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Prospective investors in LULUCF projects and host countries may have different priorities in selecting projects. From the investors' perspective, criteria such as land availability and the suitability of the country to undertake the project, the estimated GHG benefits, project cost-effectiveness, risk, and other environmental effects are some of the major concerns. From the host country's perspective, projects that more specifically consider regional or local land-use priorities and significantly strengthen sustainable development contributions will be favored. Some observers have also expressed concern that selecting only the cheapest projects will be detrimental to non-Annex I countries if they subsequently take on GHG emissions (Lee et al., 1997; Brown, 1998). For LULUCF projects to be designed, conceived, and implemented successfully to provide economic and environmental benefits, however, the support of different stakeholders of the project-project investors, host countries, and local communities-is crucial.
The voluntary nature of host country participation in climate mitigation projects increases the prospects that only projects that satisfy investor and host country interests will be implemented. Moreover, host countries can take steps to ensure that the goals of accepted projects are consistent with national and local development and natural resource protection priorities (Intarapravich, 1995; Michaelowa and Schmidt, 1997; Hardner et al., 2000). Dutch and Costa Rican criteria for approval of AIJ projects, for example, state that projects should be compatible with and supportive of sustainable development priorities of each country; fulfill the obligations of various conventions; and enhance income opportunities and quality of life for rural people and members of certain vulnerable groups, including cultural minorities (Andrasko et al., 1996; Ministry of Housing, Spatial Planning and the Environment, 1996; Subak, 2000).
One way to ensure that a mitigation project is consistent with the host country's developmental goals is for the host country to set up a simple approval process for accepting projects and to list criteria that are based on national and local needs. Projects may not satisfy all criteria, but it is important to ensure that they adhere to all applicable laws and/or regulations of the host country. To meet national or regional sustainable development priorities, project transaction costs should be kept low. High costs can reduce investor interest in financing LULUCF climate mitigation projects (Section 5.2) and reduce the proportion of funding available to promote and monitor environmental and social aspects of implemented projects.
To achieve consistency with national and regional environmental and development goals, it is also important to ensure that policies and programs support rather than undermine project objectives. Changes in key policies that may affect project sustainability either positively or negatively include financial subsidies for forestry or agriculture, land tenure, policies to expand agricultural production, import-export policies, and paper recycling programs (World Bank, 1997). For example, Brazil's government-subsidized program to produce ethanol vehicle fuel from sugarcane withered in the face of low gasoline prices (La Rovere, 1998). Therefore, incorporating projects that minimize conflicts or institutional changes relative to existing land-use policies in the host country may be essential.
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