The forestry and charcoal sectors and

the Plantar Carbon case: potential lessons

for REDD+ Initiatives

Fábio Marques

Climate Investment Funds

Meeting of the FIP Pilot Countries

Brasilia, April 2-4, 2012

PLANTAR CARBON

Outline

1. The forestry and charcoal sectors in Brazil: the Plantar

case

2. Connections with public policies and private sector

initiatives

3. Potential Lessons & Debate

The forestry and charcoal sectors

in Brazil: the Plantar case

4

4

Brasil 851 % do Total de Terras

Total of preservation areas and other uses* 529 62,2%

Total - Arable Land 315 37,0%

- Terras Cultiváveis – por cultura 72 8,5%

Soybeans 22 2,6%

Corn 14 1,7%

Sugar Cane 9 1,0%

Coffee 2 0,2%

Cotton 1 0,1%

Orange 1 0,1%

- Pastureland 172 20,2%

- Available lands 72 8,4%

Florestas Plantadas 7 0,8%

Fonte: IBGE, CAN, Conab, Min. da Agricultura e ABRAF

* Essas Áreas Incluem: Floresta Amazônica, áreas de proteção, áreas de preservação, cidades, lagos e rios.

Millions of Hectares - 2009

Land-use and the planted

forests sector in Brazil

5

Integrating wood production and conservation

(Portfolio Approach)

Conservation Areas

(RL + APPs + Others)

Wood Production

Firewood/Charcoal in the

Brazilian Energy Matrix

2006 2007 2006 2007

NON-RENEWABLE 124.464 129.102 3,7 55,0 54,1

OIL AND OIL PRODUCTS 85.545 89.239 4,3 37,8 37,4

NATURAL GAS 21.716 22.199 2,2 9,6 9,3

COAL AND COAL PRODUCTS 13.537 14.356 6,1 6,0 6,0

URANIUM (U3O8) AND U PRODUCTS 3.667 3.309 -9,8 1,6 1,4

RENEWABLE 109.656 109.656 7,6 45,0 45,9

HYDRAULICS AND ELECTRICITY 35.505 35.505 5,9 14,8 14,9

FIREWOOD AND CHARCOAL 28.628 28.628 0,1 12,6 12,0

SUGARCANE PRODUCTS 37.847 37.847 14,7 14,6 15,9

OTHER RENEWABLES 7.676 7.676 13,7 3,0 3,2

TOTAL 238.758 238.758 5,5 100,0 100,0

07/06 %Structure %

SPECIFICATIONMi TOE

Source: MINISTRY OF MINES AND ENERGY 2007

Carbon sources for the

production of iron&steel

• Coal Coke

• Non-Renewable Charcoal

• Renewable-Charcoal

(planted forests)

Fossil

(GHG emissions)

Non-renewable

(GHG emissions)

Renewable

Energy

Renewable Charcoal for Iron & Steel

CO2 emissions in the thermo-reduction process

Renewable charcoal (Solid biofuel)

Coal coke*

REMOVALS

1.1 ton CO2

(average stock)

EMISSIONS

1.9 ton CO2Emissions

CO2

Emissions

CO2

Emissions

CO2

Removals

CO2

Mine Coke plant Blast Furnace

Blast FurnacePlanted Forests

Climate Benefit

3t CO2eper ton of iron

Carbonization

Source: Sampaio et al, 1999* In the case of non-renewable charcoal, emissions are even higher,

approximately 5tCO2

Source: IISI, Sindifer, AMS

Use of reducing agents in the global

production of pig iron…the coal coke baseline has

become stronger over time

0

100.000

200.000

300.000

400.000

500.000

600.000

700.000

800.000

900.000

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Global Pig Iron Production (million metric ton) NRB Total RB Total

Share of

Renewable

Biomass

Share of Non

Renewable

Biomass

Share of

Coal Coke

Key Baseline Figures

Source: AMS

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

Pla

nte

d Á

rea

-

MG

(h

a)

