A Study on A/R CDM Application of
Deforested Land in North Korea
June 7, 2007
Young-Chool OH
Dong-Kun Lee
Jae-Uk Kim
Seoul National University, Korea
Contents
Ⅰ. Introduction
 Background
 Method of Study
Ⅱ. Literature Review
 A/R CDM Criteria
 Forest Area in North Korea
Ⅲ. Result & Discussion




Analysis of Forest Changes in North Korea
Selection of A/R CDM Sites
Project Simulation
Economic Analysis
Ⅳ. Conclusion
2/36
Ⅰ. Introduction
Background
 Kyoto Protocol came into force (Feb 2. 2005)
- North Korea : joined on April 27,2005
- South Korea : AnnexⅠcountry in the 2nd Commitment Period (2013∼2017)
 Deforested land is increasing after mid 1970’s
in North Korea
 Alternative approach to restoration of deforested
land in North Korea
3/36
Ⅰ. Introduction
Method of Study
Review
Kyoto Mechanism
Data on NK
GIS/RS
A/R CDM Criteria
Mid 1970’s
Landsat Image
Good Forest Period
- 1975/76/77/79
Forest Changes
Late 1980’s
Landsat Image
CDM Base year
- 1987/88/89
Recent 2000’s
Landsat Image
Recent Forest
- 2000/01/02
A/R CDM & Restoration
Earlier Studies
Eligible Species for A/R CDM
Eligible Sites for A/R CDM
Site Survey
No
Experts Interview
No
Yes
Suitable Site & Species
Project Simulation
Economic Analysis
4/36
Ⅱ. Literature Review
Kyoto Mechanism
 Emission Trading (ET)
Allow the developed countries to transfer emissions credits to
each other
(Unit : AAU, RMU, ERU, CER)
 Joint Implementation (JI)
To be implemented between two or more AnnexⅠ countries
 Clean Development Mechanism (CDM)
To promote sustainable development by encouraging invest
by governments and private firms in projects in developing
countries
5/36
Ⅱ. Literature Review
Credit Limit on Forest Activities
Division
Afforestation
/Reforestation
Domestic
No Limit
JI
No Limit
CDM
1% of the base
year emissions
Forest
Management
3% of the base
year emissions
(Domestic + JI)
Credit Units
RMU
(Removal Unit)
ERU
(Emission Reduction Unit)
Overseas
Not Eligible
CER
(Certified Emission Reduction)
6/36
Ⅱ. Literature Review
CDM Project Criteria
 “Non Permanence” of carbon stored in A/R CDM projects
⇒ Temporary credits
ℓCER (long-term CER)
CO2 흡수량
E
E-D
D
- Be used in the commitment period issued
- Expire at the end of the crediting period
D-C
C
C-B
B
B-A
A
A
0
5
10
15
20
25
30 Y ear
tCER (temporary CER)
CO2 흡수량
E
E
- Be issued periodically
- Expire at the end of the commitment period
subsequent to the period issued
D
D
C
C
B
B
A
A
0
5
10
15
20
25
30 Y ear
7/36
Ⅱ. Literature Review
Definitions of LULUCF activities
Afforestation
Land that has not been forested for at least 50 years
Forest cover
forest
Non-forest
T-50
Reforestation
T
Time
Land that was non-forest on 31st Dec. 1989)
Forest cover
forest
forest
Non-forest
’90
T
Time
8/36
Ⅱ. Literature Review
CDM Project Criteria
Net Human-Induced CO2 Absorption by Sinks
tCO2
Net Absorption (C)
Net Human-Induced Absorption
(C-B-A)
= Credit
Leakage (B)
Baseline Net Absorption (A)
T
Time
9/36
Ⅱ. Literature Review
Forest Changes in North Korea
Year
Forest Area (ha)
Sources
1970
9,773
North Korea
1980
9,449
the National Statistical Office (SK)
1986
9,007
Korean Federation of Science and Technology
Societies (SK)
1987
8,965
FAO
1987
8,870
East Germany
1991
6,298
China
1996
8,446
Korea Forest Research Institute
1998
7,533
FAO/UNDP
※ Deforested forest area is increasing after 1970 in North Korea
: 2.2 million ha
10/36
Ⅱ. Literature Review
Forest Changes in North Korea
 Deforested Area (1998)
Total
7,534
(59.6%)
Others
Deforested Area
Forest
12,299
(100%)
(Unit : 1,000㏊)
Sub Total
cultivated
Non-stocked
Open
Cropland/Residence
1,632
(13.3%)
972
(7.9%)
534
(4.3%)
126
(1.1%)
3,133
(27.1%)
(Lee, 2004)
▲
Deforested mountain Naseunsi
▲
Diverted for cultivation in Hwaeryung
11/36
Ⅱ. Literature Review
Forest Species
(KFRI,2004)
 Natural Forest
Regions
Main Species
High
mountain
Abies nephrolepis, Abies holophylla, Larix kaempferi, Pinus densiflora,
Larix kaempfrri, Picea jezoensis, Picea koraiensis, Juglans mandshurica etc.
