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Narration: In this presentation you will learn about voluntary markets for afforestation, reforestation and avoided deforestation.

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Narration: The presentation is divided into five sections. After the introduction, you will learn about voluntary markets. The last three sections give examples of compliance markets, voluntary markets, and finally, voluntary carbon projects.

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Narration: The CDM imposes strict eligibility criteria on projects. Among almost 2000 CDMprojects, only six are related to forestry and have been approved. This indicates that the compliance carbon market for the forestry sector is underdeveloped, compared with other sectors.

Afforestation and reforestation under the Kyoto Protocol’s Clean Development Mechanism (CDM) have been defined in such a way that projects under this mechanism will have to meet eligibility criteria.Among almost 2000 CDM projects, only six are related to forestry. It indicates that compliance carbon market for forestry sector has not been developed compared with other sectors.

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Narration: A voluntary market is not bound to any legally binding agreement but maintains its integrity as it observes the accounting and verification systems of compliance markets, such as the CDM under the Kyoto Protocol.

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Narration: There are four funds established by the World Bank: the Portfolio Carbon Fund, the Community Development Carbon Fund, the Bio Carbon Fund, and Forest Carbon Partnership Facility (FCPF).

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Narration: Most buyers establish the fund from public funding. Large buyers are expected from the private sector.

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Narration: Sellers are more selective in determining the partners. They are mostly concerned with capacity building and upfront payment.

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Narration: Commonly referred compliance carbon markets include the EU Emission Trading Scheme, New South Wales, and Chicago Climate Exchange.

Among commonly referred compliance carbon markets are EU-ETS, NSW, and CCX.

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Narration: In addition to carbon markets, there are also biodiversity, wetland and other conservation markets that are voluntary and of interest to the private sector.

Narration: A look at the history of voluntary carbon markets shows that their value has greatlyincreased in the recent years, including that from the Over-The-Counter, or OTC, market. The Chicago Carbon Exchange, or CCX, is responsible for the larger share of the market.

It is shown that the value of voluntary market is impressively increasing in the recent years,including that from the Over-The-Counter (OTC) market. Chicago Carbon Exchange (CCX) was responsible for the larger share of the market.

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Narration: The total global market was 3 billion tons of CO2-equivalent in 2007 to 2008. This market was dominated by micro-hydro and landfill projects. The transaction volume of Afforestation and Reforestation, or A/R projects was relatively small at 7%. It was even smaller for avoided deforestation, at 1%.

If we look at the transaction by project type, out of the total global market of 3 billion tons CO2-equivalent in 2007-2008, the market was dominated by micro-hydro and landfill. The transaction volume of Afforestation and Reforestation (A/R) projects were relatively small (7%) and even smaller for avoided deforestation (1%).

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Narration: Asia and North America remained dominant as credit sources. Credits from the EU, Canada, Australia and New Zealand declined significantly on the back of concerns about double-counting emissions reductions as offsets in the voluntary markets and emissions reductions under Kyoto compliance schemes.

Asia and north America remained dominant as credit sources. Credits from the EU, Canada, Australia and New Zealand declined significantly on theback of concerns about double-counting emissions reductions as offsets in the voluntary markets and emissions reductions under Kyoto compliance schemes.

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Narration: Certification of a carbon project does not have to go through a compliance scheme, that is, the A/R CDM. However, most certifiers, if not all, follow and consider the rules and modalities formally put up by the CDM Executive Board. Operational Entities certify CDM projects to produce Certified Emission Reductions, or CER, and provide services to voluntary projects to produce Verified Emission Reductions, or VER.

Certifying carbon project may not necessarily go through compliance scheme, namely A/R CDM. Most certifiers if not all, however, follow and consider rules and modalities formally put up by the CDM Executive Board. The Operational Entities, who will normally certify CDM projects to produce CER, also provide services to voluntary project to produce VER.

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Narration: Certified voluntary carbon projects consist of afforestation and reforestation either through the CDM mechanism or through voluntary markets, avoided deforestation and landscape restoration.

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Narration: Some of these projects have already been approved with a Silver rating, as in the Indonesian case, or Gold ratings, as in the Brazil, Nicaragua, and Panama cases.

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Narration: Here are some examples of standards for carbon projects entering into voluntary markets.

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Narration: The Voluntary Carbon Standard is probably the best point for projects to enter into the certification process. A lot of experiences have been gained by this initiative.

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Narration: CCBA Standards are the most comprehensive for addressing other issues, including biodiversity, sustainable development, and addition to climate change.

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Narration: The Gold standard was initiated for the energy sector but was recently also tested for the forestry sector.

Narration: Standards are an important determinant for transaction prices. As shown here, average prices range from $3.80 per ton of CO2 equivalent to $21.30 per ton of CO2 equivalent. However, as the small light-blue bars show, every standard fetched a wide range of prices.

Standards are an important determinant for transaction prices with average prices ranging from $3.80/tCO2e for the ACR to $21.30/tCO2e for CDM/JI credits. However, every standard fetched a wide range of prices.

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Narration: These are some key questions to consider regarding carbon markets and other financial mechanisms.

Please discuss the following points regarding Voluntary Market as to oppose with Compliance Market and other financial mechanism like PES from the perspectives of buyers and sellers.

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