To participate in the potential market for carbon credits based on changes in the use and management of the land, one needs to identify opportunities and implement land-use based emissions reductions or sequestration projects. A key requirement of land-based carbon (C) projects is that any activity developed for generating C benefits must be additional to business-as-usual. A rule-based model was developed and used that estimates changes in land-use and subsequent carbon emissions over the next twenty years using the Eastern Panama Canal Watershed (EPCW) as a case study. These projections of changes in C stocks serve as a baseline to identify where opportunities exist for implementing projects to generate potential C credits and to position Panama to be able to participate in the emerging C market by developing a baseline under scenarios of business-as-usual and new-road development. The projections show that the highest percent change in land use for the new-road scenario compared to the business-as-usual scenario is for urban areas, and the greatest cause of C emission is from deforestation. Thus, the most effective way to reduce C emissions to the atmosphere in the EPCW is by reducing deforestation. In addition to affecting C emissions, reducing deforestation would also protect the soil and water resources of the EPCW. Yet, under the current framework of the Clean Development Mechanism (CDM), only credits arising from reforestation are allowed, which after 20 years of plantation establishment are not enough to offset the C emissions from the ongoing, albeit small, rate of deforestation in the EPCW. The study demonstrates the value of spatial regional projections of changes in land cover and C stocks: •The approach helps a country identify its potential greenhouse gas (GHG) emission liabilities into the future and provides opportunity for the country to plan alternative development pathways. •It could be used by potential project developers to identify which types of projects will generate the largest C benefits and provide the needed baseline against which a project is then evaluated. •Spatial baselines, such as those presented here, can be used by governments to help identify development goals. •The development of such a baseline, and its expansion to other vulnerable areas, well positions Panama to respond to the future market demand for C offsets. •It is useful to compare the projected change in land cover under the business-as-usual scenario to the goals set by Law 21 for the year 2020. Suggested next steps for analysis includeusing the modeling approach to exploreland-use, C dynamics and management ofsecondary forests and plantations, soilC gains or losses, sources ofvariability in the land use and Cstock projections, and other ecologicalimplications and feedbacks resulting fromprojected changes in land cover.
