Appendix One – Background on Definition and valuation of Guyana’s forests
Over the past decade, the advanced MRVS built in Guyana enables the country to move to the next stage of its forest climate services strategy. Key information relating to that strategy is set out in this appendix including:
- Definition of forests
- Resulting Forest Area
- National Forest Carbon Stock
- Valuation of Guyana’s Forest Ecosystem Services
- Next Step in monetising value: ART-TREES
Guyana’s definition of forests is in conformance with Decision 11/CP.7 of the Marrakesh Accord which was adopted by the UNFCC in 2002. This was later extended to land use, land-use change and forestry activities carried out under the Clean Development Mechanism (CDM) of the Kyoto Protocol by Decision 19/CP.9 adopted at Milan (UNFCCC, 2004).
Guyana classifies land as forest if it meets the following criteria:
- Size: Over a minimum area of one hectare
- Canopy Cover: Tree cover of minimum 30%
- Height of Stand: At a minimum height of five metres at maturity.
Land area that satisfies the area, height and crown cover criteria for forest but are not classified as forest include lands that are predominantly under agriculture, infrastructural development and settlements.
Utilising the above definition, Guyana’s MRVS Report 2020 reported total Forest Cover as 18,001,790 hectares – about 85 percent of Guyana’s territory.
Guyana completed a national field assessment of forest carbon stocks in 2018 and concluded that on average at the 95 percent Confidence Level, one hectare of forest stores 1,213 tCO2 (tons of carbon per hectare of forest). The results of the field assessment were submitted to the UNFCCC as part of Guyana’s Reference Level for REDD+ and has been found to be robust. Additionally, the field assessment was also audited as part of the Guyana Norway Agreement Performance audits and validated.
Guyana’s MRVS Report 2020, has reported total Forest Cover as 18,001,790 hectares.
Guyana’s total forest carbon stock is:
Total Hectares of Forest X Average Carbon Stock per Hectare = Total Carbon Stock
18,001,790 ha X 1,213 tCO2 = 21,836,171,270 tco2
Estimates of the economic value that Guyana’s eco-system services provide to the world are up to US$5.4 Billion annually. This derives from a focus on the broader ecosystem valuation. The valuation references the UNU-IHDP and UNEP (2014), Inclusive Wealth Report 2014, Measuring progress toward sustainability, published by the Cambridge University Press.
This Report assesses Non-Timber Forest Benefits. It expresses that one way to assess ecosystem services (ES) from an asset perspective is by valuing the expected flows of ecological services over time at their marginal contribution to economic welfare (United Nations Statistics Division 2013b). The valuation table below summarises the 15 highest values of ecosystem services, excluding climate services, as there is already a market for forest carbon services.
This results in total forest area of Guyana, multiplied by the value of US$2,990 per hectare annually, and computing an estimated US$5.4B annually.
Hectares of Forest X Value per hectare = Total Value
(18,001,790 ha X US$2,990) = US$54.B annually broader ecosystem services valuation
This is in line with other studies – including a 2009 study by McKinsey & Company which used very conservative valuations to establish that the Economic Value to the World (EVW) provided by Guyana’s forests if left standing, contributed US$40 billion to the global economy each year.
On the other hand, a related independent assessment by McKinsey & Company estimated the value of Guyana’s rainforest, if harvested and the land put to the highest value subsequent use, to be between US$4.3 billion and $23.4 billion. The wide range of estimates is driven by fluctuating prices for commodities such as logs, rice and palm oil – but the most likely estimate is US$5.8 billion. This forest value known as Economic Value to the Nation (EVN) is the equivalent of an annual annuity payment of between US$430 million and $2.3 billion, with the most likely annuity payment being US$580 million.
However, generating this EVN, while economically rational for Guyana, would have significant negative consequences for the world by reducing the Economic Value to the World (EVW) stated above.
Therefore, Guyana’s advocacy for a market-based mechanism for valuing forests seeks to achieve a long-term monetisation of standing forest value that is between the Economic Value to the World (US$40-US$54 billion) and the Economic Value to the Nation (US$580 million).
However, as set out in 2009, this will happen in a stepwise fashion, in part because capabilities for forest monitoring and verification need to be in place to begin.
The first phase was the Guyana-Norway partnership which used a proxy-based system as set out in the Guyana-Norway Joint Concept Note. Now that the MRVS and other capabilities have been built, the next step will be integration with a market mechanism as set out in Chapter Three of this LCDS.
In guiding Guyana’s integration with a jurisdiction-scale, market-based mechanism as set out in Chapter Three of this document, Guyana will be seeking markets that recognise all aspects of REDD+ as defined by the UNFCCC.
This means that Guyana believes that markets should create long term incentives to encourage all countries to improve their HFLD score (which captures both the extent of standing forest and the rate of deforestation in a given jurisdiction). Practically, that means that markets must grow to recognise:
- Conservation of Standing Forests: Guyana’s forests store more than 19.5 Gt CO2 to 21.8 Gt CO2.
- Removals: Every year, Guyana’s forests remove about 154 million tCO2 from the atmosphere
- Reductions in Deforestation: Guyana aims to stay 90 percent below the global average
- Restoration of Forests: Guyana aims to restore about 200,000 hectares of forest as a priority
Guyana will seek out markets that best match Guyana’s strategic objectives across these four areas, and has set out a methodological approach, where the crediting level for grow emissions is to be determined by:
Historical emissions level up to 15 years plus (HFLD Score X 0.1% of carbon stock )
- Forest Carbon stock to include all carbon pools appropriately adjusted for uncertainty.
- Reversal buffers provisions not utilised, will be added to Guyana’s carbon registry following the end of a crediting period.
- Inclusion of provision (subject to refinements) remaining forest.
Evolving markets will be kept under review but as of late 2021, the two market-based mechanisms that may deliver against Guyana’s objectives for jurisdiction-scale approaches, aligned with global REDD+ targets, are:
- ART-TREES – The Architecture for REDD+ Transactions (ART) has been developed to foster the environmental integrity needed for REDD+ emission reductions and removals (ERRs) at national and jurisdictional scale. ART provides a credible standard and rigorous process to transparently register, verify, and issue REDD+ emission reduction and removal credits that ensure environmental and social integrity. ART also aims to unlock new long-term financial flows to protect and restore forests.
- VCS-JNR – As one of the leading voluntary carbon market standards, VCS provides an avenue for nesting of project level activities on reforestation within Guyana’s carbon market structure and potentially, future integration of relevant HFLD aspects which may be adopted by these and similar standards. Nested project will be facilitated to include private sector engagement.