Middle
mountain
Castanea crenata, Acer palmatum, Betula platyphylla, Dendropanax morbifera,
Picea jezoensis, Pinus koraiensis etc.
Low
mountain
Zizyphus jujuba, Acer palmatum, Ulmus davidiana, Quercus mongolica,
Populus euramericana, Fraxinus rhynchophylla etc.
Plain
Vitis coignetiae, Prunus tomentosa etc.
 Artificial Forest
- Fuel Wood & Fruit Bearing Tree
- Main Species : Japanese larch, Korean pine, Robinia pseudoacacia,
Chestnut tree, Mongolian oak
12/36
Ⅲ. Result & Discussion
Forest Changes
▲ 9,393,227 ㏊ in mid 1970’s
▲ 8,648,314 ㏊ in late 1980’s
(744,913 ㏊ ↓)
13/36
Ⅲ. Result & Discussion
Forest Changes
▲ 7,426,921 ㏊ in recent 2000’s
▲ 1,966,306 ㏊ ↓ since mid 1970’s
14/36
Ⅲ. Result & Discussion
Forest Changes
(Unit : ㏊)
Districts
NK Area
Pyungyang-si
Mid ’70’s
Forest (A)
Late ’80’s
Forest (B)
2000’s
Forest (C)
Decreased
Area (A-C)
Ratio
(A-C)/A
262
120
102
82
38
31.6%
Pyungan-namdo
1,275
870
766
634
236
27.2%
Pyungan-bukdo
1,241
748
707
581
167
22.4%
Jagang-do
1,671
1,563
1,498
1,349
213
13.7%
Yanggang-do
1,380
1,128
1,083
883
245
21.7%
Hwanghae-namdo
851
356
313
292
64
17.9%
Hwanghae-bukdo
934
630
523
408
222
35.2%
Kangwon-do
1,117
1,046
886
745
302
28.8%
Hamkyung-namdo
1,855
1,618
1,479
1,282
336
20.8%
Hamkyung-bukdo
1,685
1,314
1,291
1,171
143
10.9%
Total
12,271
9,393
8,648
7,427
1,966
20.9%
76.6%
70.5%
60.5%
16.0%
Forest Ratio
15/36
Ⅲ. Result & Discussion
Forest Changes
 Verification of land cover classification results
Subjects
Land cover classification
Of mid 1970’s
Late 1980’s
Recent 2000’s
Comparison Targets
Accuracy
Topographical map of 1977
90.76%
Land cover classification of 1980’s
made by the Ministry of Environment
in 2000
83.13%
Google Earth & Site inspection
-
16/36
Ⅲ. Result & Discussion
Forest Changes
(Diverted for cultivation near the Cheongcheon River, 2006.2.26)
(Deforested mountain along Pyungyang-Hwaecheon Expressway, 2006.2.27)
17/36
Ⅲ. Result & Discussion
Forest Changes
(Deforested land in Nampo, 2006.2.27)
(Deforested mountain around Pyungyang-Hwaecheon Expressway, 2006.2.26)
