1. International Workshop
“REDD after Copenhagen – The Way Forward”
Nairobi, Kenya
1-3 March, 2010
Luis Salgado Econ. Jorge Torres
Project Manager Technical Unit Head
ÉcoRessources Carbone SFM BAM SAC

2. Peru supports the implementation of “nested approach” and a
combination of markets and funds mechanisms for REDD
financing.
This has stimulated private and public organizations to promote
REDD initiatives in different types of land tenures (forest
concessionaries, protected areas, indigenous lands,
conservation concessions, etc.).
Most of the initiatives are located in Madre de Dios region
(south east of Peru) where a major road, that will join Brazil with
Asian markets, is being built.
Up to now, only a forest concession has got CCB Gold and is
planning to sell offsets in CCX market.

4. Brazil nut tree grows naturally in tropical rainforests of Madre de
Dios.
Peru represents around 10% of total market, after Brazil and
Bolivia. The activity is seasonal (Jan-Mar).
BN production areas are conceded for 40 years periods, with
areas of 1000 hectares in average. There are around 1000
concessions (1 million of hectares), what makes this activity very
important for the local economy.
Families dedicated to this activity are mostly poor rural that
every year in rainy season go into the forest to collect the pods,
after being funded by exporting companies or intermediaries, in
an agreement that implies a commitment for their product.

6. As a consequence of the construction of the Inter-oceanic
road, internal migration has grown significantly, increasing the
threat of deforestation on the concessions, mainly for
agricultural or cattle ranching purposes.
Slash-and-burn practices are common in Peruvian Amazon as a
cheaper way to clear the forest land.
In that context, SFM-BAM has achieved an agreement with BN
harvesters federation to develop a REDD project.
The agreement establishes that the company will invest at least
1 million dollars in the first 18 months and an amount to be
defined for the following 30 years.

8. The strategy is based in:
(i)the improvement of incomes perceived by BN harvesters from
their main activity and
(ii)The improvement of their capacity to protect their
concessions from external risks.
A BN processing and exporting facility will be implemented for
harvesters associated to the project (owners of 70% of shares).
Allowing them to receive a higher prices and participate in
profit distribution.
BN harvesters will own 30% of net incomes from CO2 sales.
Other components are organizational strengthening, technical
& legal advisory, forest enrichment, training and a plan to
prevent fires and invasions, among others.

9. ELIGIBILITY:
In Peru, there is scarce information about deforestation rates
and trends and what exists comes from different sources, done
with different methodologies, not compatible.
It implies that for a same region and year, there are differences
in deforested area. For this reason, SFM-BAM has promoted a
consortium with participation of main institutions (including
government at its different levels) that is developing an agreed
meth to generate land use maps, with the highest technical
standards.
The meth should be in accordance with national definition of
forest and the results for most recent year will be confirmed with
field assessment.

10. PROJECT ACTIVITY
The strategy of the project is based on the principle that
deforestation is caused by agricultural expansion of small
producers and limited capacity of BN harvesters to protect their
area. BN harvesters will increase the profitability of their
activities from the following sources:
• Export price against local market price
• Participation in profits of processing plant
• Participation in net incomes from carbon sales
• Incomes from reforestation component
Permanence will be guaranteed from:
• Other forest resources exploited
• Control and vigilance plan

11. ADDITIONALITY
Based on a combination of barrier and financial analysis, we
need to demonstrate that BN activity does not generate
enough conditions to avoid the expansion of agriculture and
cattle ranching activities without the inclusion of carbon
incomes.
We will calculate incomes of concessionaries in with / without
project scenarios.
We will demonstrate that BN harvesters by their own wouldn’t
have been able to implement this level of investment,
necessary to break the circle of subsistence-low added value.
And, complementarily, that this investment is not enough
profitable for any private company without the carbon
incomes.

12. BASELINE SCENARIO
Since its creation, MDD has been an isolated region (before
road paving). For this reason, historical deforestation rate
cannot be considered reliable for future trend.
A modeling baseline scenario is being developed based on
maps produced under the consortium umbrella and results of
this work also will be validated with local actors (including
governmental agencies) and expert review in order to produce
a unique agreed baseline scenario.
As required by methodologies, results will be validated with a
recent year map and input variables will be monitored in order
to analyze, in the future, if predictions are within an acceptable
margin of error.

13. Preliminary results show that deforestation is best explained with
a cost-benefit approach than with a demographic growth
approach.

