revenues Carbon Credits $393,290 The IRR for the land owners type 2 is 44.64 %, the NPV (10%) is US$ 65,555. Their total revenues are US$ 0.3 million (NPV, 10%) and O&M cost amount to US$ 0.15 million (NPV, 10%). Landowners type 2: IRR Land Owners type 2 44.64% NPV Discount Rate 7.00%1o $84711 10.00%/a $65,555 1 5.000/o $42,648 18.00% $32,789 NPV O&M $147,393 Revenues S250,32 Revenues Wood $4,542 Revenues no-Wood $50,739 Revenues Carbon Credits $153,533 The above results shows that the project investment agreements with the landowner improves the income distribution and poverty alleviation as it distributes the overall profitability of the project favouring the low income land owners (type 1) than the medium to high land owners (type 2). As the project will implement various types of forestry systems (plantations, agro-forestry), financial indicators were calculated for each type of forestry system per hectare and for each type of landowner, as shown in the following table: 40 SAN NICOLAS CDM FORESTRY PROJECT Financial Analysis per Actor per System and per hectare S2 Forestry Plantation - Pinus oocarpa tecunumani (2 ZA) 3,547 1,960 694 24% 2,900 1,330 91 16% S3 Forestry Plantation - Pinus oocarpa maximinoi (3 ZA) 3,207 1,761 610 24% 2,559 1,131 7 15% Agroforestry - Podocarpus spp, Cedrela monatana, S4 Persea Americana, Citrus spp (AF1 ZA) 89 (29) (89) 9% (489) (591) (627) 2% Agroforestry - Cariniana pyriformis, Cordia alliodora, S8 Tabebuia rosea, coffea (AF4 ZB) 6,967 5,068 3,272 6,096 4,221 2,461 56% Cariniana pyriformis, cedrela odorata,zea S9 mays,phaseolus spp,manihot suculenta 3,823 2,392 1,068 27% 2,862 1,456 173 16% The above table shows that the plantation systems have similar profitability for both landowner type 1 and 2, ranging from IRR 2% to 56%. The agro-forestry systems S8 and S9 are very profitable due to the inclusion of agricultural products; on the other hand agro-forestry systems such as S4 are marginally profitable ranging from IRR 2% to 9%. In conclusion the project offers a wide rage of systems to be implemented by the land owners with marginal to high profitability. It is not advisable to limit the project to the higher profitable systems because they were carefully selected with landholders to consider the technical constraints on the species (e.g. climate) as well as socio-economic preferences of the landholders (e.g. agricultural experience, markets for non-timber products, etc). Sensitivity Analysis A sensitivity analysis. of the project financial indicators was undertaken for the variables and assumption with higher uncertainty: Carbon Price, initial investment, harvesting costs, timber and non-timber revenues, and discount rate. The results of the sensitivity analysis are presented in the following table: Carbon Price USD 3 (only window 1) USD 4 only window 1) USD 5 (only window 1) NPV 0.9 m 0.9m 1.1 m IRR 48% 52% 55% Discount rate 6% (both windows) 10% (both windows) 15% (both windows) NPV 1.4 m I 1.1 1.4 m As shown above, the project financial indicators are robust to the variation of the variable analyzed. CONCLUSIONS The project's financial sustainability is anchored by non-timber (agro-forestry) and timber incomes, complemented by carbon revenues from windows 1 and 2. Carbon revenues contribute to cover an important part of operational costs. Without Cornare's contribution and without carbon revenues the project would not be able to overcome various barriers (See main text D.3) and would thus not be feasible. Project sustainability is further strengthened by the project's attractive returns, even when a conservative approach is used in financial projections. The project incorporates income distribution and poverty alleviation criteria in the agreements with the landowners, favoring higher returns to low-income landowners. It also diversifies by selecting different forestry systems for implementation ranging from marginally profitable (IRR 2%) to very profitable (IRR 56%). 41 ANNEX 5: Economic Analysis 1. Socio-Economic aspects of San Nicolas Region The rural area of the San Nicolas Valley has approximately 150.405 inhabitants divided into 33.848 families (considering 4.5 members per family)." Agriculture is the main activity in San Nicolas which is carried out by 41.9 % of the families. The next most important economic activities include services (14.9%), livestock production (7.96%), employments in private or public institutions (11.52%), commercial activities (3.18%), manufacturing sector (1.83%), and use of natural resources (1.85%). 15.11 % of the families have non permanent employments. Among the productive family land units in San Nicolas, 65.5% are smaller than 3 ha. These units are mainly dedicated to agricultural production. 20% of the productive family land units are between 3.1 and 6 ha, and 14% are bigger than 6.1 ha. The following types of farmers are distinguished in the region: Poor farmers own lands smaller than 3 ha. Middle income and well-off farmers own lands between 3 and 6 ha. Rural employers own lands bigger that 8ha. Table 1 shows the main land uses by category. |_ Land use Pasture Crop Weeds Forrest Famer Type area (ha) % area (ha) % area (ha) % area (ha) % Total Area With Salary 0,40 44 0 ° 0,05 55,6 0 0 0,09 PoorFarmer 1,10 42,3 1,13 43,3 0.10 3,7 0,28 10,6 2,60 Middle Farmer 4,76 55,9 2,65 31,2 0,77 9,1 0,33 3,8 8,52 Well-off Farmer 11 85 1,26 9,7 0,65 5,0 0,11 0,83 13,02 Rural employer 12,8 25 2,4 4,8 15,2 30 20 40 50,4 Table 1. Land use per type of Farmer Table 2 summarizes the expenses distribution per type of farmer. It can be observed that 60% of the incomes are spent for food, followed by expenditures for clothes and utilities. A very small share is assigned to education and health. Expenses Distribution per Farmer type | Food Health Clothes Education Utilities FamerType % % % % % With Salary 59,9 11,1 13,9 3 12,1 Poor Farmer 61,5 6,2 15,9 6,2 10,3 Middle Farmer 60,3 6 18,2 7,3 8,2 Well-off Farmer 60,6 6,9 15,9 5 11,6 Table 2. Expenses Distribution per type of Farmer " Source: Sirpas http://www.prode2az.or2/sirpazl/ 42 The diet of the average farmer is based of meat, corn, rice, potato, beans, panela, eggs, milk and vegetables. Families with % of the total % of the total agricultural agricultural families of the Municipality living families region El Retiro 420 3,0 1,2 La Ceja 882 6,3 2,6 La Uni6n 928 6,6 2,8 Marinilla 945 6,7 2,8 Rionegro 1.184 8,4 3,5 Guarne 1.590 11,3 4,7 Santuario 1.613 11,5 4,8 El Carmen 3.164 22,5 9,4 San Vicente 3.344 23,8 9,9 Table 3. Agricultural activity by family El Santuario, El Carmen and San Vicente concentrate 57.8% of the families who obtain their incomes mainly from agricultural activities (see table 4). In the region cattle raising represents a less important activity and is concentrated in the municipality of La Union (with 725 families, 27.1%). In the municipalities of Rio Negro, Marinilla, Guarne and La Ceja there is a high percentage (82.25%, 3951) of families obtaining their incomes from commercial and industrial services, and from private and public institutions. Agricultural Production in San Nicolas Valley. The agricultural production in the valley is based on a rotating system, which means that different products are cultivated during different periods of the year. Table 4 shows the most common products, income and cost per hectare. Products like strawberry, tomato and potato are the most profitable ones. The product commercialization is direct and in cash, mainly on markets located close to the production place. There is also an important amount of the production designed for auto consumption. 43 Agricultural Crop Production Revenues Costs Net Benefits (Kg/ha/yr) ($USD/ha/yr) ($USD/ha/yr) ($USD/ha/yr) Potatoe 49,288 6,780 1,347 5,433 Cabagge 45,500 3,691 1,565 2,126 Carrot 4,624 298 1,667 -1,370 Arracacha 1,125 201 941 740 Tomato 17,073 2,641 1,813 828 Bean 2,882 2,447 1,220 .1,227 Corn 3,361 503 440 63 Brocoli 1,875 342 1,413 -1,070 Strawberry 47,666 33,220 9,225 23,995 Granadilla 21,700 4,837 7,292 -2,445 Average 5,496 2,692 2,953 Table 4: Economic Performance per plantation Source: CORNARE, Unalmed. (2002) Cuentas Ambientales. Informe Tecnico Final. Data updated to 2005 according to inflation rate 6% and TRM 2300 $/US$ The current situation for the agriculture in San Nicolas faces several barriers among which the lack of financial support for agricultural production and the lack of technical assistance dominate. Only a few farmers have access to support from the Secretary of Agriculture, or from Agriculture Banks. A mechanism of financing used in the San Nicolas valley is getting additional time from the suppliers for paying the bills. With regard to technical assistance, only 50% of the farmers have access to assistances from their suppliers and from governmental entities. 2. Economic Analysis of the project Taking into account the socio-economic characteristics of the region, the project distinguishes two types of landowners: low income landowners with farms up to 3 ha (type 1); and medium to high income landowners with farms that has more than 3 hectares (type 2) Project activities will be implemented in the unmanaged (abandoned) pastures of their lands, and therefore, it will not replace or displace any productive activity. The following table shows the land use for each type of landowner that will participate in the project: Size of land Size of Land % Unmanaged agriculture pastures _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ a r e a Landowners type 1 (low income) Less than 3 ha 43% 57% Landowners type 2 (Medium to high More than 3 ha 31% 69% incom e) I _ __ _ __I_ _ I _ _ _ _ _ _ _ _ _ Table 5: Land use by type of landowners participating in the project. 44 As described in the financial analysis, type 1 landowners will not contribute with initial investment but will cover all operational costs; they will receive the totality of the timber and non-timber revenues and 45% of the carbon revenues. Landowners' type 2 will invest 50% of the initial costs and cover the totality of the operational costs; and they will receive the totality of timber and non-timber revenues as well as 45% of the carbon revenues. As presented in table 5, landowners do not use the totality of their farms in agricultural activities. Landowners type 1 have approximately 1 hectare in pastures that do not generate income to them. These are the areas that the project will reforest increasing the productivity of the farm as well as the income to the landholders. On the other hand, landowners type 2 (middle and high income landowners) have more than 50% of their land in pastures and available for implementing the reforestation project activities. The following table shows the project contribution to the income of a typical landowner type 1 with a farm of 3 hectares; and a typical landowner type 2 with a farm of 6 hectares, assuming that they will implement the project activities in the unmanaged pastures of their farms according with table 5, and with per hectare average income of agricultural activities according with table 4. Landowner type 1 Landowner type 2 WITHOUT PROJECT Land in agriculture (ha) 1.3 1.9 Land in unmanaged pastures (ha) 1.7 4.1 Total 3 6 Revenues without project Agricultural revenues per year $ 7,139 $ 10,289 Agricultural costs per year $ 3,497 $ 5,040 Net revenues without project per year $ 3,642 $ 5,249 WITH PROJECT Average net revenue NPV(7%) per hectare for project activities $ 2,364 $ 1,741 Annualized (7%) average revenue per hectare for project activities $ 223 $ 164 Land in agriculture (ha) 1.3 1.9 Land in forestry project activities (ha) 1.7 4.1 Total 3.0 6.0 Revenues with project Agricultural revenues per year $ 7,139 $ 10,289 Project activities revenues $ 380 $ 678 Agricultural costs per year $ 3,497 $ 5,040 Net revenues with project per year $ 4,022 $ 5,927 % increase in farmer income due to the project 10% 13% Table 6: Increase in farmers income due to project activity, per type of landowner and per year. 45 Table 6 shows how the project improves the income and revenues. It needs to be pointed out that the current project area doesn't generate any income to the farmers as it is degraded land. For that reason each income that is generated on the project area is additional. The project revenues increase 10% landowners' type 1 net annual income, and 13% of landowners type 2 net annual income. The project represent for the farmers a direct way of adding value to their degraded land areas: previously in unmanaged pastures and with project activities generating revenues. As the major revenues of the project activities are generated by wood products, the project also constitute an effective saving alternative for landowners. Regeneration in forest relicts: Forest and forest relicts are land uses characterized for having large externalities. These externalities might be better associated with environmental services provided by the forest. From this perspective the forest is house to local, regional and global biodiversity, protects soils, regulates the water cycle, improves water quality, reduces siltation, captures atmospheric C02 and fixes it for long periods of time. The concept of "payment for environmental services", PES, provides some light into the "economics" of forest protection and regeneration activities. Under the PES model an equilibrium price (for a set of environmental services) is obtain when different groups, within the community or not, are willing to pay for the positive externalities of the preservation of the forest, and the landowners/landholders are willing to accept that level of payment for preserving the forest, allow natural regeneration or facilitate the implementation of regeneration activities. When an agreement is reached, and buyers and providers agree to a define course of action, the "price of the environmental services" have been achieved. In the San Nicolas valley a formal commercial agreement will be reached with landowners / landholders for the protection and preservation of natural forest relicts (natural regeneration), and in selected areas activities will be conducted to promote regeneration. In both cases the initial investment will be covered by the Project, and the value of the CERs will serve as the basis of payment for the environmental services provided. The activity has been so design as to maintain a long term incentive for the preservation of the forest, and of the environmental services it provides. Although the sustainability of such activities will continue to depend on the existence of the economic incentive (the payments) it is expected that by the end of the crediting period new economic tools would be available in the valley to continue the payments. CORNARE, the local environmental authority, is studying the concept underlying the PES programs for its implementation in the project area. This component will act as a pilot of such type of initiative. CONCLUSIONS - The average farmer is the San Nicolas valley is dedicated to agriculture and can be classified as poor farmer. - Most of the farmers in San Nicolas Valley have significant areas of their lands in a non- productive use, usually in unmanaged pastures and weeds. 46 - The project will implement reforestation activities on the unmanaged pastures, and therefore will generate additional income to landowners. - It is estimated that the project will increase in 10% the annual revenues of a typical low income landowner (type 1), and in 13% the annual revenues of a typical medium income landowner (type 2). The project will add value to the land of the landowners and will constitute a saving alternative for them. 47 ANNEX 6: Social Analysis Background Information and the Consultation Process The project can only be developed with the active participation of the farmers from San Nicolas. The project scope is the direct result of years of interaction with and participation of the local community. The forestry plan was drafted in the course of a well designed and executed consultation process, during the last 20 months, with the communities in the area of influence of the project. The communities are likewise represented in the institutional arrangements for implementation of the project. MASBOSQUES itself is the result of a participatory process that includes several institutions, municipalities and grassroots organizations. The project was born in CORNARE, which enjoys a very good reputation in the region. The project is expected to improve the income of small landowners, through the sale of non timber (agro-forestry) products, therefore directly contributing to income improvements and quality of life of the involved community. The Project Area and the Farmers The project area includes two life zones: the altiplano, which occupies the majority of the area and where the humid forest ecosystem is located, and the tropical humid forest life zone characterized by rough relief and steep slopes. The rural population of San Nicolas is around 150,000 inhabitants or 33,000 families. Agriculture is the main economic activity (81% of the families). A third of the families in the region own less than 3 ha of arable land. Agricultural production is partially devoted to flowers and dairy products. However, there is a significant farmer/peasant economy that is based on the production of potatoes, beans, maize, coffee, strawberries, etc. The parcels are managed through a rotating system that combines different crops in different seasons. The production is sold in the local markets. MASBOSQUES through the assistance of UNALMED has undertaken a socio-economic characterization of the local farming community, identifying the following types of landholders: * Agricultural worker: temporal worker without land. * Employee: permanent worker without land. * Low income farmer or peasant: peasant with land that in addition works as a temporal agricultural worker. No more than 3 ha. * Medium income farmer or peasant: peasant with land that can work only with his family in his land. More than 8 ha. * High income farmer or peasant: peasant with land that can hire additional workers to work in his land. More than 8 ha. * Rural Businessman: landowner that has land, employees and also other business. 48 Land tenure and Project Participants The project will be implemented by low and medium income farmers. The project will take place on land without land tenure issues. The individual land owners have empowered MASBOSQUES with valid and binding arrangements that entitle MASBOSQUES to the carbon sink income and commit individual participants to the reforestation schemes. All project participants have secured title to the land. Individual agreements will be in place prior to implementation. Under the agreements the landholders commit to the maintenance of the reforested systems. Direct Social Benefits The project will benefit around 21,000 families; and is expected to generate around 9,000 jobs in reforestation activities and around 3,000 jobs in agro-forestry activities. The identified potential benefits are as follows: * Improvement of levels of income * Higher valuation of lands * Consolidation of institutional links * Promotion of the communities capacity for management and negotiation * Formulation of a territorial planning process in a participatory manner * Training in forest-management activities * Creation of direct and indirect employment * New products for the local market * Attraction of foreign investment for the region and for the country * Increment of wooden availability and probably reduction of pressure on natural forests as wooden sources. * The establishment of agroforesty systems will improve the food safety inside the region. For further information, the project files contains a very detailed statistical report on the socio economic, education and health situation of the rural population of San Nicolas (in Spanish). 