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Romania: Afforestation
(Prototype Carbon Fund)

4 Project Documents

Project Photo 1
The PCF's Afforestation project in Romania seeks to rehabilitate degraded forests, and to improve soil fertility, soil stabilization, and ecological integrity (Photo: World Bank)
Romania was the first industrialized country to ratify the Kyoto Protocol and is now becoming the host to a few investment projects under Article 6 of the Protocol, Joint Implementation (JI). One of these projects is the Romania Afforestation of Degraded Agricultural Land Project supported by the PCF. Under the Project, the National Forest Administration of Romania (NFA) is afforesting over 6,033 ha of State-owned degraded agricultural lowlands in 7 counties in the southwest and southeast of the Romanian Plain. In the southwest, the Project is stabilizing soils through the planting of semi-naturalized species (including Robinia pseudoacacia), depending on site conditions. In the southeast, ecological reconstruction of 10 islets making up a natural park and Ramsar site in the Lower Danube (Small Island of Braila) are occurring through the planting of native species (Pupulus alba, Pupulus nigra, Salix sp., Quercus Sp., etc.)

The project conforms with overall State forest policy and strategy, which identifies degraded agricultural lands for afforestation. The project’s degraded lands have been worked intensively for agriculture since the 1960s, coinciding with the extension of drainage works in floodplain of the river Danube. Initially these lands produced a range of crops including cereals, vegetables, fruits and grapes. Through excessive working and lack of investment in irrigation infrastructure and maintenance, the lands have become degraded and subject to erosion and are now uneconomic for crop production and are either used mainly for pasture or abandoned.

The PCF has signed an Emission Reductions Purchase Agreement (ERPA), a long-term contract providing for the delivery of nearly 900,000 tonnes of carbon dioxide equivalent (tCO2e) by the NFA to the PCF at an agreed price of US$ 3.60 per tCO2e. The PCF’s financial contribution gives the NFA a financial incentive to undertake the necessary $10 million investment.

Project Photo 2
Afforestation can significantly restore impoverished soils, as shown in a 9 year old Robinia stand used as a test site in Romania (Photo: World Bank)
In this project, the baseline scenario is defined as the most likely land use scenario for the land selected for afforestation. The argument that this project is additional is built on two pillars: (1) simple consideration of historical evidence; and (2) comparison of the financial merits of alternative land-use options.

First, there is an estimated 3 million hectares of degraded agricultural lands in Romania. Romania has a very ambitious policy of expanding its forest cover by 25,000 hectares of degraded agricultural land per year. Yet, statistics for the past decade reveal that afforestation volumes are grossly inadequate to meet that goal (over the period 1991-2001, the average area afforested annually was just under 400 hectares). One of the key explanatory factors is simply the lack of financing to the NFA, which is the public, yet financially autonomous, agency entrusted with the management of public forests. This suggests that, in the absence of carbon finance, the business as usual scenario would prevail, in other words little or no afforestation would take place.

Second, the forward-looking methodology proposed to determine the baseline scenario and establish additionality of the project is financial analysis. The method consists of selecting a number of feasible land-use options for the land included in the project and determining which one is the most likely to materialize in light of financial considerations (costs and benefits). The net present value (NPV) and financial internal rate of return (FIRR) are calculated for each of these options. The option with the highest NPV or FIRR is considered as the baseline scenario. The options include: low-quality pasture, grain and fruit crops, total abandonment and afforestation. From that analysis, it turns out that low-quality pasture ois the least costly of all options, which supports the historical evidence. For more information on the baseline methodology, please read the Romania Afforestation BLS and/or PDD.

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