18/36
Ⅲ. Result & Discussion
Selection Criteria for A/R CDM
 Suitable Site Criteria : Overseas Forestation Data → Valuation
-. Minimum size of unit site : 200㏊↑
-. Slope : 20° ↓
-. Altitude : 600m ↓
 Suitable Species : Indigenous Species → Valuation
-. Japanese larch
-. Korean pine
-. Mongolian oak
19/36
Ⅲ. Result & Discussion
Eligible Site for A/R CDM
▲ Decreased Area 744,913 ㏊ of
late 1980’s since mid 1970’s
▲ Eligible A/R CDM Site : 605,156 ㏊
(Non-forest land in recent 2000’s)
20/36
Ⅲ. Result & Discussion
Suitable Site for A/R CDM
 Suitable Sites satisfied with Site Selection Criteria
among Eligible A/R CDM Sites
▲ Slope : 20° ↓
▲ Altitude : 600m ↓
▲ Unit Site Size : 200㏊↑
21/36
Ⅲ. Result & Discussion
Suitable Site for A/R CDM
▲ Suitable A/R CDM Site : 174,542 ha
22/36
Ⅲ. Result & Discussion
A/R CDM Site in North Korea
(Unit : ㏊)
Districts
Pyungyang-si
Decreased between
mid ’70’s and late ’80’s
Eligible A/R CDM
Area
Ratio
Suitable A/R CDM
Area
Ratio
18,274
14,157
77.5%
507
3.6%
Pyungan-namdo
104,121
83,837
80.5%
17,950
21.4%
Pyungan-bukdo
40,870
34,510
84.4%
936
2.7%
Jagang-do
65,091
52,272
80.3%
3,615
6.9%
Yanggang-do
45,069
31,655
70.2%
-
-
Hwanghae-namdo
42,733
34,357
80.4%
3,000
8.7%
Hwanghae-bukdo
107,038
90,210
84.3%
27,731
30.7%
Kangwon-do
160,500
143,278
89.3%
90,398
63.1%
Hamkyung-namdo
138,929
106,853
76.9%
29,905
28.0%
Hamkyung-bukdo
22,288
14,028
62.9%
500
3.6%
744,913
605,156
81.2%
174,542
28.8%
Total
23/36
Ⅲ. 연구결과
Project Simulation
 Project Area : 174,542 ㏊
 Project Period : 30 years (Monitoring cycle : 5 year)
 Planting Species : Japanese larch, Korean pine, Mongolian oak
 Carbon Pool : Above-ground biomass, Below-ground biomass
(Not considered Litter, Dead wood, Soil organic carbon)
 Biomass & CO2 Calculation Index
Species
Growing Index
Basic Wood Density
Biomass Expansion Factor
Japanese larch
16
0.492
1.6512
Korean pine
12
0.468
1.6512
Mongolian oak
12
0.653
1.7061
 Baseline : present land use will continue by the end of the project,
Additionality and No Leakage in North Korea (Han, 2005).