49 ANNEX 7: Environmental Assessment 1. REGIONAL SETTING The area corresponding to San Nicolas region of 71,969 ha is situated between 5° 48' 51" N and 750 07' '3" E in the Central Range of the Andes mountains, near the city of MedellIn. The target MDL areas are in forest aptitude according to thematic maps (soil classification, land use potential, precipitation, temperature, etc.) as well as with land use management plan adopted by the Local Environmental Authority through the Agreement 016 of 1998. The target area is strategically situated since it provides the water for hydropower plants that supply one third of the total national hydro-energy and water for human consumption to more than 250.000 inhabitants in nine municipalities. The project area comprises 6,134 discrete potential areas of land that could benefit. The region where the Project activities will be implemented is the San Nicolas Valley with approximately 72.000 hectares of 7 municipalities. The project region is part of the East branch of the Central Andean chain mountain in Colombia. In San Miguel Peak, the Central Andean Chain Mountain is bifurcated into the east and the central branches, separated by the Medellin or Porce River Valley. The East branch is dominated by the Rio Negro high plateau, which has a moderately plain topography that includes a series of rounded hills. Table 2. Land use in year 2000 in project region Unmanaged Pastures 18,543 1,642 20,185 Forest (secondary 15,723 3,539 19,263 growth) Constructions 32 32 Managed Pastures 1,310 1,310 Water areas 7 7 Natural Forest 6,597 4,042 10,639 Planted Forest 6,499 6 6,505 Permanent crops 1,192 377 1,568 Scrublands 9,911 764 10,675 Seasonal crops 1,304 38 1,342 Shadows 213 231 444 Total 61,331 10,638 71,969 According to Holdrige (1978) classification for vegetation formation, the project region includes the following formations: bh-MB, bmh-MB, bp-MB, bmh-PM, bp-PM. Table 1 shows the main vegetation present in the project region in year 2000. It also shows the main ecological classification of the territory, the medium to high vegetation areas, and the low, humid and warm, forests. Due to its undulating landscape, short distance from Medellin (second most important city in Colombia) and environmental services it offers, San Nicolas Region has been affected by Medellin urban expansion. 50 The region of San Nicolas is considered Antioquia's agricultural pantry. Food production is locally consumed and exported to other zones of the country, with its main market in Medellin, the second largest city in Colombia. Production includes corn, beans, potatoes, grains, milk and its derivates. In the San Nicolas valley is possible to observe planted forests (cypresses, pines and eucalyptuses), which are the result of decades of governmental efforts fostering reforestation. The area constituted one of the most important recipients of reforestation programs in the country in the last five decades with commercial and protection purposes. The project specifically targets areas characterized by abandoned pastures, and which have remained unproductive since 1998. This category is constituted by native or introduced pastures which have not been in management practices, and therefore they present weeds and low growth. These factors affect the load capacity, type of cattle and consequently, its productivity. The presence of weeds and in some cases invasion of pteridium aquilinum ("helecho marranero"), are the main consequences of their abandon and the lack of management practices. The region contains threatened species (e.g. from www.redlist.org andfrom the national lists of endangered species) and their habitats which are also threaten. It was found that the two main ecological zones, the high and low forests have high diversity of species. The beta diversity calculated with the Jaccard and Sorenson index indicated high species heterogeneity. The area is also home to some threaten species: From a detailed survey conducted for CORNARE the high forest areas house two species in the IUCN vulnerable category: Brunellia subssesilis and podocarpus oleifolius. In the low warm forest some species in the IIJCN threatened category was found such as: Aniba perutilis and aphelandra lasiophylla. These findings highlight the importance of the project area for protecting, preserving and monitoring biodiversity. Regarding forest conservation in the project area, a landscape metrics analysis was carried out to identify the state of biodiversity. For this analysis the following indicators were measured: habitat loss, habitat blocks, fragmentation, conversion and protection. The results indicate high habitat loss with a metric of 74.0%, indicating a high degree of landscape alteration. The remaining forest fragments are small in comparison with the total land area; the largest forest patch has an extension of 20,162 hectares. -Iowever, the annual loss of pristine habitat was found to be -0.51%, indicating that the area covered by forest has increased by 4,503 hectares in the last 24 years, a low value that may account for the establishment of the natural protected areas regional system, covering 19,755 hectares. According to the threat categories of the IUCN the region is classed as in Danger. (Anaya, 2004) The San Nicolas region is threatened by factors such as soil degradation in steep slope areas in which the erosive process has taken out most of the superficial horizon or arable layer. The change of agricultural lands for weekend homes and villas is another factor that reduces degradation, but promotes fragmentation. 2. PROJECT ACTIVITIES The project has several activities: Reforestation of 1310 ha with Cariniana pyrifornis, Cedrela montana, Cedrela odorata, Citrus spp, Cordia alliodora, Persea Americana, Podocarpus 51 oleofolius, Tabebuia rosea, Pinus tecunumanii and Pinus oocarpa The project will also support the conservation and regeneration of about 1000 ha of existing forest stands with native, locally present species (Cedrela odorata, Tabebuia ssp, Quecus humboltii, and Podocarpus oleofolius). The protection of forest relicts and regeneration efforts seek to strengthen the system of local protected areas, protect biodiversity, and maintain environmental services and C02 sequestration. The aim of reforestation and agroforestation activities is the reclamation of degraded forestlands, C02 sequestration and timber/agricultural production for local and nearby markets. Only two non native species like Pinus Oocarpa var. Tecunumani and var. Maximinoi will be used. These species are not new to the area. Since the mid sixties forests (cypresses, pines and eucalyptuses) had been planted in the region. These species have been planted due to their economic success as the region is particularly well suited for their development, has the required infrastructure, and the population has acquired the corresponding know-how. 3. TASKS AND POTENTIAL ENVIRONMENTAL IMPACTS The environmental assessment is summarized in the table below. Each activity is described briefly, field activities are identified and the environmental impacts as indicated. For these impacts preventing and control measures are defined. These environmental control measures constitute a protocol and a set of guidelines, for training and dissemination purposes. Finally the monitoring activities, as QC/QA activities, are presented. It should be pointed that the project gives great importance to the adequate planning and design of the interventions as the best and most effective way to reduce negative environmental impacts. Care has been taken to incorporate local knowledge, as well as the goals and desires of the small landowners who will benefit from the project. No assessment or monitoring of the environmental services is contemplated in the project, as this component will be incorporated by the local environmental management authority. 52 Description Field interventions Environmental negative Environmental conlrol Nlonitoring issues measures Component 1: Planning and Design Objectives (localy The aim of Nlone relorestation and agroforesraaion aclivittcs is the reclamation ol' degraded toresilands. C02 %eque,tration. timher I agncultural production lor lkcal and nearby niarkel%. and ihe pronectiin preservalion nl cndangered specie . Site evaldation: Planning Land %ur%eys. soil Thnoe related to poor Peer review of all ILeihnical Monitoring activitie% reforeIaiion / agrllfores,atii)n sampling and [hematic planning and inadequate use actin ities: adequat. selection would he concentrated in aeLtiitie% hegan u iih ev3luaiing the map production of avatlahle informatio n of advisers and consultants: the QA/QC prioess to planting area Knowledge rif' paniciLpatiin of lioal well assure the selection of1 well polentilklk linilming eiic facior% such trained forest professionals: versed peer resiewers and as oils. existing %egetation. and and careful delinition of adv isers. andi on the ToR producti; itv pilienrial aidedl in terms of rel'erence for all for (he site assessment wleci(on "'iuitahl-e pcies. guided aaLtviLs tciviries. the deLign of site preparation actliille. aiid precribhed post planting manageneni pracices._ Planting design: pro% ide specilic Survey% Those related in poor Planiing design was Due diligence acti; ilies details for the creation Lnd planning and inadeqtiate use conducted with communily confirmed the management of d planting including of available infolrmalion. participation, thr(ough well implementation of- well acrejge. specie%. nuniber olf tree,, organized workshops. planned and executed spacing. nurser) stick rpe. incorporating local know- panicipatory workshops, to arrtngemeni. %iie preparaltin and how and lando-Aners integrale community vies planting method, and anN prst- expectations. in the planning stages planting muintenance A urialen Peer review of all technical refore%talion plan and map uah aeiuvilies: adequate selection Monionng activities developed lo help clarifv all ihese of adviwrs and consultants, would he concentrated in details. antd facililate ans parlicipalion of local well the he prcesto nindificauions prior to planting trained forest proifessionals: aue the %elen ll The planting dLsign ;e,± direcik icd and careful definition of aveure the seltion or well It a landowner's goals. and the lerms of ref'erence for all versed peer reviewers and resourccs and caplabililie of' the activifies. advisers, and on the Ts R planting site for peer revtes 53 Species selection: The trce species Land and vegetation Those related to poor Planting design was Monitoring activities selected lor reflre-t3tion are surveys planning and inadequate use conducted with community would be concentrated In compatible with the landowner'> nf available infonrmation participation. through well the QA/QC process to I management goals, and bitilogicaliv- organized workshops. assure the selection of well suiwcd to the planting site After incorporating local know- versed peer reviewers and determining the potential advantages how and landowners advisers. and on the ToR and limitation%s of ihe planting site. expectations. for peer reviews. species and/or combination of species Peer review of all technical were selected that emphasite the activities; adequate selection advantages and overcome the limiting of advisers and consultants; factor.s. Consideration was given to participation of local well the following: trained forest professionals: * Site requirements. especially soil and careful definition of factor% terms of reference for all * Climatic suiLtahility activities. - Potential growth rate on site * Sunlight requirements * Potential competition problerm * Potential for insect and disease problems * Wood and fiher properties and potential markets * Compatibility with other speCICe * Timber. wildlife, erosion control. and aesthetic valucs Seeding and Seedlings: One of the Requires nurseries Nursery planning. design Nursenes will be subjected Monitoring activities initial decisions was to plant seeds or and construction may to detailed designs, which would be concentrated in seedlings. As each method has produce local, medium include the corresponding the QAIQC process to advantages and disadvantages lor intensity environmental environmental management assure the selection of well each species. the general decision deterioraLion. Impacts plan. versed peer reviewers and was made to promote. whenever include: topsoil removal, advisers. and on the ToR feasible, the use of sedlings. landscape alterations, The local environmental for the site assessment drainage alterations, use of authonty has a long and activilies agrochemicals. storage of successful experience with agrochemicals. and ELA and the definition of inadequate disposal of EMP wastes. I I I Seed source selection: Seed nource is This activity is to he Seed collectinn may hurt the A careful, well documented Inonitoring surveys will be 54 aIn te fcn overlilked hut crilical guided by specialized site where seeds are and tested procedure usill he conducted to monitor the compOnent in a succesiful research institutions, such collected. Overexploiiation. de'eloped and implemented implementation of the reloreslalmn program. Selecting as the Botanical Garden or ihe discovery of a new In improse in the selection developed procedure This appropriale seed sources %ill and the Catholic snurce of tncome fnr loval of seeds, as well as on the actisils %kill he imprnve the oterall productitit of Unikersiti crmmunities, coiuld prevent proper handling and storing responsibiltIL of the pro lect the plantation. since the trees will a healthy forest from ilt of the collecied material manager, and 3 reports are be adapted to the enl irnnment or For each spc; ies of necessary replenishment. e'xpected to hc filed dunng the planting site. Appropriate sed interest a seed collec tion Workshops will he held it the first year of prL1ect source electioun V ill alss rrduce uateg> %kill be delined. Improper management of training farmers and fo rest implementatioin catastrnphic planptaion loses ductoI CommerLial nurseries are the coillected seeds could personnel in the Pnroe seted ein handli 1nd not discarded as a arccount for declines in identilication of good seeds. strage are criticalt the g ponieniial source for rorest producti% ity. and the oin the collection periods, on estali hment diicalrect see selected species. If loss of diversity in the gene handling and sioring the plantations Seedt colecied during an selecLed the nursery will pool. In hoth eases the new collecedi matenal and on it dbundant sCed yer i usually higher he thoroughly sur cm and plants could grow 'eak to classificanon for later usage quairv. especC1alls if malure seeds are seeds and seedlings will envirtinmental stresses thai coillected Just bl oire. r he carefully etxamine. might occur several years simulidneously A ith. secd f:all apart Properl, sitr-e. iraitfy and treat sced 1in maximmt,e germnination races Stock type selection: SeleciIIn ilihte Seedlings management Waste of resources. seeds Adequate planning will help Monioring surveys will he het %nursery stock type lr a gs Ln dill he incorporated in and eedlings ciuld occur as it prcsent mismanagement ctinducled to monitor the situaton depends upoln the nurseries management result of inadequate stock and imprOper eleciitin of implementation of the identification ol planting sile lactors operatiing manual. lype selection. Moreo%er, stock. The nurieries developed pr(oedure This ihat intlucnce seedling esthalishnent improper selection would operating manual would activ iy usill he andi earl grosth. Containerized havc a negative impact in incorporate all the activlites responsibilily o f the project stock is usually less than one-wear- old and is grown. shipped and planted the developmenl of the to effectively classify the manager. and 3 reports are in an % "plun%- hipeal. and %nid egetal material composing reforeslation malenal and expected to he tiled during ina il "plu' peat.iand sand the forestr) system hben praclices It have successful the irst year of protect i planted growing vegetatio(n implementation. It) conifer eedlings The ad% antaves tf containeri,ed sitock include the flac thai seedlings Lan he grovn in six to 15 s,Leeks. they have high urn it al rates. superio initial height gronth. more unilorm site, and plantahl.L e%pecialls on rock sities u here it may he dilfficuli it open a large hole bI;r hareroot seedlingV Bareroot 55 stock i; weeded and grn% n in nur';ers hed- 'ir nne to three vears. and mav he miced tI a transplant hed tn improve root development. Ad% antages nf barernoit %tock include lower costs. ease nl transpKrtation and storage. competitive advantage over weeds. lesv susceptibility to deer hrowse. and faster riot regeneration. Bareront stock. however. takes luLnger to grow. can dry tuut quickly due io exposed rools, is prone to root damage and deformity during planting operations. and ma) require specidl planting considerations due It the larger seedling size. Component 2: Operational Activities Site preparation: Site preparation is Site preparaltion activities Adverse impacts are related Site preparation ought to Monitoring surveys will be thc creation of a favorable growing could include: to the improper selection of follow a well define set of conducted to monilor the envirnnmenl for tree eeds nr mechanical site site preparation activities, pnnciples, and the carefutl implementation of the seedlings. The higge-t obstacle facing preparaunn, chemical. and in inadequate guidelines management of the activities contemplated in seedling establishmen is competition prescnhed burning. and for tasks implementation. preparation tasks. To avoid the Operation Manual from other vegetation. Effective uite the selection of cover Each method has advantages unnecessary environment developed for the Project. preparation will reduce competing crops. Selection will and disadvantages. and the damage an Operating This activity will he *egetation. and create a %ufficient depend on site potential impact% will Manual will be developed responsibility of the project number of suitable growing 5itC5 characteristics and depend on management for site preparation, and manager. and at leatl 2 witlhout causing excessive soil species selection, skills and proper workshops will be reports per year are disturbane, supervision conducted to enhance the expected to be filed during role of the community in planting. overseeing these activities. Planting: Planling includes many Planting activities are Planting activilies involve Planting activities will be Monitoring surveys will be tasks that require skills and training, complementary to site the displacement of covered in the field conducted to monitor the The following activities are of key preparation. It implies workers, equipment and Operation Manual implementation of the interest: mobilization of people, materials to and in the developed for the projec. activities contemplated in Packaging: Plastic-lined hoxes Or material and equipment prepared sites Main Workshops and training will the Operation Manual bags are preferred for shipping to the planting area. environmental impacts be mandaLory for those developed for the Project. hareroot seedlings hceauwe they help associated with the planting participating in this activity This activity will be prevent physical damage and keep activities include soil and it is expected that such responsibility of the project 56 tecdlilnis inmls. Paper bags ur hurlap disturhance. waste training will prevent most manager. and at least 2 halcs provide less protecit in frorm production and improper use negative impacts. Training reports per year are physical dramage Bales will ufitlee of iransportation vehicles, will alsn include feedback expecied to he filed during tor %ery short storage or tranportn on the guidelines used. as a planting penods. bLl hales lease ihe shooi0 mean to upgrade them based esposed and suhieci ito drying. on the field expenences. Seedling, care and handling The molst commoln prohlems lacing seedling wursisal arc moisture sirec%. handling. and phy%ical damage behtre planiing. From the lime seedlings ire hiled Irum the nurser% hed. in ihe ime the- are plantLd. it is crilically imporiant ii ketep the seedlings moist and cool1 Seudlings must remain in a isate of dormancv during this period. Rout pruning may hb necessar f'ir seedlings vsith I ing lihroius root systems in order io f:acilitate proper planiing. Since the kiy Io seedling eslishment and sur I%al Is a % igortiu% rii(ii %%-lm rotqll pruning mtisit b approach ciinser%atively. Sesere rono pruning cin quickli) lead It, Wedling monrtlthy after planting because seedlings will nuit hase s lufficienl root area toi absorh salter Component 3: Post-planting A tivilies Vegetation control: The success of a Field actisities to control Alihough some sites have Training, supervisiton and Surveys will he conducted planting vill .llen hb determined hb weed development and to weeds thit mighl po%e a surseys will he used tn to monitor ihe the conlrol ol compeling %sgeiati'on fonser Iorest growth will problem to forest reduce the potential negative implementation ol'the belore and after the Lrees are planied he responsibility of the development, most areas ot' impacts of weed control activities contemplated