14. LEAKAGE
As many REDD initiatives are in progress in this region, we are
planning to work with regional government and project
developers to design and implement a REDD regional program,
in accordance with standards’ technical requirements.
CARBON STOCKS
Field forest inventory will be carried out and databases will be
used as input for biomass equations to estimate carbon stocks
in project area.
Satellital images and field assessment will be combined to
monitor, using the methodology officially agreed, the annual
deforested area in order to compare it with baseline forecast.

15. LEGAL ISSUES
A long term agreement has been agreed between BN
harvesters federation and SFM-BAM were SFM-BAM commit an
investment in exchange of a participation in BN processing
company and the carbon trading rights.
Complementarily, the Federation has signed another contract
with each concessionaire where he transfers its rights over the
carbon stock from his concession.
MARKETS
Project is planning to be validated under VCS and CCBA
standards.

16. Tambopata National Reserve and Bahuaja Sonene National
Park are two natural protected areas, that are part of biological
corridor Vilcabamba-Amboro.
The areas cover a surface of 1.366.106 hectares, from which
540.244 ha where offered for private administration using an
international call for proposals.
Traditionally, Peruvian State has been responsible of the
administration of their protected areas, usually by implementing
an office with forest guards patrolling the boundaries (normally
with limited resources).

17. The private administration is a new mechanism designed by the
Peruvian Government where non-profit organizations can sign
contracts with the Government and administrate the protected
area using the incomes generated by different environmental
services.
There is an implicit acknowledge that private actors can play a
role, as they have experience in accessing to extra funds
and/or they can achieve a higher performance.
In this case, a local NGO obtained the highest score, thanks to
this innovative financial mechanism, and has signed a contract
with SFM-BAM for 7 years with option to increase to 20 years.
The proposal includes a US$ 5.2 millions support to finance the
project activities during the first 7 years and around US$ 0.5
millions per year (to be agreed with the Government) for the
next 13 years in exchange of carbon trading rights.

19. PROJECT ACTIVITY
As many of the protected areas, they are inhabited. Pre-
existing activities as logging were suspended when the area
was given. Only a few BN concessions (very controlled) and an
ecotourism lodge are allowed. Indigenous groups are also
allowed to hunt and harvest forest products for non-
commercial purposes.
Nevertheless external pressure is higher over time. Illegal gold
mining, illegal logging and agricultural expansion from migrants
are the main threats.
In that sense, the project strategy is focused on finding and
promoting, between families who live in buffer zone, economic
activities based on sustainable use of natural resources.
It is complemented with extra resources to install control points
and rivers and road patrols .

21. ADDITIONALITY
Even though, there are voices who claim that legally protected
areas should not be eligible for REDD, it’s clear in most of our
developing countries, that laws are not enough to keep them
free from deforestation.
A weak enforcement and subsistence needs of neighbor
population make unlikely that scenario.
Modeling analysis show that protected areas slow but don’t
stop deforestation.
Specifically, mining activity is already occurring in Malinowsky
River, a natural frontier of Tambopata Reserve.

22. LEGAL ISSUES
A contract has been signed between the Peruvian
Government and SFM-BAM, where trading rights of carbon
offsets will be transferred for a 20 years period, as soon as a
legal framework allows the State to do that.
This agreement will continue even if the administration contract
between the Government and the local NGO is not renewed.
In the agreement, there is a pre-condition that the legal
framework will be in place during first year and that the taxes
associated to this activity will not put in risk the feasibility of the
activity.

23. • In a sub-national approach, it is key the coordination between
private and public players to create consensus on
methodological issues. Multiple results will affect negatively the
credibility of the system.
• REDD eligibility criteria should include the creation of
alternative sources of incomes for deforestation agents and not
strictly protection actions. Even more, this should be part of
costs and not part of profit shares.
• Stopping deforestation is an ethical issue and all players
should be allowed to participate and conditions must be
created to allow it. Historically, governments have been unable
to design effective tools.

24. • Probably, the main advantage of market approach is that it
forces project developers to design effective strategies;
otherwise, they will fall in an unwanted bankruptcy. This is
probably to best incentive to do their best effort to stop
deforestation.
• The role of the Government should be focused on creating
the conditions to allow small landowners to access REDD
opportunities, to monitor that leakage and baseline scenarios
are adequately measured and land cover maps are well
generated.