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2.4 

Terms of Reference for Carbon Offset Project Feasibility Study

This document describes the terms of reference for proposed activities to be carried out by [CONSULTANT] on behalf of [CONTRACTOR], with the objective of identifying and assessing the feasibility of a forest-based carbon offset project at [FILL IN SITE NAME] that would:

The product to be delivered by [CONSULTANT] would describe possible project options such as forest conservation and restoration with native species, quantify the likely carbon benefits that would result from each option, and make recommendations for the implementation of a carbon offset project that would provide multiple biodiversity conservation, sustainable development, and greenhouse-gas (GHG) mitigation benefits. It is expected that this study will define and identify the investment criteria needed by potential investment decision-makers to justify a multi-million-dollar investment in GHG mitigation actions that improve the global environment.

TASKS

1. Literature search, expert interview, data collection

The contractor will conduct a literature survey, interview experts, and collect data on the following for the study area:

2. Baseline development

The contractor will build a land management trend model using available spatial data. If not previously done by others, the contractor will delineate the vegetation types and land uses of the study area by working with local experts to interpret the land cover images. The contractor will then build a land management trend model using the available spatial data. This model will be used to project the rate of land use and vegetation change, to establish a baseline scenario for carbon storage and uptake in the study area.

3. Estimate of growth rates/carbon stored and sequestered

On the basis of the data gathered, the contractor will provide estimates of carbon stored in the study area 1) currently, 2) in the baseline scenario (projected out 70 years), and 3) with the implementation of the carbon sequestration project (protection and/or restoration - projected across 70 years). The contractor will then estimate the net carbon benefits of carbon sequestration project activities, or additionality (with project scenario minus baseline scenario) in the study area. These initial estimates of carbon benefits may require additional in-depth analysis during a subsequent project development phase to revise these first-order estimates. The consultant will indicate in the final report what additional work if any will be needed. The parameters and data for this estimate will be entered into MS Excel software, which will be able to be used to evaluate new, similar project ideas after the development of this feasibility study.

4. Estimate of project costs

Using the data gathered, the contractor will create a budget for the estimated carbon sequestration project costs, showing startup costs, long-term costs, expected annual cash outflows, and total project costs. The budget assessments will be developed using MS Excel software, which will be able to be used to evaluate new, similar project ideas after the development of this feasibility study.

5. Estimate of cost/ton of carbon

The contractor will provide an estimate of the cost per ton of carbon sequestered for the carbon sequestration project for the study area. The parameters and data for this estimate will be entered into MS Excel software, which will be able to be used to evaluate new, similar project ideas after the development of this feasibility study.

6. Permanence assessment

The contractor will assess the permanence risks for the project implementation strategies, including an assessment of the risks from natural events.

7. Leakage assessment

For project activities to be considered creditable, they must be shown to have not simply transferred carbon emissions to another area. The contractor will identify and quantify the leakage risk for proposed project activities (positive and negative) and propose options for management of leakage.

8. Co-benefits assessment

The contractor will recommend project activities that in addition to providing GHG mitigation, maximize multiple benefits in terms of biodiversity conservation, sustainable development and environmental services as much as feasible without severely reducing the cost-effectiveness of the project in terms of carbon capture. In the final report, the consultant will list and describe the multiple economic benefits (positive and negative) that will result from project activities, and the biodiversity benefits of the carbon sequestration project in the study area.

9. Reliability

This component covers the likelihood that project activities will provide the expected carbon benefits, as well as the institutional arrangements that are most advantageous to guaranteeing the production of these benefits. The consultant will propose the best assignment of responsibilities for project execution to assure the generation of the expected benefits.

10. Monitoring protocol

The final report will propose and cost out a monitoring protocol adequate to confirming the carbon benefits of the project.

11. Investment potential assessment

The consultant will gather the information necessary for potential project investors to evaluate project options and costs and make investment decisions. The financial assessment will include a thorough evaluation and breakdown of the costs and benefits for each identified project option. This assessment will take into account the other assessments in this feasibility study (cost/ton of carbon, permanence and leakage risks, co-benefits, etc) and current and future carbon market and policy conditions. The contractor will provide an assessment of the likelihood of investments in the project.

12. Next steps

The contractor will recommend specific next steps to establish a carbon sequestration project in the study area.

DELIVERABLES

  1. Feasibility study. The contractor will submit a preliminary report capturing all of the task points outlined above to a review team for comments and discussion prior to the finalization of the report. The contractor will submit a final report in written and electronic form. The final report will contain an executive summary and the fully body of the report.
  2. Baseline report. The contractor will write a report explaining in detail each step in the creation of the baseline model. This report will contain the parameters used in the baseline projection, and copies of all baseline components (including spatial layers) will be submitted electronically.
  3. Maps. The contractor will submit electronic and hard copies of maps delineating the study area, the land use and vegetation types, and land use and vegetation types in baseline and with-project scenarios.
  4. MS Excel spreadsheets. The contractor will provide in electronic form the MS Excel spreadsheets that were used to calculate the project cost, carbon sequestered, and cost/ton of carbon sequestered estimates. These spreadsheets will be used to evaluate new, similar project ideas after the development of this feasibility study.

The feasibility study will be implemented during the period [FILL IN]. A preliminary report will be due on [FILL IN DATE] and a final report will be due on [FILL IN DATE]. The level of effort will require a total of [FILL IN #] contractor days. The budget for carrying out these activities is [FILL IN].