in Good sitc preparalion Qill gel landowner, alihough the interest are degraded and activities Training will he the Operation Mlanual seedlings off it C I'a%i lan. s but SAwLed Project kull proside should not represent a provided fulr agrochemical developed for the Project. compietition may need to he training and guidance senrous threal to seedlings usage. including guidelines This activity will he controllled ftir at least ihree gro 1 i ng Herbicide use will be and trees in their earlyv for transportation. storage, responsibility of the protect eseasois or until the trees are well- minimized by suggesting development stages. application, and disposal. manager, and at least 2 eal Cnr col ItS use uonly as Herbicide use will he reports per year are iltrough herbicides or net hanic.l 57 weed control recommended by minimizcd. expected to be Filed during foresters. planling. Animal control: Most forest Field surveys will he Animal control strategies Guidelines for animal Reports of animal damage plantings will experience some type required to assess the mighl represent a senous control strategies will be will be collected and of animal damage (e g.. hrowsing. potential threats from impact on wildlife. This is developed. and local analyzed. and surveys will ruhbing. rodent hark feeding). animal damage If a not expected to he Lhe cace experience incorporated in be conducted to assess however. the Severity otf that damage serious problem develops in the project area bulletins and other training treatment effectiveness and will vary across planting sites and speciahlits will he call to material. Workshops by its potential negative between tree species Many different assess ihe situation and specialists will be held when impacts These reports will techniques can be employed to recommend control the problem is detected. and be kept for public discoaurage severe wildlilc damage. actions. recommendation will seek inspection, and submitted such as. population control from to minimize negati'e as part ol prmiect reporting rodents, habitat manipulation or tree impacts in wildlife in requirements. proteciion de% ices. general. Fire control: The disperse nature of No activities are planned No negatve impacts are The project area has a long Fire reports will be the activities contemplated in the in the dispersed areas expecled from these tradition with reforestation collected and analyzed; prolect contribute to a nmnor fire risk where the fire threat is activitles, activities. and has developed surveys will he conducted classification. In commercial negligible. In commercial the know how to reduce the to assess damages and plantations this might become a more planiation fire prevention expected threat form forests possible improvements in pr(ominent issue. For commercial and contnol measures will Fires. In commercial control measures. These plantations a detailed fore%t he part of the forest plantation such activities reports will be kept for management plan is require, Lhat management plan to he will be incorporated in the public inspection, and includes fire hazard assessment approved by the local forest management plan. submitted as part of project among many other tasks environmental authorily. reporting requirements. Insect and Disease control: All A regular monitonng New vegetation may hnng Careful, well planned and A regular program of plantatins, will experience st'me program will he executed new diseases and insects to detailed monitoring will be monitoring will be degree of inmect and disease damage. by the prolect proponents the project area. which implemented. with emphasis implemented lto ensure the If local pot:kets of damage develop, with specialized might affect local vegetation on the eariv development. success ola reforestation or problems persist. carefully identifv professonals. Sampling and habitats. when vegetation tends to he projecl. Al a minimum. the pecs organism and asscss Lhe and control parcels will more susceptible to disease. plantations will he degzree *f damage pror to developing he use as required. The pmject proponents have evaluated dunng the first control recommendations. Once trees engaged the Botanical growing %Casonn fiur to are damaged and weakened. they Garden and local five months after planting become %usceptible to) further attacks universitte to provide (although earlier by pcsl%. Proper idcntification scienific support as well ap evaluations may make bectmes complicated when more problem diagnosis easter). than one organism or injury 1% present specialize las an and again during the third information as needed. Isee the Resource Directorv for mforma__on as needed. growing season to *erify 58 sources of as'sisiancc in insect and %urvj%al and eitahli%hmren di.ieac ideniafi.a tiiin). During ihe .c aluation Insects causing the m4oi Llam.gC to procss note'es will he made ytiung tree planai.on; fall l inlo ibree ol insect. diwaea., animal. c.iteporie'.. and/or compeling * Main stem and root pests, such as %egeialion problems ice% ils .nd % hite gruh', feet) on ihe These reports will het kept main stem or root system. and can for public inspection, and cause scriowu tree morialily %uhmited a' pan t of project * Shoot or branch pests. such ac. reporting requirements. %cale% and ;pitilehug%. Iced (in or v&ithin the '.hoov. cau%ing hranch damage or death ^ Defoliators. uch a-, calerpillar'. and '.awllic.. t'feed tin the kaie'. k'r needles 59 Conclusions Mostly positive environmental impacts are expected. The environmental assessment has indicated that the most important measure to prevent or mitigate potential environmental negative impacts is the implementation of an early and regular program of monitoring. It is also concluded that training is required to ensured that forestry activity are conducted with due consideration to environmental considerations. If properly implemented these recommendations should provide ample assurance on the environmental soundness of the proposed activities. It should be emphasized that Planning and Design are the most important tools for minimizing environmental degradation as consequence of the project. These activities have already taken place, peer reviews have been conducted and technical feasibility has been assessed. Also financial viability has been studied for each participating stakeholder, providing adequate level of comfort that small landowners will be attracted to join the project. Moreover, this project is thought to be a pilot activity of a much wider initiative to reforest over 8500 hectares. In all, the project has positive environmental impacts, and preventing measures are in place to minimize unexpected negative spillovers. 60 ANNEX 8: Eniission Reduction Purchase Agreement/Term Sheet A generic ERPA table of contents is shown below. Thee actual document is expected to be signed by December 2005. ARTICLE I: APPLICATION OF GENERAL CONDITIONS Section 1.01 Application of General Conditions Section 1.02 Inconsistency with General Conditions ARTICLE II: PROJECT DETAILS Section 2.01 Description of the Project ARTICLE III: CONDITIONS FOR SALE AND PURCHASE Section 3.01 Preconditions to be fulfilled Section 3.02 Conditions for benefit of Trustee Section 3.03 Termination of the Agreement ARTICLE IV: PURCHASE AND SALE OF EMISSION REDUCTIONS Section 4.01 Contract ER Volume and Unit Price Section 4.02 Transfer of Contract ERs Section 4.03 Advance Payment Section 4.04 Annual Payment ARTICLE V: CALL OPTION Section 5.01 Call Option provisions do not apply Section 5.01 Call Option Volume and Exercise Price ARTICLE VI: PROJECT DEVELOPMENT AND MONITORING Section 6.01 Project Development Section 6.02 Monitoring Plan ARTICLE VII: REPRESENTATIONS AND WARRANTIES Section 7.01 Additional Project Entity Warranties Section 7.02 Notices ARTICLE VII: TERM Section 8.01 Term ARTICLE IX: NOTICES Section 9.01 Notices SCHEDULE 1: CONDITIONS FOR SALE AND PURCHASE SCHEDULE 2: ANNUAL AMOUNTS SCHEDULE 3: MONITORING PLAN 61 ANNEX 9: Calculation of emission reductions Approved afforestation and reforestation baseline and monitoring methodology AR- AM0007: "Afforestation and Reforestation of Land Currently Under Agricultural or Pastoral Use" Section I. Summary and applicability of the baseline and monitoring methodologies 1. Selected baseline approach from paragraph 22 of the CDM A/R modalities and procedures "Existing or historical, as applicable, changes in carbon stocks in the carbon pools within the project boundary" 2. Applicability This methodology is applicable to the following project activities: 0 Afforestation or reforestation activities undertaken on pasture, agricultural land or abandoned lands; land use change is allowed in the baseline scenario. The conditions under which this methodology is applicable to A/R CDM project activities are: 1. Lands to be afforested or reforested are currently pasture or agricultural land or abandoned lands. 2. Environmental conditions, human-caused degradation or ongoing human activities do not permit the spontaneous encroachment of natural forest vegetation. 3. The application of the procedure for determining the baseline scenario in section 11.4 leads to the conclusion that the baseline approach 22(a) (existing or historical changes in carbon stocks in the carbon pools with the project boundary) is the most appropriate choice for determination of the baseline scenario. This implies that only land uses that currently form part of the land use pattern within the analyzed area are plausible alternative land uses for the baseline scenario. 4. Biomass of non-tree vegetation is in a steady-state or decreasing for all baseline land uses; for rotational land-use systems, peak biomass over the rotation has to be constant or decreasing over several rotations. 5. Lands will be afforested or reforested by direct planting and/or seeding. 6. Site preparation does not cause significant longer term net decreases of soil carbon stocks or increases of non-C02 emissions from soil carbon. In particular, soil disturbance is insignificant, so that C02 and non C02-greenhouse gas emissions from these activities can be neglected. Soil drainage is not permitted. 7. Flooding irrigation is not permitted. 8. Greenhouse gas emissions from denitrification due to the use of nitrogen-fixing species are not significant. 9. Plantation may be harvested with either short or long rotation and will be regenerated either by direct planting, sowing, coppicing or assisted natural regeneration 10. For each of the alternative land uses being part of the baseline scenario, carbon stocks in soilorganic carbon can be expected to decrease more or increase less in the absence of the project activity, relative to the project scenario. 11. All of the plausible land use changes being part of the baseline scenario shall lead only to such changes in soil organic carbon stocks that the stocks can be expected to decrease more or increase less, relative to afforestation/reforestation of the project area. 12. Displacement of landowners that lose their farms due to the project activity is not expected to 62 occur. 13. Agricultural and pastoral pre-project activities shall be terminated on commencement of the A/R project activity and their shift outside of the project boundary is not expected to occur. 14. The A/R CDM project activity shall not lead to destocking of existing forested areas in any ways other than possible farming undertaken by the displaced people (other than landowners of the project area) and farming or pastoral activities undertaken by the displaced people shall not lead to significant increase in non-C02 emissions. The use of a Geographical Information System (GIS) platform and the use of Global Positioning System receivers are recommended. 3. Selected carbon pools: Table 1: Selection and justification of carbon pools Aboe aroud Yes M.1io carbon pool subjected to the project activit- Below 2round Yes |Major carboon pool subjected to the project activity Deadwvood Yes Major calrbo pool subjected to the project activity Litter Yes Major carbon pool subjccted to the project acti vity Soil organic carbon No Excluded. Consei-vative approach under applicability I I_conlditions 4. Summary of baseline and monitoring methodologies Baseline methodology steps The baseline methodology is structured into the following steps: Step 1: Demonstrate the applicability of the methodology to the specific project activity. Step 2: The project boundary is defined for all discrete parcels of land to be afforested or reforested and that are under the control of the project participants at the starting date of the project activity. The methodology also provides rules for including in the project area discrete parcels of land not yet under the control of the project participants at the starting date of the proposed A/R CDM project activity but expected to become under the control of the project participants during the crediting period. Step 3: The eligibility of land for an A/R CDM project activity is demonstrated based on definitions provided in paragraph 1 of the annex to the decision 16/CMP. 1 ("Land use, land-use change and forestry"), as requested by decision 5/CMP. 1 ("Modalities and procedures for afforestation and reforestation project activities under the clean development mechanism in the first commitment period of the Kyoto Protocol"), until new procedures to demonstrate the eligibility of lands for afforestation and reforestation project activities under the clean development mechanism are approved by the Board. Step 4: Stratification of the A/R CDM project area is based on local site classification map/table, the most updated land-use / land-cover maps, satellite image, soil map, vegetation map, landform map as well as supplementary surveys, and the baseline land-use / land-cover is determined separately for each stratum. a) Sub-step 1. Stratification according to the baseline projections. b) Sub-step 2. Stratification according to the project scenario. c) Sub-step 3. Final ex-ante stratification 63 Step 5: This methodology applies approach 22(a), taking into account historical land use/cover changes, national, local and sectoral policies that influence land use within the boundary of the proposed A/R CDM project activity, economic attractiveness of the project relative to the baseline, and barriers for implementing project activities in absence of CDM finance. The baseline approach 22(a) is applied to extrapolate past land use change trends into the future over the crediting period. The baseline scenario is determined by the following steps: a) Identify and list plausible alternative land uses on the project lands b) Map current and historical land use c) Derive land-use change trends d) Extrapolate the observed past trends into the future. Step 6: Determination of baseline carbon stock changes. The baseline carbon-stock changes are estimated based on the identified baseline land-use scenario (step 5). For strata without growing trees or woody perennials, this methodology assumes that the carbon stock in above-ground and below-ground biomass, as well as deadwood and litter would remain constant in the absence of the project activity, i.e., the baseline net GHG removals by sinks are assumed to be zero. For strata with a few growing trees or woody perennials, the baseline net GHG removals by sinks are estimated based on the carbon stock changes in above-ground and below-ground biomass (in living trees), litter and deadwood. To estimate carbon stock decreases due to land preparation for planting, this methodology conservatively estimates the highest carbon stock in above-ground and below-ground living biomass, as well as deadwood and litter that exists through the current land use cycle. The loss of non-tree living biomass on the site due to competition from planted trees or site preparation is accounted as a carbon stock decrease within the project boundary, in a conservative manner. The omission of the soil organic matter can considered to be conservative if it can be justified that this pool would decrease more or increase less in the absence of the proposed A/R CDM project activity, relative to the project scenario. This assumption has to be demonstrated through pre-project measurements in representative pastures, agricultural lands and forest areas, or alternatively based on scientific literature. Step 7: Ex ante actual net GHG removal by sinks are estimated for each type of stand to be created with the A/R CDM project activity. Stand types are represented by a description of the species planted or regenerated and the management prescribed (species, fertilization, thinning, harvesting, etc.). Carbon stock changes and the increase of GHG emissions resulting from fertilization, site preparation (biomass burning) and fossil fuel consumption are estimated using methods developed in IPCC GPG-LULUCF (IPCC 2003)1 and IPCC (1997)2. Step 8: This methodology uses the latest version of the "Tool for the demonstration and assessment of additionality for afforestation and reforestation CDM project activities" approved by the CDM Executive Board3. Step 9: Leakage emissions, including carbon stock decreases outside the project boundary, are accounted for the following sources: fossil fuels consumption for transport of staff, products and services; displacement of the former employees on the lands, leakage from the increased use of wood posts for fencing and from the displacement of fuel-wood collection. Monitoring methodology steps This methodology includes the following elements: Step 1: The overall performance of the proposed A/R CDM project activity is monitored, including the integrity of the project boundary and the success of forest establishment and forest management activities. 