The end of the fiscal incentives and the

scarcity of planted forests

4/16/2012

The Plantar Carbon Portfolio:

a supply chain approach

A/R with new

planted forests

Project Activity Baseline Project (MtCO2e) Approximate Numbers

Improved

carbonization

process

Sustainable iron

production

Pastureland

Charcoal production

with high levels of

methane emissions

Pig iron production

based on coal coke

New planted

forests

Charcoal production

with low levels of

methane emissions

Pig iron production

based on charcoal

from planted forests

Net

removals

4,500,000

CH4ERs

500,000

8,000,000

Total: 12,8 million tCO2e over 28 years

Project’s timeline1998 - Conception

1999 - Aspen Forum presentation (São Roque/SP)

2000 - Non-objection letter by Brazilian Government

2001 - Signing of the Letter of Intention with PCF

PCF’s Investors Comittee approval

2002 - Signing of ERPA with PCF

2002 - Project’s partial validation by DNV

2003 - Signing of LA with Rabobank

2003 - Initial Verification ( Part I )

2005 - Initial Verification (Part II – Conclusion)

2006 - Methodologies for the forestry and carbonization activities

approved by the CDM Executive Board

2007 - Carbonization Activity Registration

2009 - Forestry Activity Validated and Registered

2010 - Approval of the Pig Iron Methodology

2011 - Forestry Activity Verification

2012 - First issuance of tCERs in the World

The A/R project component

Baseline scenario Project scenarioX

The A/R component:

planted forests as renewable energy

First generation of improvements in

the carbonization process, within the

Plantar Carbon Projects New (2nd) Generation of improvements

(under implementation by Plantar)

- Technological improvements triggered by the CDM

- GHG emission reductions + improved labor conditions

The carbonization project component

The Industrial Component: Green Pig Iron

Sustainable Planted Forests = Renewable Energy

...reduce emissions through the use of renewable

charcoal from sustainably managed plantations,

integrated with conservation areas

®

ER’s

$

$

The Financial Structure

1,5 million tCO2e for US$ 5,3 million

Based on its pioneer CDM projects, and

with the support of the World Bank’s

Prototype Carbon Fund, Plantar has

become the first of its kind, to have its

iron production 100% based on

renewable charcoal from sustainably

planted forests.

The Plantar Case

Certification: transparent and strong

accountability standards

ISO 9001-2000

Plantar S/A

ISO 14001 Plantar

Siderúrgica ISO 9001-2000 Plantar

Siderúrgica Abrinq - Plantar S/A e Siderúrgica

FSC - Forest Stewardship Council

Jaguar

Cattleya walkerianaorchid

Camera trap

Environmental Management

Cerrado: initial regeneration

phase

Fauna & Flora Corridors...

10 monitoring points checked quarterly. In

each station, 43 parameters are analyzed

(physical, chemical and bacteriological

parameters)

Monitoring of water quality & quantity

Monitoring of biodiversity

Environmental Management

Caracterização da Fauna

Fotos câmeras trap

Lobo-guará - Felixlândia/MG

Tamanduá-bandeiraFelixlândia e Morada Nova de Minas/MG

Onça-parda Felixlândia e Morada Nova de Minas/MG

Environmental Management

Social Development: Some Examples

• 1,200 direct jobs + Working Quality Indicators (Directly related to the project)

• Support to local income generation projects, implemented together with local communities and other external partners, e.g:

- Local Communities Trade Fair

- Brown Sugar factory

- Medicinal plants nursery

- Sugar cane seedling area

- Apiculture project

- Vegetable garden

- Transforming Local Culture into Art: Estetica Interiorana

www.aviva.com.br

• Social management structure with community leaders aimed at increasing accountability at the local level

Social Development

Social Development

Social Development

Social Development

Social Development

Social Development

Connections with public policies

and private sector initiatives

Climate benefits potentially associated

with the use of renewable forestry biomass

A/R CDM + REDD

processSTOCK USE

ENERGY + INPUTS

Increase removals Reduce Emissions

Creation of new

carbon stocks

Maintain/Enhance

existing stocks

Reduce emissions from GHG

intensive sources or deforestation

trough renewable forestry biomass

Integration of the CDM with public policies and regulations

covering the renewable charcoal supply chain:

1) Sustainability Pact in the State of Minas Gerais

2) New state forestry law (command and control phasing out the use of non-

renewable charcoal by 2019 + economic incentives through carbon finance,

e.g. CDM)

3) Assessment of a CDM PoA, convering the forestry, carbonization and iron

components + consistency with the Brazilian NAMA on green iron (Plantar,

World Bank and State Government)

Upscaling the Experience:

integration with the policy level

The Plantar Case and the

charcoal industry: potential to

integrate existing structures,

including A/R CDM with

REDD+ iniciatives

Horizontal and Vertical Connections

within the forestry supply chain

Value of sustainable forest

products, both from planted

forests or SFM in the supply chain

up to the consumer (increase

accountability with purchasing

power + policy & regulation)

Other forest based activities

in the private sector, e.g.

plywood, furniture, pulp &

paper, timber for

construction, multiple

purposes, etc.

