The project’s boundaries were assumed to be the Brazilian territorial boundaries. Most sources of emissions and emissions reductions associated with this project, which take place in Brazil, were accounted for. This includes transport of charcoal and coal/coke that will or would take place in the project and baseline scenarios, as well as the coking process that is expected to take place in Brazil. The emissions associated with coal mining elsewhere and coal transport to Brazil were not included in the analysis. There are good reasons for that.

First, if these emissions were included, it would be also plausible to consider the possible sources of transnational leakage potentially generated by the project. While one could argue that the project has led to a reduction in global consumption of coal (and this is picked up by the emissions reductions taking place in Brazil), one could also argue that the reduction in imports of coal to Brazil could lead to a reduction in international prices leading to increased consumption elsewhere.

Second, there is still a lack of definition regarding the “ownership” of emissions (and consequently emissions reductions) associated with international transport. The complexity of this type of analysis, associated with the lack of definitions regarding international “property rights” related to emissions reductions, were determinant in limiting the boundaries of this analysis to the territory boundaries of Brazil.

The mitigation activity of the Plantar project is unlikely to result in significant amount of leakage. While the coke-avoidance component of the project is based on the reduction of fossil fuel consumption (imported coal), thus in a sense making this amount of coal available to the rest of the world, in global terms the project is relatively small and unlikely to have any effect on the price and consumption in the global coal market.

The forestry component is based on the establishment of 23 100 ha of sustainable and high yielding forest plantations in lieu of pastureland. Consequently, no leakage is expected. On the contrary, it is expected that the project will result in positive offsite impacts, reducing the pressure on native forests for commercial charcoal production and for fuel wood.

In the past, charcoal producers from the State of Minas Gerais have looked for other areas to relocate their production, responding to the constraints imposed on the use of native forests for charcoal. In particular, the Carajas region in the Eastern Amazon has been a major target. In theory, this could be a possible source of leakage for the Plantar project. However, investment and environmental constraints in Carajas today are similar to those in Minas Gerais. Thus, this possibility of leakage seems quite unlikely.

From a commercial perspective, these small industrialists lack capital and collateral to borrow as their equity is trapped in Minas Gerais blast furnaces, which cannot be sold in the present market. Brazilian credit markets have been quite restricted, especially after the events of 11 September in the US.

The project requires careful monitoring of other small independent pig iron producers and the large integrated mills in Brazil as a whole. Data gathered from a reputable and independent source on trends in the iron and steel industry will be used to determine whether and to what extent the independent sector of pig iron producers is expanding production based on charcoal in comparison with the coke-based production, without the benefit of carbon finance. These data will contribute to the initial verification of the industrial coke-avoidance component of the project when it is commenced in 2008. It is presumed that maintaining and assessing the significance of these data will maintain the integrity of the baseline scenario.

Under the sequestration component, the project sponsor intends to claim carbon credits from established plantations on land that has been pasture land since 1989, taking into account the CDM Modalities and Procedures.