64 Step 2: Stratification of the projectarea is monitored periodically as the boundary of the strata may have to be adjusted to account for unexpected disturbances, changes in forest establishment and management, or because two different strata may become similar enough in terms of carbon to justify their merging. Step 3: Baseline net GHG removals by sinks are not monitored in this methodology. The ex-ante estimate is "frozen" on a per area-unit basis for the entire crediting period. Step 4: The calculation of ex-post actual net GHG removals by sinks is based on data obtained from permanent sample plots and methods developed in IPCC GPG-LULUCF to estimate carbon stock changes in the carbon pools and increase of project emissions due to fossil fuel consumption and nitrogen fertilization. Step 5: Leakage due to vehicle use for transportation of staff, seedlings, timber and non-forest products, as a result of the implementation of the proposed A/R CDM project activities is monitored. Step 6: Leakage due to displacement of employees from the project area to other areas, the increased use of wood posts for fencing and the displacement of fuel-wood collection outside the project boundary is monitored. Step 7: A Quality Assurance/Quality Control plan, including field measurements, data collection verification, data entry and archiving, as an integral part of the monitoring plan of the proposed A/R CDM project activity, to ensure the integrity of data collected and improve the monitoring efficiency. The baseline net GHG removals by sinks do not need to be measured and monitored over time. However, the methodology checks and re-assesses the baseline assumptions if a renewable crediting period is chosen. This methodology uses permanent sample plots to monitor carbon stock changes in living tree biomass pools. The methodology first determines the number of plots needed in each stratum/sub-stratum to reach the targeted precision level of ±10% of the mean at the 95% confidence level. GPS is used to locate plots. Estimate of Emission Reductions On the basis of the methods outlined in the methodology an estimate has been made of emission reductions to 2017: Annual Amount of Cumulative Amount of Contract ERs to be Contract ERs which must be Reporting transferred in this transferred by this Reporting Year Period Reporting Year Year 1 2007 (11,030) 2 2008 (19,222) 3 2009 (15,480) 4 2010 12,669 12,669 5 2011 37,363 50,032 6 2012 34,150 84,183 7 2013 30,798 114,981 8 2014 32,101 147,082 9 2015 29,865 176,947 10 2016 21,000 197,947 11 2017 11,751 209,698 65 B. Calculation of the carbon benefits from avoiding deforestation and natural forest enrichment activities in the San Nicolas Proiect The methodology for calculating the carbon benefits from reducing deforestation and natural forest enrichment, as the current CDM modalities and procedures, requires the calculation of the difference between two scenarios, namely: * the baseline scenario, i.e., what would have happened in the absence of the project? * the project scenario, i.e., what will happen as a result of the project's activities? In order to model the effect of different baseline and project scenarios on the carbon pools and flows it is necessary to first stratify the whole area into groups of similar total biomass per hectare. In practice, dividing the area into vegetation types accomplishes this objective. After stratifying the area, separate analyses are conducted for each stratum, to estimate what would be the carbon flows in the baseline and project scenarios. Stratification of forest in the project and regional boundary The project area shows a distinct altitudinal division into a higher, mountainous zone and a lower, Andean foot slope to tropical lowland zone. Climatic and topographic conditions are very different in the two zones (see also Werner, 2003). The activities that the project intends to carry out are also stratified according to altitude because the ecological requirements of most tree and crop species usually restrict them to one of the two zones. Based on an existing forest classification specific to the project area (CORNARE-FAL, 1995) and on the area's topographical features various natural forest types were identified (Table 1). Table 1. Forest types (Strata) in San NicolAs Region Code Highland Zone Primary forests and forests with low (BN1 - ZA) levels of degradation Forests with intermediate levels of (BN2 - ZA) degradation Forests in an early successional stage or (BN3 - ZA) high levels of degradation Lowland Zone Primary forests and forests in a late (BN1 - ZB) successional stage Forests in an intermediate successional (BN2 - ZB) stage Forests in an early successional stage (BN3 - ZB) 66 Baseline Scenario The baseline scenario for the area is based on what would have happened in the absence of the project activities. The methodology requires undertaking a historical analysis of what has happened in the region in which the project activity will be implemented. In the following table the results of a land use change analysis using two satellite images, from 1986 and 2000 (Naranjo, 2003) are shown. This table comprises all forest strata in the highland region of the Valley of San Nicolas. The focus is on the highland region because the forest strata chosen for the project activity are also located in the highland zone (ZA). Table 1 Historical Land Use and Forest Strata in the Highlands of San Nicolas Valley Land Use and Forest Strata in 2000 Land Use and Forest strata in 1986 BNI - ZA BN2 - ZA BN3 - ZA Non Forest use Total BN1 - ZA 6.346 1.144 301 428 8.219 BN2 - ZA 6 9.880 1.153 1.386 12.426 BN3 - ZA 108 2.221 3.996 4.155 10.480 Total 6.460 13.245 5.450 5.970 31.124 With the land use change analysis, it is possible to calculate forest conversion rates which result from the calculation of the percentage of the area in a forest strata that changes into another strata during the evaluation period. According to Table 1, of the total 8.219 ha of BN1 highland natural forest in 1986, 1,144 hectares have been degraded to BN2 during the evaluation period (14 years), therefore the forest conversion rate from BN1ZA to BN2ZA is 14%, and its annual forest conversion rate is 1%. Table 2 and Table 3 show the calculation of the forest conversion rate and the annual forest conversion rates for all strata: Table 2 Forest Conversion Rates Period (1986-2000) Land Use and Forest Strata in 2000 Land Use and Forest strata in 1986 BNI - ZA BN2 - ZA BN3 - ZA Non Forest use Total BNI - ZA 77% 14% 4% 5% 100% BN2 - ZA 0% 80% 9% 11% 100% BN3 - ZA 1% 21% 38% 40% 100% Table 3 Forest Annual Conversion Rates Land Use and Forest Strata in 2000 Land Use and Forest strata in 1986 BNI - ZA BN2 - ZA BN3 - ZA Non Forest use Total BNI - ZA 98,4% 1,0% 0,3% 0,4% 100% 67 |BN2 - ZA | 0,0% | 99,3% 0,7% 0,8% 101%| I BN3 - ZA I 0,1%| 1,5%| 95,6% 2,8%1 100% | The baseline scenario is calculated assuming that during the crediting period, the same annual forest conversion rates will continue in the project area. Therefore, table 4 shows the expected land use change in the absence of the project activity in year 14: Table 4 Project Area Baseline scenario in year 14 (hectares) BN1 - ZA BN2 - ZA BN3 - ZA Non Forest use BN1- ZA 267 206.15 37 10 14 BN2 - ZA 752 0.39 598 70 84 BN3- ZA 0 0.0_ 0 _ _ 0 0 1.019 206.54 635 80 98 According to the above table, in the absence of the project activity 98 hectares of forest will be deforested in the highlands (14 from BN2 and 84 from BN3); but on the other hand, 0.39 new hectares will be regenerated to BN 1. Therefore, the application of forest conversion rates to the project area can result in emissions from deforestation or degradation, as well as enhancement of carbon sinks from natural regeneration. For calculating carbon benefits in the baseline scenario, it necessary first to calculate the average carbon stocks in each forest strata. The following table shows the average carbon stock per hectare for each forest strata in San Nicolas Region based on the forest inventory undertaken by the National University: Table 5 Total in Ton C per ha. BN1 - ZA 247 BN2 - ZA 84 BN3 - ZA 44 As the project does not include the carbon soil pool, carbon stocks were calculated only in aboveground, below ground and deadwood pools. With the carbon stocks data, it is possible to estimate the emissions from deforestation or degradation between each forest strata. For example the degradation of one hectare of a BN2 forest in the highland to a BN3 forest, results in an estimated emission of 40 Ton C (84 Ton C-44 Ton C). On the other hand, the natural regeneration of a BN3 forest in the highland to a BN1 forest results in an enhancement of sinks of 203 ton C (247 - 44). The methodology assumes a total carbon loss when a forest is converted to non-forest vegetation. Consequently baseline emissions and carbon capture per hectare can be calculated multiplying the annual forest conversion rates to the corresponding emissions or enhancements. Tables 6 and 7 show the calculation of baseline emissions and capture factors per hectare: 68 Table 6 Baseline emnissions factor GHG Emissions Conversion Factor Degradation _ _ Degradation Initial carbon stocks To BN2 Emission To BN3 Emission BN1- ZA 247 1,0% 1,6 0,3% 0,5 84 1 0,7% 0,3 _ _44 Baseline emissions factor Deforestation Total Initial carbon stocks to Other Uses Emission Emission Factor BN1 - ZA 247 0,4% 0,9 3,1 BN2 - ZA 84 0,8% 0,7 0,9 BN3 - ZA 44 2,8% 1,2 1,2 Table 7 Baseline capture factor _Regeneration To BNI Regeneration To BN2 Initial carbon Conversion Conversion Capture Factor stocks Rate Capture Rate Capture (Ton C/ha/yr) BN1 - ZA 247 -_-__ BN2 - ZA 84 0.0% 0.01 0.01 BN3 - ZA 44 0.1% 0.15 2% 0.62 0.77 Finally, the baseline per hectare carbon stock and flows are calculated applying annually the emissions factor and the capture factor to the per hectare carbon stock of each forest strata: Table 8: Per hectare carbon stock in the baseline scenario for each forest strata (Ton C) Baseline carbon stock (Ton C) per hectare Year BN I -ZA BN2-Z.A 0 2| 4 667 |4.31 l '4 3.3h8 2 2MI.S- S'.4 31 2'.' 3 74.5l 4 23'4.41 8u158 5 231.35 ' .64 6 ''S.2Q 7S.71 7 - . 77.7 69 *9 219.10- 75.9') 2Q 216.03 74.96 12 - -__ '12.97 74.03 12 2 09.91 73.09 I13 206.84 72.15 114 203.78 71.22' }15 200.72 70.28 1__6 197.65 69.35 17 194.59 68.41 -8 191.53 67.48 19 188.46 66.54 .20 185.401 65.6( Table 9: Total carbon stock in the baseline scenario for each forest strata in the project areas (Ton C) Baseline carbon stock (Ton C) in the total project areas Yew BNI-ZA BN2-ZA Total o 65 860 63.409 129.269 665.042 62.705 127.747 2 64 224 62001 126.225 3 63.406 61.'97 124 704 4 62.588 6)594 1 23182 61 77(0 59.890 121 660 6 60.953 59.186 I2"(1 139 17 60135 5 8482 118.617 is 59 5317 57 779 117 096 9 58499 57.075 115.574 10 57.681 56.371 114.0521 II 56 863 55 667 112.531 ,12 56.0-45 54.964 III (09 13 55.'27 54.26(1 1O9 487 14 54.409 53 556 S107 966 15 5 3592' 52 h3 10h 4-44 16 52.774 52.149 104 923 17 Sl 956 51.44 101.401 Is SI 138 50 741 101.879 19 50.320( 50.038 10O0I358 20 49 502' 49 334 9s4 836 Project Scenario The conservation project component includes activities to both maintain the existing forest as well as to enrich the degraded forest. Therefore in the project scenario, degradation and deforestation rates are assumed to be zero. The project scenario is calculated both simulating the 70 growth of the species planted in the enrichment activity, as well as its effect in the regeneration of the initial forest. The projections of carbon stocks and flows for the project were conducted utilizing the EC02ForestryTM model (EcoSecurities). The EC02ForestryTM model quantifies the carbon budget of forest systems at the stand level, scaled to 1 hectare, using annual time steps and allowing for multiple rotations or planting cycles. Carbon flows through the system are calculated as inputs (additions) and outputs (reductions) to the three carbon pools on which the model is structured: trees, other vegetation (together: phytomass) and coarse and fine necromass (together: deadwood or necromass). The carbon flows that inter-link these pools are influenced by factors that are both natural (e.g., growth) and anthropogenic (e.g., harvests). The initial total carbon budget of the system is calculated from the forestry inventory, and is the same than in the baseline. Subsequent changes are then quantified by tracking carbon flows between the pools on a yearly basis. Final annual volumes (m3/ha) for the pools are converted into biomass (t/ha) and then carbon (tC/ha) using appropriate conversion factors. The carbon stored in each pool is then summed to give the annual system-wide carbon budget, profiled over the length of the model run. The EC02Forestry TM model requires a range of data inputs that describe the forest system to be modeled. To keep uncertainty margins low, it is always preferable for such data to be empirically determined on site. Where such data was not available, appropriate inputs were sourced from the relevant literature. For the San Nicolas project, empirical equations were derived for modeling natural forest tree parameters such as conicity, volume, coarse and fine steams and coarse and fine roots. Project carbon benefits The net carbon benefits of the project are calculated as difference between the baseline scenario and the project scenario, first at a hectare level and then summing for the total project area according to the planting schedule. The following table shows the per hectare and total carbon stocks and the aggregated carbon benefits, in tons CO2e, for the conservation and the enrichment activities: With ro ject scenario carbon stock (ton C) per hectare Conservation Conservation Enrichment Total Year BNI-Z.A BN2-Z.A BN2-Z.A 0 24h.67 xI. I" - 30.99 1 241.67 X4.3 (., 'I 1.2' 2 2-'.h7 x4.32' I).09 3321.os 3 2146.67 S 4.A 1,92 ' I 33.902) 4 240.6h7 4.3 2 '.61 333.6() 5 246.67 X4.12 3.I 114.17 6 246.67 84 32 3.64 h 163 7 24h.h7 84. 32 ' 4.02 ' 335.01 71 8 246.67 84,32 4,27 335,25 29 46.67 84,32 4,71 335,70 iO 240.67 84,32 5,14 336,13 246.67 84,32 5,56 336,54 12 246.67 84,32 5,96 336,94 13 246.67 84,32 6,35 337,34 14 246.67 84,32 6,76 337,75 1I5 246.67 84,32 7,19 338,18 J6 246,67 84,32 7,65 338,63 17 246,67 84,32 8,15 339,13 246,67 84,32 8,69 339,67 19 246,67 84,32 9,28 340,26 20 246,67 84,32 9,92 340,90 With Project scenario carbon stocks (ton C) in total project areas Conservation Conservation Enrichment yew BNI-ZA BN2-ZA BN2-ZA Total O 65.860 63.409 - '9.2'9 . 65.860 63.409 2(8 129.477 -65.860 63 409821 130.090 65.860 63.409 1.440 130.709 4 65.860 63.409 1.966 131.234 5 65.860 63.409 2.393 131.661 6 65.860 63.409 2.739 132.008 7 65.600 63.409 3.026 132.294 8 65 86(0 63.409 3.209 132.478 9 65.8h60 63.409 3.543 132.811 - 65.864) 63.409 3.868 133.136 11 65 8h() 63.409 4.179 133.447 12 65.860h 63.409 4.480 133.748 13 65 860 63.409 4.778 134.047 .14 65.860 63.409 5.084 134.353 15 65.86o) 63.409 5.406 134.675 16 65.8601 63.409 5.751 135.019 17 65.860 63.409 6.125 135.394 18 - 6.960 63.409 6.533 135.801 19 65.060 63.409 6.976 136.245 20 65 8601) 63.409 7.457 136.726 ESTIMATED TOTAL CARBON BENEFITS Cumulative Additional Carbon Stocks CREDITS Conservation | Conservation | Enrichment | I BN1-ZA BN2-ZA BN2-ZA Total -Total tCERs ICERs 72 ;Year ton C ton C ton C ton C Ton C02e Ton C02e Ton C02e 0 S1. 704 20) 1 73'. 6.342 2 I 66h 1.407 8 3 I 4 14.170 3 2.454 '.I I 1.4410 6.(-5 ' 2.019 4 3 272 2. '1 S 1 966 s.1-152 2'.525 I- 4 3.5 19 2 393 1 .R0O1 36.669 36.669 36.669 16 4.907 4.222 2 739 1 1 869 43.519 7 5.75 4.926 3.i)26 1 677 50.149 8 6.54 3 630 3 2109 I 82 is 56.402 7,361 o.334 35 43 17 237 h3.204 10 8 I'9 7.(03' 3 868 19.(184 69.974 69.974 33.305 - 897' 7.'41 4.179 (0.9 17 76.694 12 9.815 S.445 4 481) 22 739 S.3.377 13 10.632 9 149) 4 77,8 24.561 90.052 '14 1 1 4(1 XS' ' 5S- 'h 26 3' 96.753 5 2 ' h I(I 'Sh 5 406 2 230 1113 511 103.511 33.537 16 13 O. I 11 26h) 5 751 0.1)(7 111!) .56 17 1 3 914 11 964 6I 12 A 1.93 117.307 18 14 722 12 6 6.h33 3 3 .92 1 24 380 19 15 540 133 71 6976 3%.S87 131 586 20 16 35x 14.1175 7.457 17.'49) I 38.929 138.929 35.418 TL; 349.085 138.929 The estimated total carbon benefits during the 20 years of the conservation component are 349.085 Tons CO2e (tCERs) and 138.929 Tons CO2e (ICERs). Up to 2017 the conservation component will generate 76.694 Tons CO2e (tCERs). Ex-post calculation of carbon benefits The methodology requires that the forest conversion rates of the baseline scenario shall be updated with the land use change of the forest in the region but not included in the project activity. Therefore, it is necessary to monitor not only the project area, but also the area of the region to update those parameters. This monitoring will be done by the comparison of periodical satellite images of the region. Similarly, the methodology also requires that the calculation of the project scenario shall be done by both the monitoring of land use change within the project boundary as well as the monitoring of the changes of carbon stocks in the carbon pools on each forest strata. This will be done by implementing permanent sampling plots and undertaking conventional forestry techniques. 73 Annual Amount of Cumulative Amount of Contract ERs to be Contract ERs which must be Reporting transferred in this transferred by this Reporting Year Period Reporting Year Year 1 2007 6,342 6,342 2 2008 7,827 14,170 3 2009 7,849 22,019 4 2010 7,506 29,525 5 2011 7,144 36,669 6 2012 6,850 43,519 7 2013 6,630 50,149 8 2014 6,253 56,402 9 2015 6,802 63,204 10 2016 6,771 69,974 11 2017 6,719 76,694 74 ANNEX 10: Endangered populations of arboreal species The project intends to aid in the recovery of the populations of Abarco, Caunce and Podocarpus Oleifolius, all endangered arboreal species: ABARCO (Cariniana pyriformis) is a timber tree. Its wood is highly prized and is known as Colombian MAHOGANY, JEQUITIBA, JIQUITIBA, and ABARCO. The species is at Critical Risk (CR) in the IUCN classification. It is principally found in the Departments of C6rdoba, Choco6, Antioquia (Middle Magdalena), and Santander. The species may also be found in the Amazon region but stands are rare. The southernmost record is from Santa Cruz in Bolivia. CAUNCE (Endangered arboreal species) is a tree of the OCHNACEAE family. It is an endemic species and also the flag tree of the province of Antioquia. Its endangered status has created alarm in the environmental community. To address the endangered status, CORPOICA is promoting the in vitro propagation of this species. The species appears in the IUCN red book and its populations are restricted to a handful of localities in Antioquia. PODOCARPUS OLEIFOLIUS: It is a gymnosperm of the PODOCARPACEAE family, whose standard type was described in Peru. In Colombia it is found in the departments of Antioquia, Choc6, Cundinamarca, Magdalena, Narifio, Norte de Santander, Santander, Valle del Cauca, and Isla Gorgona. It is prohibited to log these species due to excessive use as timber and the persecution of its forests for such purposes. Resolution 316 of 1974, states logging prohibition throughout the country, except Cauca, Narino, and Antioquia. ABARCO (Cariniana pyriformis) The Abarco belongs to the Lecythidaceae, a family with pan-tropical distribution, composed of nearly 200 species spread among eleven genera (Prance & Mori 1979). In the neotropics, they are mainly represented by trees that occupy higher strata, principally in tropical rainforests where they are particularly abundant and diverse. Most of them are exclusively found in old forests, with good structure and a good level of conservation; very few species are able to reproduce in disturbed habitats. In addition to their abundance and diversity, the Lecythidaceae play an important ecological role as a source of food for pollinators (principally insects) and dispersers (birds, mammals, and fish that consume the pulp or seed which is of great nutritional value and is a source of energy. Their economic importance stems from different sources: the seeds of some species, particularly of the Brazil nut, are sold worldwide, extracted from Bertholetia excelsa from the Brazilian, Peruvian, and Bolivian Amazon, and constitute an important economic category for these regions. The pulp and/or seeds of other species also have high nutritional value and are utilized locally for food. The fruits and seeds of many species are utilized for various purposes in traditional medicine. The wood is generally strong and many species have high levels of silica, making them important sources of wood that is weather resistant and used for ship construction. The fibrous bark is widely used by local communities for rope and various types of ties (Prance & Mori 1979). 75 In Colombia, 75 species under 9 genera have been registered, most of them distributed in the low- and wetlands of the Amazon, the Pacific plains, and the Magdalena River valley. Only a handful of species are found in Andean forest zones. Twenty-six species (about 34%) and two sub-species are in any IUCN category of actual threat (2001). Of these, eleven species and one sub-specie are exclusive to Colombia and most are restricted to the Magdalena River valley and/or to Biogeographic Choc6) The principal threat to Lecythidaceae in Colombia is the deforestation and indiscriminate logging of large forested areas, although some species are endangered because their valuable wood has been overexploited (i.e., Colombian mahogany-Cariniana pyriformis). Only 15% (4 species) of the Lecythidaceae that are in any category of threat, have been found with certainty in any protected area, and although the presence of other species in protected areas is assumed, current conservation measures are clearly insufficient to ensure the preservation of the endangered Lecythidaceae in Colombia.. Family Lecythidaceae Cariniana pyriformis Miers, Trans. Linn. Soc. London 30: 290 t. 13, fig. 11-23. 