Bio-Carbon Fund

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Bio-Carbon Fund

Since its creation in 2004, the BioCarbon Fund has allocated resources to projects that transform landscapes and directly benefit poor farmers. It was the first carbon fund established in the world to focus on land use.

Housed within the Carbon Finance Unit of the World Bank, the BioCarbon Fund is a public-private sector initiative mobilizing financing to help develop projects that sequester or conserve carbon in forest and agro-ecosystems. It has been a pioneer in this sector, developing the infrastructure needed to pilot transactions and paving the way for the growing land-use carbon market established to date.

The Challenge We Face

Rural communities in the developing world depend heavily on productive land and the resources it provides to sustain their livelihoods. With upward population trends in most of these countries, the competition for land increases too. Yet agricultural and forested land is often less productive than it used to be, as it has been degraded over time by soil erosion, deforestation, and other unsustainable land use. Land degradation threatens the important goods and services that healthy ecosystems provide, such as fertile soils, clean water, biodiversity as well as the storage of carbon. As a result, livelihoods, food security, and economic development of rural communities are increasingly compromised.

Climate change can also exacerbate stress on degraded ecosystems, further reducing land productivity for crops and livestock, increasing water shortages, and releasing more greenhouse gases into the atmosphere.

While agriculture and forestry are themselves susceptible to climate change, they are also major contributors to it. Deforestation, forest degradation, agriculture and other land-use changes together account for almost one-third of global greenhouse gas emissions. Fortunately, sustainable land management practices can lead to simultaneous mitigation and adaptation benefits.

The BioCarbon Fund has contributed to reversing global land degradation trends in several areas of the developing world by applying sustainable land management practices to restore and increase the capacity of degraded lands and to provide increased, yet sustainable yields. These activities have also reduced the vulnerability of rural land users to the impacts of climate change and have helped to diversify their livelihoods, while simultaneously contributing to solving the global climate challenge.

The Opportunity to Transform Landscapes And Generate Multiple Revenue Streams

Since its creation in 2004, the BioCarbon Fund has allocated resources to projects that transform landscapes and directly benefit poor farmers. Half of the BioCarbon Fund’s projects have invested in environmental restoration of degraded lands, twenty-three percent have invested in fuel wood production, twenty percent in timber production, five percent in conserving forests (i.e., reducing emissions from deforestation and forest degradation–REDD+), and two percent in sustainable agricultural land management.

BioCarbon Fund projects generate multiple revenue streams, combining financial returns from the sale of emission reductions (i.e., carbon credits) with increased local incomes and other indirect benefits from sustainable land management practices. The payments made by the BioCarbon Fund are results-based, thus providing strong incentives for good project management, performance, and impact. Generating multiple revenue streams is crucial to rural communities that otherwise have limited sources of income. An equally important component of BioCarbon Fund operations is the delivery of additional benefits, so called ‘co-benefits’, that accrue to the communities in addition to the payments for the emission reductions. These co-benefits often take the form of biodiversity conservation, improved water services, and social/ institutional benefits (e.g., improved land tenure and stronger community organizations).

Current BioCarbon Fund activities

Over the past decade, the BioCarbon Fund has committed $90 million to over 20 projects that are restoring 150,000 hectares of degraded lands and reducing deforestation in over 350,000 hectares of land. These projects are sequestering 15 million tons of CO2 and avoiding the release of 5 million tons of CO2 in their first 20 years of operation. The projects have all been pioneers in the land-use carbon markets and span 16 countries across major regions of the developing world (Africa, Asia, Europe, and Latin America).

Through these projects, the BioCarbon Fund has worked with national entities, private companies and non-governmental organizations. It has tapped the carbon market by both working extensively within the UNFCCC’s Clean Development Mechanism (CDM) and the voluntary carbon market. The BioCarbon Fund has further played an important role in pioneering land-based carbon innovation by supporting early project development, designing the first methodologies and tools for carbon accounting, promoting policy dialogue in the context of the UNFCCC negotiations and other fora, and disseminating lessons learned. Overall, the BioCarbon Fund’s first-of-a-kind projects have paved the way for other land-based carbon projects and generated a wealth of knowledge and experiences that have been replicated around the world. At a global scale, land-use carbon projects beyond the BioCarbon Fund have now made an impact on some 18 million hectares, which equates to the global expansion of oil palm plantations. The BioCarbon Fund is complemented by a Technical Assistance Fund, BioCFplus, which provides capacity building, promotes policy research, and supports further methodological work. It has been critical in promoting the land-based carbon market at large.

How the BioCarbon Fund works

On behalf of its investors, the BioCarbon Fund pays for land-based carbon emission reductions from projects implemented on forested or agricultural lands in developing countries. The investors can choose to use these purchases against obligations for emission reductions under the Kyoto Protocol or for other regulated or voluntary greenhouse gas emission reduction regimes, and investors have the option to retire the emission reduction credits altogether, thereby funding these powerful projects without purchasing any carbon credits. The payment made for the emission reductions in turn benefit the project stakeholders as per benefit-sharing arrangements agreed with each individual project.

For information about Zambia and her involvement with the BioCarbon Fund, please see the following link.

Zambia: Presentations from a stakeholder meeting for a potential landscape programme in the Luangwa Valley (October 4, 2013)