24/36
Ⅲ. Result & Discussion
Biomass & CO2 per ㏊
132.68
140㎥
 Planted 3 species
120
110.80
100
at the same rate
86.40
80
59.19
60
40
26.92
20
7.93
0
0
5
낙엽송
CO2 : 7.21 tCO2/㏊/year
250
10
tCO2
216.16
200
15
잣나무
20
신갈나무
25
합계
30
Y ear
Biomass : MAI 4.42 ㎥/㏊
181.34
142.20
150
98.11
100
45.53
50
13.31
0
0
5
10
낙엽송
15
잣나무
20
신갈나무
25
합계
30
Y ear
25/36
Ⅲ. Result & Discussion
Total Biomass & CO2
천㎥
25000
23,159
20000
19,339
15,081
15000
10,331
10000
4,698
5000
CO2 : 37,728,272 tCO2
1,385
0
(1,257,609 tCO2/year)
0
5
10
낙엽송
15
잣나무
20
신갈나무
25
Year
30
합계
천tCO2
40000
37,728
Biomass : 23,158,814 ㎥
(771,960 ㎥)
35000
31,651
30000
24,821
25000
20000
17,124
15000
10000
7,946
5000
2,324
0
0
5
10
낙엽송
15
잣나무
20
신갈나무
25
Year
30
합계
26/36
Ⅲ. Result & Discussion
Economic Analysis
Preconditions
 Project Size : 174,542㏊
 Period :
30 years
 Species :
Japanese Larch, Korean pine, Mongolian oak
 Land Cost :
free (North Korea’s expenses)
 Labor Cost :
2.4 U$/day (real wages in Kaesong Industrial District)
 Carbon credit :
 CER price :
ℓCER
15U$/tCO2
 Exchange Rate :
 Discount rate :
930 \/U$, 1.3 U$/Euro
4%
27/36
Ⅲ. Result & Discussion
Economic Analysis
 Products of A/R CDM Project
Item
Total
5yr
Timber (1,000㎥)
23,159
1,385
CO2 (1,000tCO2)
37,728
ℓCER (1,000tCO2)
ERU or RMU (1,000tCO2)
10yr
15yr
20yr
25yr
30yr
4,698
10,331
15,081
19,339
23,159
2,324
7,946
17,124
24,821
31,651
37,728
31,651
2,324
5,623
9,177
7,697
6,830
47,959
2,324
5,623
9,177
7,697
6,830
6,078
※ ERU : JI Project, RMU : Domestic Afforestation/Reforestation
천tCO 2
40,000
35,000
30,000
6,830
25,000
7,697
20,000
9,177
15,000
10,000
5,623
5,000
2,324
0
5
10
15
20
ℓCER classified by period
25
30 Y ear
28/36
Ⅲ. Result & Discussion
Economic Analysis

Forestation Cost : 4,939 U$/㏊
Item
U$/㏊
Planting
Remarks
1,022.2
Japanese Larch, Korean pine, Mongolian oak
Forest management
294.6
Weeding, Tending, Thinning, Pruning
Facilities
153.7
Office, Warehouse, Supplies, etc.
CDM fee
3.5
Harvesting
3,239.4
General management
225.6
Total
4,939
Negotiation, Meth. Development, Approval, etc.
Logging, Transportation, etc.
5%
 Timber Revenue : 9,185 U$/㏊
구분
Amount (㎥)
Price (U$/㎥)
Income (U$)
U$/㏊
Japanese Larch
8,778,299
94.98
833,749,623
4,777
Korean pine
7,539,633
48.39
364,820,932
2,090
Mongolian oak
6,840,883
59.14
404,568,337
2,318
1,603,138,892
9,185
Total
23,158,814
29/36
Ⅲ. Result & Discussion
Economic Analysis
 ℓCER Income : 1,067 U$/㏊
Item
Total
5y
10y
15y
31,651
2,324
5,623
9,177
7,697
6,830
9.59
8.37
6.87
5.03
2.77
21,847
46,122
61,774
37,923
18,537
Expired Period
25y
20y
15y
10y
5y
Relative Value against CER
64%
56%
46%
34%
18%
Price against CER 15 U$ (U$)
9.59
8.37
6.87
5.03
2.77
ℓCER (1,000tCO2)
Price (U$/tCO2)
Income (1,000U$)
186,203
20y
25y
※ ℓCER Value (Discount rate : 4%)
 ERU or RMU Income : 3,177 U$/㏊
Item
Credits (1,000tCO2)
Total
37,728
Price (1,000U$/tCO2)
Income (1,000U$)
554,606
5y
10y
15y
20y
25y
30y
2,324
5,623
9,177
7,697
6,830
6,078
15
15
15
15
15
15
34,158
82,655
134,904
113,146
100,402
89,341
30/36
Ⅲ. Result & Discussion
Cash Flow Analysis
 A/R CDM Project
(unit : 1,000U$)
Total
Item
Planting
NPV