1974 (E.R. Hernandez et al., 338, COL) Common names Abarco (Antioquia, Choc6, and Northern Santander) Chibuga (Choc6), Colombian mahogany (commercial name of this wood overseas) National category CR A2cd+4cd Geographic distribution It grows in Colombia and Venezuela. In Colombia it has been found in northern Choc6, including Uraba, the Sinui River valley, the Cauca-Magdalena basin, and the Catatumbo region, between 30 and 770 m of altitude. There are some indications of its presence in the Amazon Trapezoid, but the material from this zone is sterile and has not been conclusively determined. In addition, it is suspected that these may be cultivated examples. Ecology It is a tree, up to 30 m in height. It grows in dry or humid tropical forests, generally in groups (stands), on clay soils. It has been found to flower in August and September and to bear fruit between. October and May. Seeds are scattered by the wind. Uses and importance It is a species with high economic value, especially because of the resistance of its wood, even when exposed to inclement weather. There is high demand for it in the market because it is used in construction, as beams, in carpentry and cabinetmaking, for the manufacture of handles and veneer, and in aeronautical and naval construction. Locally, the interior bark is used to make ties 76 in handicrafts and rustic constructions. Currently, the supply of Colombian mahogany has decreased as a consequence of the reduction of its natural populations. Threats Highly threatened by overexploitation, logging, and the opening of land for large-scale agriculture and cattle raising. Conservation measures taken It is protected in the Reserves of the Can6n de Rioclaro Civil Society, department of Antioquia, and Riomanso-San Antonio, department of Caldas. Apparently not reported for any national park and therefore the conservation measures taken in Colombia are clearly insufficient. Has been used successfully in reforestations in hot-humid climate in various tropical sites, and cultivated individually in botanical gardens and reforestations in Trinidad-Tobago, Jamaica, and Singapore (Prance & Mori 1979). Current status The Colombian population of this species, known historically in some 20 localities, is seriously decimated and has suffered a drastic reduction, estimated at over 80% in the past 100 years. It is believed that this rate of reduction will continue in the future unless appropriate conservation measures are taken. Most of the remaining populations are outside of natural reserves or protected areas. Proposed conservation measures Exploration and monitoring of remaining wild populations, propagation in nurseries, and reintroduction in farms and reserves. Total prohibition of the logging, exploitation, and commerce of its wood, in the Choc6, in the Uraba region, as well as in the basins of the Atrato, San Jorge-Siniu, Cauca-Magdalena, and Catatumbo River basins. CAUNCE (Endangered arboreal species) Endangered arboreal species is a hardwood species widely used for the quality of its wood. Because the destruction of natural forests has led to its endangered status, the Autonomous Regional Corporation of central Antioquia-CORANTIOQUIA- prohibited its use by means of resolution 3182 of January 2000, as an initial protection measure. This species has been considered endemic to the department of Antioquia. A botanical report was found for 18 municipalities of this department. However, according to an Internet search by the Missouri Botanical Garden of New York, this species is also reported in Ecuador and Peru. Family It is a family whose number of genera and the species that comprise it has not been well defined. According to Toro (2000) there are 30 genera and 400 species; according to Killeen et al (1993) there are 37 genera and 460 species, according to Watson and Dallwitz (1992) (Internet search) there are 35 genera and 600 species, and according to Willis (1973) there are 40 genera and 600 species. 77 This family includes timber-yielding trees and shrubs but rarely herbaceous plants. The leaves are perennial, simple, alternating, and occasionally pinnate (only for a few species of the genus Godoya). The limbs are of a coriaceous consistency, with pinnate nervations, numerous lateral veins, and serrated edges. The leaves have ochre, cadufoliate stipules, in most taxa leaving a ringed scar (Gentry 1993; Toro 2000). The leaves may have a mucilaginous epidermis (Watson and Dalwitz 1992). The fruits are usually small, often narrow capsules with small, wing-shaped seeds. It grows in inter-tropical countries; a large number of species are found in South America, especially in Brazil, while others are found in Africa. The species was first recorded in 1832 by J. Triana and was collected in Rionegro, Antioquia, and it is probably the isotype. This sample is stored in the COL herbarium. The next record was in 1930 by E.P. Killip and was found along the RIo Negro in Antioquia. According to the Cronquist classification system (1981), the species has the following taxonomic position: Class Magnoliopsida Subclass Magnoliidae Order Theales Family Ochnaceae Genus Godoya Species Endangered arboreal species Planch Common Name For all zones where it has been reported, it is known as "Caunce" National Category Geographic distribution and habitat According to the botanical review and field visits by the Medellin Botanical Garden, antioquensis is found in the following municipalities of Antioquia: Andes, Caicedo, Caldas, Concepci6n, Copacabana, El Carmen de Viboral, El Retiro, Envigado, Frontino, Guarne, Guatape, Ituango, Medellin, Pueblo Rico, Rionegro, Santa Rosa de Osos, Santuario, and Urrao. This species was believed to be endemic to Antioquia. However, it was also found to be reported for Ecuador, in the province of Carchi; it was collected by Gentry and Shupp, in September 1979 at 1300 to 1500 meters above sea level. The reference collection is at the Missouri Botanical Garden, with voucher 26547, Jorgensen and Yanez (1999). According to an Internet search, it was also collected in the Peruvian Amazon by R. Vasquez et al. in October 1997, at an altitude of 1200 meters above sea level. In Colombia, however, it has only been reported to date in the department of Antioquia. Ecology It is a medium-sized species that is very beautiful because of its attractive, abundant yellow flowering tips (flowering occurs between May and June). The species is found in altitudes ranging from 1200 to 2800 meters above sea level, between the Premontane (PM) and Low Montane (LM) zones and with humidity ranging from humid (h) to rainy (r). It grows in acidic soils and generates an abundant accumulation of fallen leaves. 78 Use and importance Caunce is a species of very fine, durable wood. It could potentially be an ornamental species because of its beauty and its attractive flowering. This species is important as a soil protector, due to the abundant biomass it contributes to forests. This contributes to improving soil conditions such as structure and porosity, thus improving water regulation and carbon storage. Threats The high level of extraction for firewood and the manufacture of tool handles and fencepost are the main threats to Endangered arboreal species. However, the lack of documentation and scientific research work on this species is another risk factor to the species' survival. Practically no studies have been performed on this species, even though it has been listed in botanical records since 1832. Conservation measures taken As an initial measure to protect this species, in January 2000 CORANTIOQUIA resolution 3182 prohibited its use. Current status A study prepared in 2001 (Botanical Garden, CORANTIOQUIA, 2001) showed that, according to an analysis of populations carried out in the department of Antioquia, the future presence of the Endangered arboreal species population is problematic because the presence of young estadios tends to decrease. The study concludes that there is a trend toward imbalance in the population's development, because one can observe a decrease in the presence of individuals in the smaller categories. The current status of populations, added to uncontrolled extraction of the species, places the Caunce's long-term survival at risk, despite the implementation of resolution 3182 of 2000. Proposed conservation measures The species should be protected through research, propagation, and establishment of nurseries based on existing populations. These new populations should be planted in the proper environment in order to enrich forests. Training programs should also be developed for those directly involved in the use of alternative species used to manufacture tool handles and fencepost. This should include proper forest management practices to avoid the use of this species as firewood. Pino Colombiano (Colombian Pine) Family Podocarpaceae Nageia rospigliosii (Pilg.) de Laub. Synonyms: Podocarpus rospigliosii Pilg. Decussocarpus rospigliosii (Pilg.) de Laub. 79 Common names Pino colombiano, Chaquiro, Romer6n, Pino romer6n, Pino hayuelo, Pino de montania. National category Vulnerable/endangered Geographic distribution N. rospigliossi is found growing in the Andean zones of Colombia, Ecuador, Peru, and Venezuela and in the highlands of Brazil. It grows at altitudes of 1500 to 3500 meters. Ecology Trees reach a height of over 30 meters and a diameter of over 1 meter, with a straight, cylindrical trunk, a rather wide canopy, and simple, opposite leaves. They develop drupe fruits 2.0 to 3.0 cm in diameter which are consumed by birds and mammals. They grow in humid forests and very humid premontane forests, low mountain and mountain forests, and prefer fertile, well drained soils. Uses and importance Because its wood is hard and resistant, this species has been used heavily in cabinetmaking and in the manufacture of fencepost and paper; it was traditionally used as firewood. It has also been propagated as an ornamental species for gardens and meadows. Threats The species has been decimated due to widespread use and the transformation of Andean forests for agricultural, livestock, and construction uses. Conservation measures taken An indefinite prohibition was placed on the use of this species throughout Colombia, under resolution 0316 of 1974 issued by INDERENA. Current status There are reports of several localities in Colombia where this species has been collected, including populations in the department of Caldas. In Antoquia, populations have been reported in the municipalities of San Vicente and Jardfn, but in most cases only isolated individuals have been found. Proposed conservation measures The few populations and individuals of this species should be inventoried and registered systematically in order to obtain a more realistic population diagnostic. The characterization of the genetic variability of the populations found may help to estimate this species' possible durability over time in light of environmental variations. A quick, effective propagation of this species is required, aimed at including different populations and thereby increasing genetic variability. 80 ANNEX 11: Population study and recovery plan for Endangered Arboreal Species Population study and recovery plan of the endangered arboreal species in the sub-regional valleys of San Nicolas, CORNARE, for the formulation of its sustainable management and conservation The objective of the plan is to contribute to the conservation in situ and ex situ of Endangered arboreal species in the sub regional valleys of San Nicolas, as well as to the conservation framework of threatened species in the department of Antioquia, and finally to the objective of MASBOSQUES to promote the conservation, sustainable use and the restoration of forestry and associated resources. SPECIFIC OBJECTIVES - Preliminary evaluation of individuals and/or populations of Endangered arboreal species in order to define their conservation status. - Establishment of seedbed trees, in order to set up seed providers - Reference collection of the located populations in order to verify the realized study - Propagate recollected germ-plasma of the species in order to contribute to the knowledge of the forestry of this species - Design strategies for the conservation in situ and ex situ of Endangered arboreal species. - Analysis of use and commercialization of the wood of Endangered arboreal species in Antioquia, which outcomes are to be considered in the formulation of the management plan of the species - Involve surrounding communities where species are located in order to promote their contribution to its conservation and sustainable use in a conscious manner ACTIVITIES - Locate individuals or populations of Endangered arboreal species - Mark seedbed trees - Recollect germ-plasma of the planted populations and carry out test of propagation - Phenological follow up of individuals of identified populations. - Recollect botanical material of herbarium and germ-plasma (fruits, seeds), in at least two locations of the jurisdiction of the Corporation that correspond to the natural distribution of the studied species before their populations disappear. - Planning of Godoya trees in the area of the project STUDY AREA The places reported by CORNARE where the species Godoya antioquenis have been seen include: Municipio de El Retiro 1. Alto de la cruz, Vereda El Carmen 2. Limite entre La Amapola y Tabacal 3. Alto del Gallinazo, Vereda El Chuscal 81 4. Quebrada La Agudelo, Sector la Argentina. Verdad El Carmen Municipio de La Ceja 5. Cerro El Capiro Municipio de rionegro 6. Antes de la glorieta del Aeropuerto Via Llano grande, Aeropuerto Municipio de san Vicente 7. Vereda Corrientes 8. Vereda San Antonio de la compafiia 9. Vereda El Canelo, Finca Joaquin Emilio Morales In accordance with the review of the herbaria realized in 2000 this species has also been reported in other municipalities of the Sub-region of the valleys of San Nicolas which are El Carmen de Viboral and Santuario. METHODOLOGY SECONDARY REVIEW The bibliography of the species will be analyzed, the herbaria will be reviewed, and information will be searched on the internet about the species which will contribute to the proposal constituting the Management Plan of the Endangered arboreal species. FIELD WORK Localization of populations Based on literature study and review in the herbaria, as well as on information provided by CORNARE, the places where the species have been reported will be visited, and there will be an attempt to locate new populations of this species in neighboring areas. This will be done based on reports provided by other institutions and/or inhabitants of the area that have knowledge of the vegetation in order to geo-referenced the major quantity of individuals by species and/or populations in the area of influence of Masbosques. Workshops on environmental awareness building will be carried out through CORNARE and the other partners of MASBOSQUES, such as Asocomunales, environmental NGOs etc. that can support the participation of organized comnnunities. Botanical re-collection of reference Botanical samples of reference of representative individuals of the populations or of the located individuals will be re-collected, applying the international technique for setting up herbaria. The information of these - such as phenological status, diameter, height and dendrological characteristics - will be documented in adequate forms. A photo registry will be developed. Selection of seedbed trees For this selection the basis will be the methodology developed by Marin in 1999. The selection will include individuals which are pheno-typically acceptable or desirable with regard to form and size and which offer the possibility to produce seeds of adequate quality and quantity. These individuals will be duly marked and geo-referenced. 82 Preliminary evaluation of the population status Plots of a size of 20 x 20 m will be established for the preliminary analysis of the populations of Endangered arboreal species. The following variables will be taken: number of individuals, normal diameter (at 1.30 from the soil), total height, status of growth, quality of shaft and of top. An analysis will be conducted based on the histology of height, status of development and diametric structure. In addition to that the characterization of the habitat of these species will be realized in which the related flora and the physiographical aspects of the place. Information about use and marketing of the wood Three interviews per species will be carried out with experts on the local flora. The interviews will be dealing with ethno-botanical aspects of Endangered arboreal species in each visited region in order to determine their actual and potential uses and the importance that they represent for local communities based on the use of ethno-botanical filling cards. LABORATORY AND DESK WORK PROPAGATION TESTS Propagation tests will be carried out with the recollected germ-plasma of Endangered arboreal species in the facilities of the nursery of the Botanical Garden JAUM. The material obtained through seeds or transplanted seedlings will be brought to the nurseries of the Corporation MASBOSQUES and CORNARE, and to the communities that have participated with information and that are interested in the Botanical Garden. Herborization The botanical recollection of reference will be executed in the herbarium JAUM. The processed collections will be put in the herbarium JAUM of the Botanical Garden of Medellin, a duplicate to the national herbarium. The information will be processed based on data compatible with information systems of CORNARE and of institutes such as Alexander Von Humboldt. PRODUCTION OF 60,000 SEEDLINGS A greenhouse Hill will be set up to produce a minimum of 20,000 seedlings per species for use in the recovery of population and contribute to the biodiversity of the area of the project. PLANTING AND MAINTENANCE. Once the seedlings are produced a planting program will be executed based on the general planting schedule for the overall project. The planting will be supervised by experts from the Universidad Nacional and the Von Humboldt Institute to maximize the chances of survival of the seedlings. Under the CC-IG grant resources will be allocated for training and supervision of the planting. A routine count of survival rates will be made during the first years of the project. 83 ANNEX 12: Use of soil in the San Nicolas area The San Nicolas region is considered the agricultural "pantry" of the department of Antioquia. The production of important foodstuffs (corn, beans, potatoes, vegetables, milk and its by- products) that are essential to supply other zones of the country, is threatened by factors such as soil deterioration in areas with steep slopes (>50%) in which all or most of the surface area or arable layer has been eroded. An interesting aspect of land use in this sub-region is the presence of forests planted with cypress, pine, and eucalyptus trees; these constitute one of the most important reforestation programs implemented in the country over the last five decades for commercial and protective purposes. It should also be noted that the planting of native species is insignificant in the region. Of the 71,969 ha that comprise the project, 40,577 ha are under natural forests and 6,505 ha are under planted forests, totaling 47,081 ha. 20,185 ha are under natural pasture (Table 1). Ta!i L. Co'ruras v usos &l sudo ci dul az d44 proXwt. Co.*MfW/ ad1 Axes O1ai Bosqies Natxa:cs 0.57 o.S Bosques PIatados c 5 Cult,as Pru%awAtes 45o6 5 Cultros Trarunstas 134I Psts NatwAxzes Otacs Toal 1S6 0 EVALUATION OF CHANGE IN SOIL USE FOR THE CDM COMPONENT The results of the change in soil use for the CDM Component in the Upper Zone are presented in Table 7 and Figure 9. 8.8 percent of the areas where unmanaged pasture is used for other purposes, especially agricultural crops or managed pastures. 61 percent remain as unmanaged pastures throughout the period, 6.4 percent are agricultural lands that are converted to unmanaged pastures, 21.3 percent (1.52 percent annually) are regenerated either as secondary natural forest or are planted with conifers. The latter percentage is subtracted from the total area, using the annual rate of 1.52 percent multiplied by 10 years which is the period for the establishment of the CDM project. Thus, eligible lands total 11,352.9 ha. In the Lower Zone (Table 7, Figure 9), 55.9 percent of unmanaged pastures remained unchanged throughout the period, 1 percent changed from lands used for agriculture to unmanaged pastures. The total area of unmanaged pastures with reforestation potential is 980.08 ha in the Lower Zone. In addition, in this same zone the rate of return for the conversion from unmanaged pastures to secondary forests during the evaluation period is 34.4 percent (2.46 percent annually), much higher than in the Upper Zone because, from a climate standpoint, the latter is hotter and precipitation is higher; it is considered a rainy zone. Based on the latter rate, those lands that could potentially be converted to forests during the ten-year project establishment period were 84 subtracted, resulting in an application rate of 24.6 percent, that is, 739.3 ha eligible for CDM in the Lower Zone. Tbla.. inamnimc tc; cambio paio . per' odo 36-00 ram l c1mav u >d u d! fuc1O - P2s:os no NAfancia4oes PŽ ,.orro,ntc T ITEMS BNJ BNZ RB PL CP CT PM PN Ottos TOrAL ZONA ALTA INGRESASNA PN' N49 I56.37 702 4',3 1:94;4 NO CAMBLARON 113=,1 EXCLItDMAS P.ARS DL 3.9 :099 3353,4 .359,4 SUBTOTAL : 3,, .4 Pocetaile de rehiuat2cion de rioes degradaas = 15.2 e Are ha. 1902'3 TO-"_ KYO70 ZONA ALTA 106.3.9 ZONA BAJA DIGRESAN- A PY 0.09 62.64 627- NO CAMJBLARON 917,4 EXCCtUAS PARs MDL 96,03 350,14 215,06 0,38 S BTOT.AL 930:. Poc:eaje de xebhAbii:itcs6 de tiems deg2adidas = 49 6-c 24.-. TOTACL K YO:O ZONA BA-^iA -39t3 TOTA.L C D I= 115 'cOta: Es coi de iatetoi.et2cioA cic-iido cog el estadistico de appo de - I-,-' Table 3. b. Land uce in 1986 in the project lregion .n.ranaged Pastures 19 i72 1. |9 21 570 Forest tsecondary 12 426 3.539 15,964 growth, Constrfctiors 69 69 Managec Fas:ures 175 17' Water areas 5 Natura Forest . 