Carbon offset projects
Conservation Finance Mechanisms


As a response to climate change, most of the world's governments have been negotiating an international regulatory framework to counter global warming. In 1997 they signed the Kyoto Protocol. The Protocol sets mandatory limits on the green house gas (GHG) emissions of industrialized and transitional countries. In addition to setting emission limits, the Kyoto Protocol provides several market-based mechanisms to enable GHG emitters to achieve their assigned reductions in the most cost effective and efficient manner. Under this system, because some countries will be able to reduce emissions more easily and cheaply than other countries, they can sell their surplus reductions (or carbon credits) to countries that emit more than their limit. Carbon projects can become a conservation finance tool if they produce carbon credits that can be sold through one of the regimes within the carbon market context. The outcome of international policies such as the Kyoto Protocol and various national regimes driving market development will determine the range and magnitude of opportunities for generating funding from so called carbon offset projects. Carbon projects can be developed in both the energy and the land-use, land-use change and forestry (LULUCF) sectors. However, for purposes of this chapter, carbon offset projects will refer to those projects in the LULUCF sector, and in particular, forestry-based projects. The purpose of this chapter is to help readers understand how some conservation projects might generate funding by providing climate change benefits, and how to begin the process of measuring, marketing, and selling those benefits.

Table of Contents


1.1  Overview

1.1.1  The science of climate change

1.1.2  Policy context

1.1.3  The carbon market

1.1.4  Snapshot of carbon projects

1.2  Key Actors and Motivations

1.3  Types of Carbon Offset Projects

1.3.1  Carbon sequestration

1.3.2  Emissions avoidance

1.3.3  Forest management

1.4  Advantages and Disadvantages

1.5  Success Factors

1.6  Steps to Implement a Carbon Offset Project

1.6.1  CDM project cycle

1.6.2  Step-By-Step Methodology

2  Feasibility Phase

2.1  Pre-feasibility Stage

2.2  Information Gathering

2.3  Sustainable Development

2.4  Terms of Reference for Carbon Offset Project Feasibility Study

2.5  Carbon Project Calculator

2.6  Leakage Tools

2.7  Project Marketing and Proposal Development


3.1   Legal Agreements

3.1.1  Letter of Agreement

3.1.2  Memorandum of Agreement

3.1.3  Comprehensive Agreement

3.2  Monitoring and Verification protocols

3.2.1  Protocol


4.1  References

4.2  Web Sites