1~5y
6~10y
11~15y
16~20y
21~25y
26~30y
178,420
171,558
178,420
-
-
-
-
-
Forest management
51,428
37,056
17,187
19,824
12,720
1,696
-
-
Facilities
26,825
16,366
6,425
4,080
4,080
4,080
4,080
4,080
CDM fee
607
539
515
23
23
23
23
-
565,412
174,327
-
-
-
-
-
565,412
41,135
19,992
10,127
1,196
841
290
205
28,475
863,827
419,837
212,674
25,124
17,665
6,089
4,308
597,967
1,603,139
494,278
-
-
-
-
-
1,603,139
186,203
107,677
21,847
46,121
61,774
37,923
18,537
-
1,789,342
601,955
21,847
46,121
61,774
37,923
18,537
1,603,139
925,515
182,117
-190,827
20,998
44,110
31,834
14,229
1,005,172
Harvesting
General management
Total Cost
Timber
ℓCER
Total Income
Net Income
※ IRR : 6.70%
31/36
Ⅲ. Result & Discussion
Cash Flow Analysis
 A/R CDM Project (Without Timber Sales)
(unit : 1,000U$)
Total
Item
1~5y
6~10y
11~15y
16~20y
21~25y
26~30y
NPV
Planting
178,420
171,558
178,420
-
-
-
-
-
Forest management
51,428
37,056
17,187
19,824
12,720
1,696
-
-
Facilities
26,825
16,366
6,425
4,080
4,080
4,080
4,080
4,080
CDM fee
607
539
515
23
23
23
23
-
12,864
11,276
10,127
1,196
841
290
205
204
Total Cost
270,144
236,794
212,674
25,124
17,665
6,089
4,308
4,284
ℓCER Income
186,203
107,677
21,847
46,121
61,774
37,923
18,537
-
- 83,941
-129,117
190,827
20,998
44,110
31,834
14,229
-4,284
General management
Net Income
※ 45% of Total Cost can be covered by ℓCER Income.
32/36
Ⅲ. Result & Discussion
Cash Flow Analysis
 JI Project or Domestic Afforestation/Reforestation
(unit : 1,000U$)
Total
Item
1-5y
6-10y
11-15y
16-20y
21-25y
26-30y
NPV
Planting
178,420
171,558
178,420
-
-
-
-
-
Forest management
51,428
37,056
17,187
19,824
12,720
1,696
-
-
Facilities
26,825
16,366
6,425
4,080
4,080
4,080
4,080
4,080
CDM fee
630
546
515
23
23
23
23
23
12,865
11,276
10,127
1,196
841
290
205
205
Total Cost
270,168
236,801
212,674
25,124
17,665
6,089
4,308
4,308
ERU / RMU Income
554,606
275,668
34,158
82,655
134,904
113,146
100,402
89,340
Net Income
284,438
38,867
-178,517
57,532
117,239
107,058
96,094
85,032
General management
※ IRR : 5.16%
33/36
Ⅲ. Result & Discussion
Sensitivity Analysis
 IRR changes of A/R CDM and JI/Dom. project according to carbon credit prices
10.00
%
9.00
8.00
7.00
6.00
5.00
4.00
3.00
2.00
1.00
0.00
13
14
15
16
A/R CDM 사업 (IRR)
17
18
19
20
21
22
23
U$ /CO 2
일반배출권사업 전환시 (IRR)
※ Linear Regression Analysis : goodness of fit 99%
A/R CDM project
JI or Dom. A/R project
y = 0.1178x + 6.3495
y = 0.4854x + 3.7653
R2 = 0.9999
R2 = 0.9967
34/36
Ⅲ. Conclusion
Conclusion of study
 Confirm the eligible A/R CDM sites in North Korea
- Eligible sites for A/R CDM : 605,156 ㏊ → Suitable sites : 174,542 ㏊
- Better accessibility for forestation than other countries
 Confirm the feasibility of A/R CDM Project for restoration
of deforested land in North Korea
- A/R CDM project : IRR 6.70%
- A/R CDM (without timber) : 45% of total cost is covered by ℓCER Income
- JI or Domestic A/R : IRR 5.16% (without timber)
• JI : When both South and North Korea are AnnexⅠ country
• Domestic A/R : If we are unified in the future
 A/R CDM Project is Alternative approach to
South and North Economic Cooperation
35/36