2t9 4.213 12.431 FPanted Forest 7 27? 10 7,283 0emianent crops 1 119r 381 1 E.cU Shruo lands l0C 480 9 4S4 10 9-44 Seasonal crcps 1 894 134 2 C28 Toral 1 331 1063; 71 9-59 S,Ilr:e- !.--t :a2se IS -ept S6_ .=d tl e.t CsS EVALUATION OF CHANGE IN SOIL USE FOR THE CONSERVATION COMPONENT The dynamics of the conservation component, consisting of natural forest areas with varying degrees of intervention and/or changing status for the period of analysis, are shown in Table 8, Figure 9. The overall deterioration of natural forests during the period is presented. The dynamics of Bn3-"low stubble"-are highlighted because in most cases it is associated with crop and pasture rotation systems. In the region, these systems also have fallow periods that vary depending on socioeconomic status. As shown in Table 8, the dynamics are even greater in the Lower Zone because humidity favors changes in unmanaged areas. 85 ANNEX 13. Assessment of Carbon Sink Risks I. LEGAL ANALYSIS 1. Property law issues a. Land tenure Risk (low): The project seeks to finance the establishment of forestry plantations, and agro- forestry on abandoned pasturelands in the San Nicholas region in eastern Antioquia over a total of 7,225 ha. Project lands are privately-owned, and land titles for properties are registered with and certified by the Public Instruments Bureau (PIB). Though-Annex 7 does not state whether any of this land is subject to third party interests but the Project entities indicate they will conduct studies and take all procedures necessary to secure long-term rights to carbon on these lands, prior to the actual sale of carbon sinks. It is recommended that the ERPA contain a provision that warrants that project entities have verified that all project lands are registered and certified by the PI1B, are not the subject of a land ownership dispute, and are free of all encumbrances (such as mortgages and other liens). Annex 7 states there are no indigenous claims to the land. There is no information in the documentation which indicates otherwise. Expropriation of private land is possible for public purposes with prior compensation and subject to judicial decision for reasons of 'public utility or social interest defined by the legislature' (Art. 58, Constitution). There remains some legal risk of expropriation of project lands although this risk is no greater than under expropriation laws elsewhere. b. Legal nature and title to carbon. Risk (low): Annex 7 states that, in Colombia, title to carbon belongs to the landowner as part of the landowner's right to timber on the land. Although Annex 7 states that there are instances of national resources being nationalized, it is clear from an elaboration of the response and subsequent enquiries that the response referred to the nationalization of national parks; there are no instances of nationalization of renewable resources of this nature in Colombia. 2. Forest rights Risk (low): In Colombia, the owner of the land also owns rights to timber on that land. However, rights to timber can be separated from rights to the land in part or in whole through a profit a prendre contract between the landowner and the purchaser of the carbon credits. MABOSQUES, a non-profit organization, would pay landholders to maintain and conserve the crop in exchange for payments for environmental services (including carbon sequestration). 86 MASBOSQUES is a public/private partnership composed of representatives of government, the regional environmental authority (CORNARE), the regional association of entrepreneurs (CEO), local environmental NGOs, landowners, and two research institutes (CFD, 1). To provide greater security of investment, it is recommended to attach or reference the terms of the management plan to the profit a prendre contract. In addition, language in the contract which specifies that the obligations of the landowner must be performed in a 'timely manner' (p, 4, "[ciumplir oportunamente con las obligaciones garantizadas...") would be improved by specifying a time-frame for the performance of obligations. On April 2006, the Colombian Congress approved a new Forest Bill. The Bill seeks to establish legal norms that promote the sustainable development of the Colombian forest sector within the framework of a National Plan of Forest Development, and under the coordination of a new National Forest Council. The Bill states that development of the forest sector is of strategic and priority interest for Colombia. The law introduces the concept of 'vuelo forestal'; this allows a separation of rights to land from rights to timber and has particular application for the development of natural forests. The Forest does not create additional risks for this project. In some ways, the Bill provides greater certainty of investment for projects of the kind contemplated here. Article 25 of the Bill emphasizes that products of forest plantations established by individuals on private property remain private property; property of forest plantations performed for the State with the participation of private agents will be regulated by the terms of their respective contracts. Article 29 requires, inter alia, that agro-forestry, plantation forests, and silvopastoral enterprises financed by the sale of environmental services in the framework of a multilateral agreement must obtain approval of a Plan of Establishment and Forest Management from the competent authority. CORNARE has held discussions on this matter and arrangements are in place to obtain approval from the competent authority if the proposed law is approved. At Article 35, the State guarantees not to modify forest contracts for a period of 20 years to give security to investments. B. Permanence risks 1. Fire Risk (low): Colombia has a number of laws which regulate policies and responsibilities concerning forest protection and fire management. The use of fire in the agricultural sector is regulated by law (Decree 948 of 1995). Though a national forest service has been created by law (Law 37 of 1989), no operational structure has been defined, and in operation, fire protection responsibilities are shared between various government agencies. For the San Nicholas region, forest fire information is based on the results of the Regional Strengthening Fires Program. This program trains firemen against forest fires; it also trains the Emergency Local Committees in the region (CLEs) and maintains a disasters database (Desinventar) of annual records of forest fires for each of the municipalities in CORNARE jurisdiction (refer p. 56, CFD). Fire threat in the project area is considered low in relation to the risk in more highly-populated regions. Art 41 of the proposed Forest Bill adopts a National Plan of Prevention, Control of Forest Fires and Restoration of Affected Areas that will be coordinated by the National Commission of 87 Assessments for the Prevention and Mitigation of Forest Fires of the National System for the Prevention and Attention of Disasters with regional and local authorities. Annex 7 states that the project entities have considered a Monitoring Plan for fire management. This program has training components but will also promote the construction of fire pits. As the project lands are dispersed, the risk of fire destroying a significant portion of the forest area is minimal. 2. Pests Risk (low): Annex 7 states that forest engineers consider the risk of pest infestation as low but intend to adopt procedures in the Monitoring Plan to mitigate against pests. This will include monitoring and consultation with sanitation authorities, and an integrated pest management scheme (refer p.57, CFD). As a preventative strategy, the project entities also intend to continue strips of natural vegetation at fences and edge roads to act as a food source for parasites in the area. Article 43 of the proposed Forest Bill creates a National Program of Prevention and Control of Plagues and Forest Illnesses which will include a permanent system of diagnoses, evaluation and early warning system as well as phyto-sanitary standards for forests 3. Illegal logging Risk (low): Though Annex 7 lays out no specific plan to combat illegal logging, project documents point to extensive consultation processes with stakeholders that have bolstered local ownership of the project activities. Increasing knowledge of the project in the local community is likely to reduce illegal logging. At the same time, the project will establish a monitoring and assistance program (see CFD, Cover Note). A Plan for Sustainable and Participatory Management was drafted in the course of consultation with the communities of the San Nicholas region (CFD, p. 1). Extensive community participation is likely to reduce significantly the threat of illegal logging. The actual enforcement will be a result of the application of incentives through the project and the vigilance provided by CORNARE to ensure that the agreements with MASBOSQUES are complied with. In addition, the prospects of illegal logging are reduced by the disperse nature of the planting. 4. Social conflict Risk (low to medium): Even though project documents state that there are no land tenure issues or disputes over land ownership in the project area, there is some social conflict in the Antioquia region. To mitigate this risk, the project entities, led by CORNARE, the regional environmental agency for east Antioquia, have engaged in a 20-month consultation process with local communities to formulate a draft forest plan which addresses local needs; wide agreement with the local community was achieved (PCN Data Sheet, 5; see also CFD, p. 1, p. 62). As the primary beneficiaries, local communities will also benefit from implementation of the program. Extensive community consultation, together with community 'buy-in' will minimize threats to the permanence of the timber from social conflict. 88 II. RISK MITIGATION MEASURES a. Due diligence responses 1. To provide greater security of investment, it is recommended to attach or reference the terms of the management plan to the profit a prendre contract. 2. Language in the profit a prendre contract which specifies that the obligations of the landowner must be performed in a 'timely manner' (p, 4, "[cuiumplir oportunamente con las obligaciones garantizadas") would be improved by specifying a time-frame for the performance of obligations. b. Recommendations for the ERPA 1. To mitigate risks to title of land, it is recommended that the ERPA contain a provision that warrants that project entities have verified that all project lands are: (a) registered and certified by the Public Instruments Bureau, (b) are not the subject of a land ownership dispute, and (c) are free of all encumbrances 89 ANNEX 14: The Colombian Forestry Law and its Implications on the Project The Colombian Congress approved the forestry law in April 2006. The present document will summarize the law, cite the President's 12 objections, which were subsequently addressed, and analyze the impacts of the Law to the San Nicolas Reforestation Project. SUMMARY OF GENERAL FORESTRY LAW Title I: General Provisions Chapter 1: Objective of the Law, Principles, Strategic Interest, and Planning. The objective of the Law is to establish a set of legal standards that promote the sustainable development of the Colombian forestry sector under the framework of the National Forestry Development Plan. The 18 principles developed, on which the law is supported, include the introduction of the concept of "forest stand." This law states that the use and management of natural resources are in line with sustainable development and that the actions performed for this exercise are a joint, coordinated task among the State, civil society, and the productive sector, whose aim will be to use them in an optimum and equitable manner. Moreover, in terms of strategic interest, the law states: activities related to the establishment, management, and use of forest plantations; the management, use, and conservation of natural forest; the industrialization and commercialization of forest products and services; as well as forest knowledge and research, are of priority and strategic interest to the nation. Chapter 2: Institutional Framework and Responsibilities. Articles 4, 5, and 6 mention the responsibilities of the Ministry of Environment, Housing and Territorial Development; the Ministry of Agriculture and Rural Development; and the Ministry of Commerce, Industry and Tourism. The Ministry of Environment, Housing and Territorial Development will be in charge of issuing the regulations for the planning, protection, control, administration, conservation, and sustainable use of natural forests and degraded forest ecosystems. The Ministry of Agriculture and Rural Development should: a) formulate the national forest production policy; b) issue the required development regulations; and c) promote productive forest plantations through forestry units, as well as forest production through productive chains. The Ministry of Commerce, Industry and Tourism will formulate the policy related to the competitiveness, integration, and development of the productive sectors of industry, the foreign trade of goods, services, and technology, and the promotion of foreign investment in forests. The criteria for regulating and defining forest areas will be determined by the aforementioned three ministries. 90 Article 8 creates the National Forest Council as an agency in charge of coordinating and reaching consensus on the national forest policy. The Council will be composed of one representative of each of the parties that take part in the forest exercise. Chapter 3: Planning Article 11 states that the National Forest Development Plan (PNDF) is the framework guiding the country's forest policy. This plan will be executed by means of forest programs and projects. The Regional Autonomous and Sustainable Development Corporations will prepare and approve the General Forestry Planning Plan for their respective jurisdictions, including the areas that form part of the forest reserves. Title II: Natural Forests and Forest Plantations. This title makes a classification for purposes of sustainable forest planning and management, lands, and forest resources. Chapter 1. Classification of Forest Lands. Article 13 considers the types of forest lands: those for protection and those for production. Article 14 defines forest reserve areas. Chapter 2. Natural Forest. Article 15 defines Natural Forest as an ecosystem composed of trees and shrubs, with a predominance of native species, in a determined place and spontaneously generated by natural succession. Article 16 defines the types of wood- and non-wood uses. Usage rights are defined: by operation of law, by authorization, by permit, by forest concession, and by association. Article 22 describes the instruments to be used for the monitoring and control of the use of natural forests. Chapter 3. Forest Plantations. The terms forest plantation and agro-forestry system are described in Article 24. With regard to domain, Article 25 explains that forest plantations located in vacant and other lands in the public domain are national property. Forest plantations established by individuals on privately owned lands are considered private property. It also highlights the fact that the ownership of forest plantations that are carried out by the State with the participation of private agents will be subject to provisions in the respective contracts. Article 29 requires that "any forest, agro-forestry, or silvopastoral plantation that is established with total or partial financing from state resources, international credits channeled by public entities, international technical cooperation, financing from the sale of environmental services under the framework of a multilateral agreement, which are applied for the issuance of the Forest Incentive Certificate (CIF), or those that are established on State-owned farms, should prepare and obtain the approval of the Forest Establishment and Management Plan by the relevant authority." 91 Chapter 4: Industrial Production. Article 34 of this section affirms that the State will promote the development and modernization of the forestry sector to increase the competitiveness of the wood industry. For this purpose, it will support industrial modernization, in keeping with the principles of sustainable development. Title III: Financing, encouragement, incentives, exemptions, and collateral Articles 35 and 36 define investment guarantees and the volumes that may be used, where the State, to provide security to investments, will not modify the contracts that have been or may be signed for a period of up to twenty (20) years from the date the contract is signed, and the amount that may be used constitutes collateral for credit transactions or other financial operations. Development activities are presented in Article 38, which indicates the preferred credits to promote the exportation of products from forest plantations, agro-forestry systems, and natural forests. Moreover, paragraph 1 makes reference to the funds mentioned in Article 92 of Law 99 of 1993 (Environmental Law) which is allocated for the financing and promotion of sustainable natural forest management activities in the Amazonas region. Paragraph 2 creates the Commercial Forestry Fund and the restoration of commercial lands and for the production of sustainable natural forest management activities on the collective lands of Afro-Colombian communities. Article 40 mentions the bridge credits through which the National Agricultural Credit Commission and FINAGRO (Fund for Agricultural Sector Financing) will facilitate lines of credit for small reforesters up to fifty percent (50%) of the CIF (Forestry Incentive Certificate: Law 139 of 1994) value, so that this amount can be reimbursed by FINAGRO from the respective account. Title IV: Other Provisions Chapter 1: Forest Protection and Health Article 41 adopts the National Plan for Forest Fire Prevention and Control and Restoration of Affected Areas, which will be coordinated and launched by the National Advisory Commission for the Prevention and Mitigation of Forest Fires, an agency that is part of the National System for Disaster Prevention and Response. The National Program for the Prevention and Control of Forest Pests and Diseases is created. Chapter 2: Forestry Information The National Forestry Information System, coordinated by the Institute of Meteorology and Environmental Studies (IDEAM), is created. Article 49 establishes the National Forestry Inventory. Chapter 4: Education, Training, Technical Assistance, Dissemination, and Community Participation. 