This case focuses on the opportunities that American Electric Power (AEP) has to invest, with The Nature Conservancy (TNC), one of the first projects in the world to reduce emissions from deforestation and forest degradation (REDD). The proposed plan was to protect 812,000 acres of rich biological diversity, forest, known as the Bosque Rojo, in central Peru. This project will focus on two issues targeted by REDD about deforestation and the local community land conversion from forest to farmland and forest degradation from commercial logging. REDD projects offered significant opportunities to mitigate climate change, deforestation and forest degradation contribute about 15-20 per cent of global greenhouse gas (GHG) emissions. Protection Bosque Rojo can prevent the release of millions of tons of carbon dioxide (CO2). The project partners and investors will receive certified offset credits equivalent to a reduction of emissions over a 30-year period of operation. Among the companies, the U.S. government, AEP was one of the highest levels of emissions CO2. It is about 2009 emissions reach 150 million tons. With climate change legislation on the horizon, he wanted to set an example for Congress to show that REDD offsets can lead to cost-effective reduction of greenhouse gas emissions, and to gain experience in the international arena REDD. AEP is expected to significantly reduce their emissions (eg, wind energy to replace coal in electricity generation) or to obtain loans or credit in the open market or through direct participation in external projects to reduce emissions. AEP believed that REDD projects will be much cheaper than any of the other options to get the credit loans. To confirm this belief, companies are required to calculate the net present value (NPV) of the project, understand the risks of the project, and determine if the Bosque Rojo was, indeed, better use of company funds. "Hide
by Erica Plambeck, Gretchen Daily, Sara Gaviser Leslie Source: Stanford Graduate School of Business 18 pages. Publication Date: Mar 09, 2010. Prod. #: OIT96-PDF-ENG