Planted

Forests

Conservation

Areas

Combined incentives

for planted forests

and conservation

areas, under private

sector control

The Brazil Sustainable

Forests Program

Fostering public policies capable of integrating mitigation and sustainable

development, through the valuation of the climate benefits associated

with planted forests, including carbon finance mechanisms

Initial Target: Duplicate the planted forest base in 10 years

Partners

BRACELPA, ABRAF, ABTCP, Instituto Ethos, Instituto BioAtlântica, WWF Brasil,

Imaflora, Conservação Internacional, TNC, Plantar,Brasil Florestas, ArcelorMittal,

Fibria, Suzano, Klabin, Duratex, Rigesa, Imazon e BNDES.

Two Integrated Tracks of Actions

Micro level: large scale

pilot projects,

including CDM

Macro level: public policies

and sectoral mechanisms

36

36

Strategy based on the integration with

small & medium producers

2010 Figures

17% of the total planted area in Brazil is provided by small producers

26.581 families

Área plantada do fomento florestal e porcentagem

sobre o total (associadas ABRAF)

Fonte: ABRAF

223258

322

380

443 457 449

17%17%16%

15%

13%

11%10%

0

100

200

300

400

500

2004 2005 2006 2007 2008 2009 2010

Área de Fomento Florestal das Associadas ABRAF (mil ha)

37

37

The Additionality

Triple Bottom

Line

Social

EconomicEnvironmental

Brazil Sustainable Forests

PR: 50.000 ha

RL: 20.000 ha

APP: 10.000 ha

Pilot Project 01 – Reforestation of degraded lands with commercial and

native species for timber production and conservation

Reforestation with native species

for conservation purposes

Commercial reforestation for

multiple purposes > fomento

0

100

200

300

400

500

600

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30

Est

oq

ue

de

ca

rbo

no

(tC

O2-

e/h

a)

Ano do Projeto

Average Stock with native

species

0

50

100

150

200

250

300

350

400

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30

Est

oq

ue

de

ca

rbo

no

(tC

O2-

e/h

a)

Ano do Projeto

Average Stock with commercial

forests

0

50

100

150

200

250

300

350

400

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30

Est

oq

ue

de

ca

rbo

no

(tC

O2-

e/h

a)

Ano do Projeto

Cenário 04 – Average Stock with native and commercial species

AverageStock

Final Remarks & Potential Lessons

7 million hectares of planted forests in Brazil are part of production

chains within the private sector, which can result in: (i) decrasing

deforestation pressure (ii) reducing the use of fossil fuels and

(ii) approximately 5 million hectares of lands that have to be

preserved, generating and maintaining carbon stocks.

Command and control actions have not been enough to

ensure that conservation lands under control of commercial/industrial

activities reach their full potential (climate, biodiversity, water and

other SD benefits)

The Plantar Case illustrates the importance of carbon finance

incentives for the accomplishment of the private sector’s full potential

in terms of sustainable wood production and conservation (A/R CDM

+ World Bank Safeguards integrated with FSC Certification

created the required incentives for a wide range of sustainable

development benefits)

Incentives for conservation alone are not likely to

generate the necessary engagement to enhance forest

carbon stocks in the private sector.

In addition to the mainstreaming of REDD+ into national

and sectoral policies, there seems to be a need to integrate

REDD+ measures with existing carbon incentives, e.g.

A/R CDM, and with supplementary institutional

arrangemnts (e.g. FSC) capable of generating the

necessary accountability mechanisms for the private sector

engagement

Final Remarks & Potential Lessons

THANK YOU !

fabio.marques@plantar.com.br

PLANTAR CARBON