From Principles to Numbers: Approaches in Implementing Payments for Environmental Services (PES) in the Philippines - Smallholder Tree Growing for Rural Development and Environmental Services - page 372

The expected GHG benefits were calculated using a high and low scenario. For
the project period (2004-2014), the project will have total net carbon benefits of
3,204 tC (11,759 tCO 2 -e) and 1,424 (5,230 tCO 2 -e) under the high and low scenarios,
respectively (Santos-Borja et al. 2005). The anticipated Total Emission Reduction
Purchase Agreement (ERPA) Value is US$31,380 for the low scenario and
US$70,554 for the high scenario. These calculations were essentially made using
the Tier 2 approach.
During project implementation, a Tier 3 method will be employed in measuring
carbon removals which will be the basis for actual payments. The carbon monitor-
ing method to be used is the one prescribed by the UNFCCC for small scale affor-
estation and reforestation projects (CDM Executive Board 2006). Annual net GHG
removals by sinks during a monitoring period shall be projected using the
equation:

N* = N - N

(t) (t − 1)

Where,
N*: Annual changes in carbon stocks in the carbon pools within the project
boundary of the project scenario
N (t) : Carbon stocks within the project boundary at time “t” under project scenario
(ton C)
The stocks of carbon for the project scenario at the starting date of the project (t = 0)
is the same as for the projection of the baseline net greenhouse gas removals by
sinks at t = 0. For all other years, the carbon stocks within the project boundary at
time “t”, N (t) shall be calculated as follows:

N = SUM ((N + N ) *A

i ) (t) i A(t) B(t) i

Where,
N A(t) : Carbon stocks in above ground biomass of stratum i at time “t” from
project scenario (ton C/ha)
N B(t) : Carbon stocks in below ground biomass of stratum i at time “t” from
project scenario (ton C/ha)
A i : Project area of stratum i (ha)
The main advantage of the Tier 3 approach is that it is the most accurate, quantita-
tive estimate of the environmental services being “sold”. Payments for ES can be
done on a per unit basis (e.g., US$5 per metric ton carbon). Its main drawback is
the relatively high cost required to implement it. Thus, it will most likely only be
feasible in cases where a high price is expected for the environmental service and/or
where a market for the service already exists.