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Financial Feasibility of Ghg Reduction. The Case of Baturite Mountain-Brazil 2013

Ana Milena Plata Fajardo* and Romano Timofeiczyk Junior

Forest carbon sequestration is a mechanism to remove greenhouse gases. Trees, through the process of photosynthesis, absorb carbon dioxide – CO2 from the atmosphere and store it as biomass. The objective of this study was to quantify and assess the financial viability of the generation of carbon credits in the Baturité Mountain, an area of 7,000 ha of tropical montane sub humid forest in Ceará state of Brazil. GHG reduction was estimated by nondestructive methods (based on forest inventory estimates). Economic criteria used to evaluate the project were the Net Present Value (NPV) and Internal Rate of Return (IRR). The results showed that, as a result of project activitiesin the Baturité MountainGHG emissions were reduced annually by 903,120 Tones of CO2. Based on prices and costs in 2013, forestry projects for carbon sequestration are non-viable if traded under the Clean Development Mechanism. The project is financially viable with returns under the New Zealand Emission Trading Scheme (IRR=28%) and in the Voluntary Carbon Standard (VCS, IRR=27%). This study provides methodological guidelines for economic evaluation of carbon capture projects. In the right environments and with the right financial incentives, keeping standing forests intact can provide benefits for the environment and higher economic benefits compared with other extractive uses.