Box 6 Capacity Needs

In-country project staff will require a diverse skill set in order to complete a feasibility study including:

  • Project activity design - Project designers must determine what combination of project activities will ensure a carbon benefit while at the same time be technically feasible in the project area. Skill areas include conservation planning and management, business planning and specialized forestry technical assistance such as conducting carbon sequestration estimates, developing monitoring protocols, and projecting baseline scenarios.

  • Institutional capacity assessment - Once technically feasible project activities are identified, project designers must assess whether organizational capacity in the project region is sufficient for implementing the project activities.

  • Stakeholder liaison - In-country staff or a trusted partner organization must be able to interact with local people in the proposed project area and effectively gauge their level of interest in the project. This is a delicate undertaking because one must sufficiently describe the project yet not unduly raise expectation levels.

  • Scientific assistance - It is helpful if a local technician familiar with the region's plant and tree species can interact directly with the consultant who will determine the project's carbon benefit.

  • Government relations - Host country support is necessary prior to implementing a carbon sequestration project. In-country project designers should engage appropriate government officials during feasibility analysis to ensure their support of the project.

  • Other technical skills needed to complete a feasibility study in initiate project development can include: business administration and proposal writing, policy and legal expertise, climate change technical advisor, financial management, and GIS.



2.5 

Carbon Project Calculator

The carbon project calculator is a powerful spreadsheet tool that enables users to estimate the potential carbon tonnage sequestered from a specific project area - the Atlantic Rainforest of Brazil - and the associated costs of developing and implementing the project. The calculator is intended to produce first cut estimates for a forty year project feasibility study.

** THIS TOOL IS SPECIFICALLY CALIBRATED FOR THE BRAZILIAN ATLANTIC RAINFORESTS. IT WILL NOT GIVE ACCURATE CARBON ESTIMATES FOR DIFFERENT FOREST TYPES. HOWEVER IT CAN HELP YOU THINK THROUGH THE KINDS OF CALCULATIONS NECESSARY FOR CARBON ESTIMATES, AND BE USED TO GIVE A VERY ROUGH PRELIMINARY INDICATION OF THE FEASIBILITY OF YOUR PROJECT.**

Click here to access the worksheets and instructions or open it from the worksheets in the Annex.

Important: note that you can not change the name of this file because some macros (embedded programs) are related to the file name.



2.6 

Leakage Tools

A forest-based carbon offset project could potentially influence land-use patterns not only within the project site but also in surrounding areas. Land that is placed under conservation protection limits the amount of land that can be used for agricultural production, logging, and industrial uses. As a result, stakeholders affected by land-use changes may begin clearing other land outside project boundaries to meet their need for timber and other forest products, as well as for food production or other economic needs. For example, a logging concession displaced by a carbon-offset project may merely move its operations to another area, not reduce logging activities or improve sustainable logging practices. Without careful planning, design, and implementation, the project may have difficulty demonstrating a "net" reduction in carbon.

This phenomenon of shifting land development and resultant greenhouse gas production is known as "leakage" or "activity-shifting. Leakage is the unintended loss or displacement of estimated greenhouse gas benefits.

Successful carbon offset projects must identify, measure, and address potential secondary impacts, including those that might occur off-site. Project implementers are required to make estimates of "leakage." Since projects can only take credit for incremental carbon emissions reductions, emissions reduction estimates must be decreased by the amount of leakage detected or anticipated.

To avoid leakage or minimize its risk at the project level, we recommend:

Table 5 provides an index of the various leakage risks associated with different land use project types, and the potential strategies for mitigating those risks.

Table 5: Leakage Index

Primary Drivers of Land-use Change

Market Boundaries

Project Components

Conditions Signaling Leakage Risk

Potential Net Effect

Strategies

Agricultural Land

Subsistence for local use

Local, regional, or global export

Increased agricultural productivity through green cover crop cultivation, agroforestry, soil conservation practices, or other measures

Increase output but free resources for development on adjacent lands

Moderate Leakage

Protect adjacent forests; Implement sustainable forestry; Introduce ecotourism

   

Forest preservation

Increased agricultural productivity

Forest preservation

Decrease agricultural output

Free resources for development on adjacent lands

Decrease agricultural output

High leakage

Moderate leakage

High leakage depending on where activity shifts

Create alternative income source (i.e. non-timber forest products); Add agricultural productivity component

Protect adjacent forests; Implement sustainable forestry; Introduce ecotourism

Create alternative income source such as sustainable forestry

Fuel wood

Local use or regional market

Agroforestry, Re/afforestation, Windbreaks

Common property resource; Offsite market demand

Moderate leakage potential

Employ transferable technology (i.e., solar power, fuel stoves)

   

Fuel stoves

N/A

N/A

N/A

Timber

Local use

Sustainable forestry (Reduced impact logging, Natural forest management

Decrease short-term timber output

Short-term leakage

Re-estimate project impacts over short-term; Develop alternative timber sources such as plantations on marginal land

     

Decrease long-term timber output

Leakage throughout project life. (High)

Re-estimate project impacts over short-term; Develop alternative timber sources such as plantations on marginal land

   

Forest preservation

Decrease or halt timber output

High degree of leakage

Develop alternative timber sources such as plantations on marginal land; Introduce sustainable harvest in buffer areas

 

Export

Sustainable forestry (Reduced impact logging, Natural forest management)

Decrease short-term timber output

Short-term leakage

Re-estimate project impacts over short-term

     

Decrease long-term timber output

Long-term leakage

Re-estimate long-term project impacts

   

Forest preservation

Decrease or halt timber output

Leakage

Develop alternative timber sources such as plantations on marginal land

Source: Paige Brown, Bruce Cabarle, and Robert Livernash, "Carbon Counts: Estimating climate change mitigation in forestry projects."


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