92 This chapter states that, for the stability of employment and the development of forest industries, workforce training will be strengthened in all areas of knowledge about forests and their culture. Chapter 5: Forest Research. The National Plan for Forest Research and Technology Transfer is created. This Plan will be focused on enriching knowledge about technology development and transfer, to add to knowledge about forest ecosystems, biodiversity, cultural importance, evaluation and valuation of resources, forest usage and industry, fire prevention and control, protection of forest areas, forestry techniques, technological development of forest products, genetic improvement and market-related economic aspects, yields, incentives, productivity and competitiveness, and other aspects that promote and support the nation's forest development. PRESIDENTIAL OBJECTIONS TO THE LAW Prior to its approval, the draft Forest Law was returned to the Senate for reasons of unconstitutionality and unsuitability. The President objected to 10 of the law's 57 articles. These objections, which were later addressed, are: 1. The draft Law violates the principle of material unit, embodied in articles 158 and 169 and the latter principle of law revokes the former, as envisaged in Article 150, numeral 1, of the Political Charter. The paragraph of Article 4, by stating: "The resources and projects aimed at environmental protection and basic sanitation that have been placed in the charge of basic service units by previous laws, will be prioritized, made feasible, and allocated by these entities to the most vulnerable sectors of their area of jurisdiction," is remitting to Article 54 of Law 863, Tax Reform. Taking into account the project's objects, i.e., the establishment of a national forest regime, it has no relation to the origin and allocation of resources foreseen in the tax regulation. Therefore, the aforementioned paragraph of Article 4 disregards the principle of material unit. 2. The other regulation that was declared unconstitutional refers to clause two of Article 56, which states that "In case of conflict with other laws and for the purpose of exceptions and revocations, it will not be understood that this Law is contradicted by later regulations on the matter, except when they precisely identify that the objective of this law is subject to modification or revocation." With regard to the revocation of laws, the aforementioned provision is endangering the democratic principle, by virtue of which the legislator may modify and contradict prior laws; a prior regulation cannot prevail over the will of the later legislator who wishes to modify it. 3. The following numerals of Article 2: * 3 (partial): The conservation and sustainable development of forests in the Amazon and biogeographically Choc6 regions will be the subject of special development measures to be established by the National Government, and decisions should be adopted that guarantee the effective operation of provisions in Article 92 of Law 99 of 1993. * 12: The economic occupation of forests for production through sustainable use by regular forest stakeholders is recognized as the fundamental strategy for conserving these forests and for the environmental services associated with their ecosystems. For this purpose, it is the State's obligation to provide 93 effective legal security to such stakeholders and to establish an environment that is favorable to investments. * 16: With the exception of the case of forests on indigenous and Afro- Colombian lands, the forest stand is recognized as the right of the holder of a concession or a usage permit, or the owner of a duly registered private forest plantation, to establish collateral with any financial entity on the existing forest or in a future plantation. For all legal purposes, it is understood that trees are anticipated movable property as stipulated in Article 659 of the Civil Code. 4. Numeral 2, partial, of 13: Forest Production Areas correspond to those slated for sustainable use of the natural forest or for the establishment of forest plantations, including degraded lands and those not declared as protected lands. These lands have the character of forest production lands, for all suitable purposes, those that are or may be legally slated for other purposes, those whose owners voluntarily assign to forest plantations or agro-forestry systems and as long as, by their sovereign will, they do not decide otherwise. 5. Partial Article 36: Collateral on Usable Volumes. For any of the classes of rights with the legal purposes to which this law refers, the usable volume constitutes collateral for credit transactions or other financial operations. This same regulation governs forest plantations. 6. Partial Article 37 Privately owned natural forests. The current incentives and those that become effective for forest and agro-forestry activities are applicable to the conservation and sustainable management of privately owned natural forests, in accordance with the regulation. 7. Partial Article 38. Both paragraphs: Development. The State must promote, through the issuance of preferential credits for up to thirty (30) years, the exportation of products from forest plantations, agro-forestry systems, and sustainably managed natural forests. Paragraph 1. The fund to which Article 92 of Law 99 of 1993 refers, will receive 10 percent of the resources to which Article 24 of Law 344 of 1996 refers. These will be allocated for the financing and promotion of s istainable management activities in this region's natural forests. Paragraph 2. The Fund for Commercial Forestry and restoration of commercial lands and for the promotion of sustainable management activities in natural forests on the collective lands of Afro-Colombian communities is created. This fund will receive ten (10) percent of the resources to which Article 24 of Law 344 of 1996 refers. 8. Article 6: Functions of the Ministry of Commerce, Industry and Tourism. The Ministry of Commerce, Industry and Tourism, as the country's leading economic and social 94 development agency, in accordance with its sphere of expertise, will formulate the policy related to the competitiveness, integration, and development of the productive sectors of industry, the foreign trade of goods, services, and technology, and the promotion of forest-related foreign investment. 9. Article 23: Forest Usage Fees. The usage of natural forest will give rise to the levying of compensatory fees as stated in Article 42 of Law 99 of 1993. 10. Article 26: Establishment and Usage. Any productive forest or agro-forestry plantation carried out with own funds, implies the right of the title holder to use or make use of such plantation as determined by his sovereign will. In the case of other forest products used for human consumption, including those stemming from beekeeping, such products cannot be announced or commercialized without analytical tests such as physical- chemical, microbiological, bromatological, and organoleptic tests. INVIMA is responsible for surveillance and control, and the National Beekeepers' Association or its delegate is responsible for issuing the respective certification. 11. (Partial) Article 14: Forest reserve areas. Forest reserve areas are large tracts of land which, due to the wealth of their plant formations and the strategic importance of their environmental services, are delimited and officially declared as such by the State, for the purpose of using them exclusively for conservation and sustainable development. 12. Paragraph 2 of 19: In relation to the issuance of natural forest usage rights, the Sustainable Development Corporations will enjoy the same prerogatives and have the same authority and responsibilities as those of the Regional Autonomous Corporations. IMPLICATIONS FOR SAN NICOLAS The Forest Law, which is still being processed, considers the following points as important for the project: The conservation and sustainable management of the country's natural forests and the establishment of forest plantations on soils suitable for forestry, are declared to be a national priority and of strategic importance for development. These plantations shall be executed in accordance with the relevant instruments of International Law, to which the Republic of Colombia is a signatory. This point ensures that the project will remain immersed in the national policy. Actions to halt deforestation and the illegal logging of forests, as well as to promote the sustainable development of the forest sector, should be adopted and executed in a joint, coordinated manner by the State, civil society, and the productive sector, aiming at equitable access to resources and their comprehensive use, under the framework of the basic requirements for the conservation of ecosystems and their biodiversity. This was one of the premises of the project and thus of the MASBOSQUES scheme. 95 The State will promote the development of the forest sector in recognition of the economic, social, and environmental benefits that this sector generates for the country. The development of the forest sector is declared a national priority in achieving the peace and coexistence of the country's citizens. Forest plantations, as well as agro-forestry systems, play a key role in the production of renewable energy, the provision of raw material, the supply of environmental goods and services, the expansion of the supply of forest resources, the generation of employment, and national socioeconomic development. Therefore, the State will encourage their development on lands that lack natural forest cover. The project fully complies with this point. The National Plan for the Prevention and Control of Forest Fires and Restoration of Affected Areas and the National Program for the Prevention and Control of Forest Pests and Diseases will provide technical support and decrease the risk of fires and pests which are a major concern in MDL forest projects. The San Nicolas Project will develop nurseries whose aim is to recover three endangered native species. These activities can fit in the National Plan for Forest Research and Technology Transfer, to which they can contribute and from which they can gain understanding. With regard to the financing mechanisms mentioned in the Law's Article 41 for small reforesters through the CIF, the Ministry of Environment has declared that these mechanisms do not apply to MDL projects. The President's objections do not affect to a large extent the articles that benefit the project. His objection to the definition of productive forest areas could have some effect but it would not be major. 96 ANNEX 15: World Bank Activities in the San Nicolas Region regarding Violence Human, social and economic costs from violence refugees have demanded special attention from the Government to mitigate this national drama. The project "Paz y desarrollo" supports vulnerable, poor and refugee population in the urban and rural communities. The project will reduce the risk of the population exposed to the armed conflict and mitigate the possible negative effects of violence. The project has tree components: A. Social, economic and environmental assets built in priorities zones. Income generation, habitat improvement, food security. B. Support to the refugee famnilies who return to their homes. Income generation, Social and Cultural work, habitat improvement, food security. C. Institutional and local government empowerment. In Antioquia, the "Paz y Desarrollo" project covers three subregions: Paramo, Embalses, Bosques, Altiplano. The San Nicolas Valley is located in the Altiplano subregion, which includes the nine municipalities participating in the Carbon Offset program (Marinilla, El Santuario, El Carmen de Viboral, Rionegro, El Retiro, La Ceja, San Vicente, Guarne and La Union). In 2005 the project invested US$950.000 in 15 projects for component A- covering 1808 vulnerable families with an inversion of US$522 per family. In component B- US$543.000 was invested in 14 projects. Vulnerable families (95) and refugee families (1015) were assisted to return to their lands and in the process of relocation, with an inversion of US$ 489 per family. In the Atiplano subregion 30 projects were implemented with a total investment of US$485.000. Within the subregion, the 82% of the total investment was concentrate in four municipalities: Rionegro (26%), La Ceja (24%), El Retiro (18%) and El Santuario (14%). In 2006 the project plans to invest US$256.000 in 6 projects for component A covering 322 vulnerable families with an inversion of US$795 per family. The inversion in component B is expected to be US$568.000 for 12 projects. Component B will help 1120 refugee families with an inversion of US$ 507 per family. In the Atiplano subregion 11 projects are planned with a total investment of US$241.000. The time horizon for the first stage of the "Paz y Desarrollo" project is five years (until 2009). There is a possibility of a second stage (with also five years of time horizon) depending of the success of the first stage. 97 ANNEX 16: Strategy for Climate Change Activities in Colombia The GoC, with World Bank assistance, has followed a climate strategy that focuses on the following three goals: a) Strengthen institutional capacity to allow regional governments and civil society to play an active and influential role in the international climate agenda by: * cooperating in formulation of policies, standards, and guidelines and enhancing capacity to plan, manage, and monitor those policies; * developing common regional positions and participating vigorously in international forums. and negotiations; * supporting effective mechanisms for sharing best practices in climate change assessment, adaptation, and technologies; * promoting equity and fair valuation of carbon emission reductions and developing a portfolio of activities eligible for funding by the Clean Development Mechanism (CDM). b) Improve knowledge and analysis to support planning for adaptation measures and funding by: * strengthening knowledge and documentation on vulnerable ecosystems and human health; * assessing the impacts of climate change and its implications for sustainable development; * analyzing policy options and identifying and implementing adaptation measures. In particular, focusing on support of key pilot adaptation measures that illustrate how these could be put in place to mitigate impacts and adapt the countries to climate change effects. c) Increase carbon financing for mitigation actions and maximize the value of funding by seeking synergies and aligning strategies closely with local environmental and social priorities. The institutional capacity has been supported through NSS and IDF grants that supported the assessment of the use of the CDM in Colombia and the development of the climate change office at the Ministry, respectively. The adaptation filed is being supported through GEF and CC-IG supported operations, amongst the first approved by the Board and the TFO in this field in the region. The development of mitigation efforts has been done through specific carbon finance operations that until now focused on the energy and waste management sectors. The San Nicolas and Caribbean Savannah projects constitute the first effort at developing carbon sinks in Colombia, thus complementing a wide range of activities in support of the climate strategy. The two carbon sinks operations are being formulated in concert. The differences and synergies between both are summarized below. Differences and synergies of Carbon Sink Projects in Colombia 98 San Nicolas Caribbean Savannah Differences Ecosystems Mid altitude Andean forest. Area originally Caribbean Savannah. Area is under severe under forest cover and converted first into degradation after years of unsustainable agriculture and then into pastures in a process practices, with current limited productive of gradual degradation. Area of high endemic value. biodiversity Recovery of soil cover includes the use of Recovery of soil cover through the use of native vulnerable and endangered populations native tree species with commercial value for of arboreal species, involving the development timber and non timber products, such as Albizia of nurseries, planting and monitoring protocols saman, Guazuma ulmifolia, Anacardium and the actual reintroduction in the region of excelsum, Tabebuia billbergii and Hevea these endangered arboreal species. brasiliensis. Grasses will be established in the soils most devoid of vegetation as an interim and complementary measure. Forestry and aLyro-forestrv systems Silvopastoral and forestry systems Social and par nership aspects Active involvement of farmers and local Active involvement of indigenous people: communities: The project will prepare an IPDP in The project will be implemented by low and consultation with indigenous people in which medium income farmers. The project will help their involvement in the project and benefits implementing a forest management program will be established. (developed through a participatory community process) through which individual landowners voluntarily and partially forest their land. Partnership of local community, NGOs, Partnership involves international and national municipalities, business organizations and applied agriculture research institutions linked academic institutions. to impoverished indigenous community and settlers. Carbon Finance Methodology New methodology has been proposed and is The project will apply an already approved under CDM review. Approval will benefit methodology thereby reducing transaction future carbon sink projects in the context of the costs. particular characteristics of land use in Colombia. Synergies Contribution to arrest land degradation Both projects contribute to arresting land degradation one of the most intractable issues associated with environmental degradation. Both projects follow the CEA recommendations by generating alternatives to diversify non-timber forest products with the benefits reaching directly rural communities. They both improve the livelihoods of forest-dwelling communities, and the fostering of capacity for both indigenous communities and the rural poor to profit from the sustainable and productive uses of forest areas and the implementation of payments for environmental services. BCF as an instrument to link climate change with the goals of conservation of biodiversity and poverty reduction Both projects restore biodiversity in degraded lands and generate additional revenues for local 99 communities. Involvement of CARs In both projects the local environmental authorities play an important role, technically as well as financially. In San Nicolas, Comare will provide 90% of the required resources. In Caribbean Savannah CVS will contribute with an important share to the investments. At the same time being the first carbon sink projects in Colombia, the projects will further strengthen the capacity of local environmental authorities in this field. Diversification of agro-forestry production systems Both projects contribute to diversifying agro-forestry production systems and to creating new sources of revenues as well as capacities for local communities. Fit into an overall strategy: Projects initiate the use of carbon sinks under the Marrakesh accords in Colombia. Projects complement the previous experience with GHG mitigation, adaptation and institutional development on climate issues in the country, thus representing a comprehensive strategy on climate change in the region. Both projects will provide valuable experience with tools and processes under the CDM, preparing the country for eventual expansion of carbon sinks as envisioned under the COPs to the UNFCC. Project seeks to pioneer carbon sinks as a tool Project aims at recovery of severely damaged to protect biodiversity and to use it for selective ecosystem (Caribbean Savannah) and to recovery of endangered arboreal species in involve a marginalized indigenous population their original range. in the process. Vocation and cattle raising Projects will not change the vocation of land. No attempt or indirect effect is expected on cattle raising. There is no cattle raising activity in the project The project will not contribute to displacing area. cattle raising activities. 100 ANNEX 17. Project Preparation and Supervision Planned Actual PCN review 10/20/2005 01/18/2006 Initial PID to PIC 11/07/2005 02/12/2006 Initial ISDS to PIC 11/07/2005 02/12/2006 Appraisal 09/05/2006 09/26/2006 Negotiations 09/11/2006 04/26/2007 Sign ERPA 09/25/2006 06/27/2007 Bank staff and consultants who worked on the project included: Name Title Unit Walter Vergara Engineer and TTL /Environmental Spec. LCSSD Saima Qadir Deal Manager ENVCF Alejandro Deeb Hydrologist LCSSD Seraphine Haeussling Economist LCSSD Rama Chandra Reddy Carbon sinks/forestry specialist ENVCF Alonso Zarzar Social specialist LCSSD Natalia Gomez Rural specialist LCSSD Monica Restrepo Lawyer LEGCF Benoit Bosquet BCF Manager ENVCF Sebastian Martin Scholz Carbon Sinks/Climate Change Specialist LCSSD Javier Blanco Financial analyst LCSSD 101 ANNEX 18: Generic baseline and monitoring methodology for avoiding deforestation and forest enrichment project activities Introduction This document proposes a baseline and monitoring methodology for avoiding deforestation and forest management project activities under the Clean Development Mechanism. Although it was developed for the presentation of the conservation component of San Nicolas CDM forestry project to the Biocarbon Fund, the methodology was designed as a proposal for discussion under the UNFCCC agenda for the inclusion of avoiding deforestation project activities under the CDM. For the development of the methodology, the authors draw mainly on the discussion paper "Accounting for avoided conversion of intact and non-intact forests. Technical options and a proposal for a policy tool" by Achard F., Belward A.S., Eva H.D., Federici S., Mollicone D. and Raes F., of the Institute for Environment and Sustainability - Joint Research Centre of the European Commission. As the methodology proposed by the discussion paper was designed to be applied at a country level, substantial modifications were introduced in order to make it applicable for project activities. For facilitating its review, the methodology covers the same sections of the Executive Board template for proposing new baseline and monitoring methodologies for afforestation and reforestation project activities. Applicability This methodology is applicable for project activities which reduce emissions from deforestation or degradation of a natural forest, and/or project activities which enhance the carbon sinks of a degraded natural forest. Project participants shall comply with the following applicability conditions: 1. Project activity does not cover the totality of the forest in the region. 