Abstract:

Under the Kyoto Protocol, the Clean Development Mechanism (CDM) allows carbon credits of forestry projects in developing countries to be sold in carbon markets. It is estimated that up to 13.6 million carbon credits will be available by 2012, based on the total projects in the pipeline for registration. However, only fourteen Afforestation and Reforestation (A/R) projects are currently registered with the United Nations Framework Convention on Climate Change (UNFCCC, December 2009). Among the reasons for this slow take-up are: the strict requirements of CDM projects, complicated rules and methodologies, high transaction costs, lack of support for base financing, and the current price1 of carbon from forestry projects vis-à-vis the development cost. In spite of these impeding factors, a number of carbon markets for forestry projects are being developed in many tropical countries.