2. Project participants can have access at least some areas of the forest in the region for establishing monitoring plots. 3. For projects that reduce emissions from deforestation or degradation, project participant can identify the deforestation or degradation driver. Project and regional boundary In order to apply the proposed methodology, project participant shall define the project boundary as well as the regional boundary. The project boundary, as in A/R CDM project activities, geographically delineates the proposed project activity under the control of the project participants. 102 For projects that reduce emissions from deforestation or degradation, in defining the geographical boundary of the region, project participants shall estimate the range of action of the deforestation/degradation driver. The regional boundary shall cover all forest in a radius of twice the calculated range from the project boundary. (i.e. if the deforestation is caused by wood extraction and the wood market place is located up to 25 km, the region may cover a radius of 50 km around the project activity.) For project activities that enhance carbon sinks of a degraded natural forest, the regional boundary shall comprise at least an equivalent area of natural forest with the same physical and socio-economic conditions than the forest included in the project boundary. In any case, the region should cover all forest in a radius around the project activity of at least 10 km but not more than 100 km. Once defined, the region should not be changed during the crediting period(s). Stratification of forest in the project and regional boundary Project participant shall stratify forest areas in the project boundary and the regional boundary into relatively homogeneous units. The stratification shall take into account both natural conditions (i.e. soil, climate, vegetation types etc) as well as anthropogenic conditions (i.e. drivers of deforestation/degradation, land tenure etc). Distinct strata should differ significantly from each other in terms of their carbon content, and shall cover significant differences in forest degradation stages caused by the deforestation/degradation driver. The stratification units shall be the same in the regional boundary than in the project boundary. For each stratum, project participant shall estimate per hectare carbon stocks in each carbon pool. Selection of most plausible baseline scenario For avoiding deforestation/degradation project activities, baseline scenario is defined as the scenario that reasonably represents GHG emissions from deforestation/degradation within the project boundary that would occur in the absence of the project activity. For enhancement of sinks in natural forest project activities, baseline scenario is defined as the scenario that reasonably represent the changes in carbon stocks in the carbon pool of the natural forest included in the project boundary that would occur in the absence of the project activity. The methodology uses the existing/historical forest conversion approach for the determination of the baseline scenario. Baseline scenario is determined applying the historical annual forest conversion rates calculated in the regional boundary, to the initial project area in the corresponding forest strata. Forest conversion rates are calculated as the percentage of area converted from one forest strata to another forest strata or land use during two evaluation years. Ex-ante calculation of baseline GHG emissions by forest sources and GHG enhancement of sinks 103 Ex-ante calculation of baseline GHG emissions by forest sources and GHG enhancement of sinks is calculated applying emissions/enhancement factors to the project area in each forest strata. The emissions/enhancement factors are calculated multiplying the annual conversion rates by the associated per hectare emissions/enhancements of the changes from a forest stratum to another. Project participant shall apply the following steps for calculating baseline GHG emissions by forest sources and/or enhancement of sinks: Step 1: Calculate historical forest conversion rates in the regional boundary, including the project boundary. Conversions rates shall be calculated as the percentage annual area change from one forest stratum to another forest stratum, according to the following formula: FCRH FCr+h (1) "J A ri' Where: FCRijH = Forest Conversion Rate from stratum i to stratum or land use j during the historical period H. Arit = Total area in the regional boundary of forest stratum i in historical year t, in hectares. FCrijt+h = Area of forest strata i of the year t in the regional boundary that has change to forest strata or land use j at the year t+h. Arit and FCrijt+h can be estimated by project participant with the comparison of satellite images, aerial photographies or other remote sensing techniques. Annual Forest Conversion Rate (AFCrij) is calculated dividing the Forest Conversion Rate (FCrijt+h) by the number of years of the historical period (h). Step 2: Estimate per hectare GHG emissions or GHG enhancement of sinks associated with the changes of a forest stratum to another forest stratum or land use, equivalent to the difference between its carbon stocks, according with the following formula: CFCij = CSj - CSj (2) Where CFCij = Per hectare carbon emissions (-) or enhancement (+) from the change of a forest stratum i to a forest stratum j in Ton C02e/ha. CSi = Average per hectare total carbon stock in selected carbon pools in forest stratum i, in Ton C02e/ha. Project participant shall calculate CSi with conventional forest inventory techniques in the regional boundary. 104 Step 3: Calculate per hectare GHG emissions factor and/or GHG enhancement of sinks for each forest strata multiplying the annual conversion rates by the corresponding per hectare GHG emissions or enhancement, according with the following formula: CFFCj = E (AFCrij * CFCi) (3) Where CFFCi = Per hectare annual GHG emission factor (-) or enhancement factor (+) of forest strata i, in Ton C02e/yr/ha. CFCij = Per hectare carbon emissions (-) or enhancement (+) from the change of a forest stratum i to a forest stratum j in Ton C02e/ha. AFCrij = Annual Forest Conversion Rate from stratum i to stratum or land use j, in Ton C02e/yr. Step 4: Calculate baseline GHG emissions applying the emissions factor and/or capture factor to the total area of each stratum in the project boundary during the crediting period. BC, = i(Api * CFFCi) (4) Where BC, = Baseline GHG emissions (-) or enhancements (+) in year t, in Ton C02e. Api = Total area in the project boundary of forest stratum i, in hectares. CFFCi = Per hectare annual GHG emission factor (-) or enhancement factor (+) of forest strata i, in Ton C02e/yr/ha. Ex-ante calculation of project actual net GHG emissions or enhancements of sinks Project activities aimed at avoiding deforestation shall achieve a real GHG emissions reduction from forest sources by reducing the forest conversion rates below the baseline scenario. Similarly, project activities aimed at the enhancement of sinks in degraded forest shall increase carbon stock above baseline natural regeneration rates. Project participant shall define the level at which the forest conversion rates will be achieved with the implementation of the project activity in the project boundary during the crediting period. If the project activity include the enhancement of sinks by planting or seeding, project participant shall also estimate the changes in carbon stock in the selected carbon pools of the corresponding anthropogenic intervention. For calculating ex-ante project GHG emissions or enhancement of sinks, project participant shall apply the following steps: 105 Step 1: Define the target forest conversion rates that the project activity will achieve during the crediting period. This step will result in the definition of the following variable for the project activity: AFCpij = Target annual forest conversion rate from stratum i to stratum or land use j that the project activity will achieve during the crediting period. Step 2: For project activities that include planting or seeding of natural forest, estimate changes in carbon stocks in carbon pools due to the anthropogenic intervention. This step will result in the estimation of the following variable for each forest stratum: ACSpit = Per hectare changes in carbon stock in carbon pools in year t due to the anthropogenic intervention of the project activity in forest stratum i. Step 3: Calculation of project GHG emissions or enhancements of sinks. Project participants shall calculate project GHG emissions or enhancements by replacing in formula (3) AFCrjj with AFCpij, and calculating emissions or enhancement factors (CFFCpi) for the project activity. Finally, project GHG emissions or enhancements of sinks will result from the application of the following formula: PC, =I E(Api * ACSp )+ (Ap; * CFFCpi)] (5) Where: PCt = Project GHG emissions (-) or enhancements (+) in year t, in Ton C02e. Api = Total area in the project boundary of forest stratum i, in hectares. CFFCpi = Per hectare annual project GHG emission factor (-) or enhancement factor (+) of forest strata i, in Ton C02e/yr/ha. A CSpit = Per hectare changes in carbon stock in carbon pools in year t due to the anthropogenic intervention of the project activity in forest stratum i. Ex-ante calculation of project GHG emissions reduction Emissions reduction will be calculated as the difference between the GHG baseline emissions or enhancements and the project GHG emissions or enhancements of the project activity calculated according with the above procedure. Ex-post calculation of baseline GHG emissions from forest sources Baseline parameters will be monitored in the forest areas of the regional boundary not included in the project boundary. Project participants shall monitor forest conversion rates in those areas during the crediting period. This monitoring can be undertaken with the comparison of satellite images, aerial photography or other remote sensing techniques during the crediting period. This monitoring shall result in an updated value for variable (AFCrij). 106 Additionally, project participant shall monitor the changes in carbon stocks in carbon pools on each forest stratum in the forest areas of the regional boundary not included in the project boundary, to control for changes in carbon stocks in carbon pools within the same stratum in the baseline. This monitoring can be undertaken with permanent sampling plots and conventional forest inventory techniques. This monitoring shall result in an updated value for variable (CSj). For calculating ex-post baseline GHG emissions from forest sources and C02 baseline enhancement of sinks, project participant shall re-calculate formulas (2) (3) and (4) with the updated monitored forest conversions rates as well as the changes in carbon stocks in carbon pools of each stratum. Ex-post calculation of project actual net GHG emission or enhancement of sinks Project participant shall monitor both forest conversion rates as well as changes in carbon stock in carbon pools in the project boundary. Monitored forest conversion rates shall replace variable (AFCpij) and monitored changes in carbon stock in carbon pools shall replace variable (ACSpit), in formula (5) for the calculation of ex-post project actual net GHG emission or enhancement of sinks. For monitoring the above parameters, project participant shall use remote sensing techniques complemented by standard forest inventory techniques. Ex-post calculation of GHG emissions reduction or enhancement of sink Finally, ex-post calculation of GHG emissions reduction shall be calculated with the difference between updated baseline GHG emissions reduction from forest sources or enhancement of sinks, and the ex-post project actual net GHG emissions from forest sources or enhancement of sinks. Crediting Although emissions reduction from deforestation could be treated similar as a CDM emissions reduction project activity, the methodology proposed the use of ICERs to deal with permanence. This is because reducing emissions from deforestation can be achieved implementing activities that could be reverted or stopped in the future; therefore the nature of those activities are not permanent. Additionally project activities can involve both reducing emissions from deforestation as well as enhancing sinks of degraded forest and the formulas used in the methodology aggregated both effects, and therefore its results shall generate the same types of credits. 107 ANNEX 19: Avoided Deforestation Two different actions are proposed for the forest conservation component: 1. COMMITTED FORESTS: In the process of reaching agreement with farms for the restoration of the forest landscape in the San Nicolas region, several fragments of natural and secondary forests were identified, and the owners are willing to conserve them. These forests are located in the municipalities of San Vicente and El Retiro. The following table presents information related to the area, type of forest, and location: Municipality Location Type of Forest Area (Ha) San Vicente San Jose Secondary forest 148.362 El Canelo Secondary forest 112.556 Corrientes Secondary forest 235.15 Alto El Venado Secondary forest 118.32 El Retiro San Sebastian Secondary forest 30.673 San Sebastian Secondary forest 13.599 San Sebastian Natural forest 224.831 Normandfa Natural forest 7.557 Normandia Natural forest 34.615 La Luz Secondary forest 52.247 La Luz Secondary forest 41.13 Total Area 1019.04 Forests in the Municipality of San Vicente: Most of the committed forests in the municipality of San Vicente are located in the districts of El Canelo and San Jose; in the zone delimited as the Santa Isabel Los Cachos section of the delimitation carried out in the second phase of the project for sustainable management of forests in San Nicolas. There is a high level of agricultural and livestock activity in this zone and the fragments are secondary forests in intermediate states, located in higher areas with steeper slopes. The other forest fragment is located in the protected zone, known as Alto del Venado according to agreement 016/98. Some of the biophysical characteristics of the zone where forest fragments are located are described below. Life zone: Very humid low mountain forest (bmh-MB) and very humid premontane forest (bmh- PM). The altitude ranges from 1900 to 2600 m.a.s.l. Strategic areas: FMHM2 (transitional and mixed areas in the process of deterioration), corresponding to a mountain landscape with a very humid cold climate, with a subdivision indicated by the density of construction and farm value. Social use: Around forest fragments there are various uses such as temporary crops and pasture as well as low stubble. Biotic potential: The surrounding area is extensively deforested, with a few remaining narrow strips of stubble or riparian forests on the banks of creeks and zones with steeper slopes. 108 Environmental supply: This is a zone with a large supply of water. A large number of springs flow toward the various neighboring microcatchments whose waters flow into the Porce River in the San Jos6 district; the rest flow toward La Magdalena creek whose waters in turn flow into the Peniol reservoir. The view of forest use and management is limited to the extraction of envaradera for stakes (in some temporary crops), and firewood for cooking food. It is also common to observe small patches for ecological use, such as the protection of springs and creek banks. There are some individual uses including the extraction of trees such as Chilco Colorado, and several types of laurel. Figure I shows the location of forest fragments in the municipal and regional context. Forests in the Municipality of El Retiro: Most of the committed forests in the municipality of El Retiro are located in the La Luz and Normandfa districts, in the zone delimited as the Retiro unit within the delimitation carried out during the second phase of the project for sustainable management of forests in San Nicolds. The La Luz district has a high level of livestock activity and to a lesser extent agriculture, while the Normandfa district has a larger area of plantations in the San Nicolds valleys. The fragments are natural and secondary forests in intermediate states. The other forest fragment is located in the reserve known as San Sebastian La Castellana. Some of the biophysical characteristics of the zone, in which forest fragments are located, are described below. Life zone: According to Holdridge's plant formation classification system (1978), the node or unit mainly encompasses the formation of very humid low mountain forest (bmh-MB). Strategic Areas: The FMHC1 unit (areas of plantations and secondary forests) and FMHM2 unit (transitional and mixed area in the process of deterioration) correspond to a mountain landscape with very humid cold climate, where the subdivision is shown by the degree of intensity of construction and farm value, in which the FMHC1 unit is represented by farms of lower value and with a lower density of construction. Soil Use: The identified forest fragments correspond to two types of plant cover: Bnl (Natural Forest), Bn2 (Secondary Forest) surrounded by medium and high stubble, natural pasture, managed pasture, and temporary crops. 109 MUNICIPIO DE SAN VICENTE Bosques Comprometidos para Deforestacion Evitada uBosque Verede * ..: i - , ' . . - , r ^ N4 *,- . .* *i. ?''' - r ).- 1, < .- - , s. * a',< *. - * F' ; '- i , -16w CONVENCIONES '.- - Deforestacon. . --a j .- a :-, - Degradadon ' Nubes y sombras STqr Recuperacon Reforestadon - Sn Inforrrcion Sn canbio CAMBIO EN LAS COBERTURAS ESCALA VEGETALES PERIODO 1986-2000 1 OM Figure 3. Change in plant cover, 1986-2000 Recovery: This area changed from secondary forest and low stubble to affected natural forest or from low stubble to secondary forest. Degradation: This area changed from affected natural forest to secondary forest or low stubble and from secondary forest to low stubble. Deforestation: This area changed from one of the three types of cover to non-forest cover (PN, PM, CT, CP). Reforestation: This area changed from non-forest cover to one of the three types of forest cover; for example, from crop or pasture to stubble, secondary forest, or affected natural forest. 114 Table 2. Change in plant cover CHANGE (1986-2000) AREA (HA) % Deforestation 20870.2 12.01 Degradation 5097.1 2.93 Clouds and shade 642.5 0.37 Recovery 5167.8 2.97 Reforestation 18039.7 10.38 No information 132.4 0.08 No change 123867.6 71.26 In order to identify the most threatened forest areas in the project area, a multi-criteria analysis was performed. The criteria analyzed were: * Distance from forests to deforested areas * Distance from forests to possible roads * Density of construction in forest areas * Slopes of terrain in forest areas Each of the selected criteria 'was assigned a weight according to the importance of each for the conservation of forests present in the project area: * Distance from forests to deforested areas: 35% * Distance from forests to possible roads: 20% * Density of construction in forest areas: 20% * Slopes of terrain in forest areas: 25% Each criterion was spatialized and a map was generated. An algebraic mapping procedure was carried out, showing as a result the forest areas that are threatened by deforestation to a greater or lesser degree. 115 ,~~~ -F. a,x . ,, . -, .~ ;4 - . CONVENCIONES Lirnites corredores *-Menor grado de amenaza Escala Mayor grado de arrenaza 1:300.000 GRADOS DE AMENAZA PARA AREAS BOSCOSAS EN EL AREA DEL PROYECTO Figure 4. Degrees of threat for forest areas Table 3 shows forest areas under different classes of threat and for both periods of analysis. 116 Table 3. Forest areas according to classes of threat 1986-2000 Threat category Area (ha) % High 3704.6 6.38 Medium high 23350.3 40.19 Medium 24032.0 41.36 Low 7012.4 12.07 According to the table above and the analysis performed as part of this work, most of the region's forests are classified in the medium and medium high threat categories. wb235281 C:\Documents and Settings\wb235281\My Documents\CO San Nicolas\PAD San Nicolas June 25.doc 06/27/2007 11:28:00 AM 117 I i II i i