Energy and Environment Research; Vol. 3, No. 2; 2013 ISSN 1927-0569 E-ISSN 1927-0577 Published by Canadian Center of Science and Education 198 Carbon Market Funding for the Development of Areas of Pastures: The Case of Small Farms in the State of Rio de Janeiro, Brazil Fabiano Oliveira Chagas 1 , Osvaldo Luiz Gonçalves Quelhas 1 , Roberto Guimarães Pereira 1 & Valdir Lameira 2 1 Universidade Federal Fluminense, Rio de Janeiro, Brasil 2 University of Coimbra, Coimbra, Portugal Correspondence: Fabiano Oliveira Chagas, Universidade Federal Fluminense, Rio de Janeiro, Brasil. Tel: 98-935-574-6603. E-mail: fabiano.chagas@gmail.com Received: April 12, 2013 Accepted: August 1, 2013 Online Published: November 22, 2013 doi:10.5539/eer.v3n2p198 URL: http://dx.doi.org/10.5539/eer.v3n2p198 Abstract This study aims to examine, within the Local Development, the reforestation with eucalyptus on land used for grazing. Uses the Market Certified Emission Reductions (CER) as a source for funding, through projects of Clean Development Mechanism (CDM). The study analyzes the cash flow of small-scale beef cattle operation and simulates the eucalyptus plantation on the farms. The area selected for this study covers the family-structured farms of small and medium extension on the beef cattle industry in north-central state of Rio de Janeiro, Brazil. The research method used was a literature review, application of the methodology recommended by the UN and cash flow analysis. Analysis of Net Present Value (NPV) considering the eucalyptus plantations for energy purposes, has brought positive values. The study confirms that the implementation of forestry along these models is itself a profitable activity. This study applied the methodology AR-AMS0001, recommended by the executive board of the United Nations on Climate Exchange. Keywords: sustainable development, CDM for reforestation, engineering sustainability, local development 1. Introduction The farms all over the state of Rio de Janeiro, whose source of income is agriculture and livestock, according to agricultural census of the Brazilian Institute of Geography and Statistics (CIDE, 2008) covers 1.6 million hectares. The cattle ranches basically depend on grazing and sugar cane, for the livestock maintenance and in some cases, a small farming focused not much more than subsistence. Many of these farms are maintained by families who hold possession of these areas because they are heirs of ancient estates, as presented in the study Nozoe (2006). The work presented here aims to answer the following main question: Is it financially and economically feasible to replace the beef cattle and milk production by small-scale eucalyptus plantations for siderurgical charcoal production and obtain financing through CDM forestry projects, after obtaining obtaining funding through forestry CDM projects? The problem was investigated within the following economic and financial conditions observed in the Brazilian environment:  Farmers who economically depends on the cattle on a small scale production have little chance to prosper economically;  The charcoal supply for the steel industry does not fully address the necessary demand from steel producers, and the planned investments to increase forest for this purpose does not follow the same proportion of growth investments in steel production;  The implementation of CDM forestry projects in Brazil for energy co-generation is a strategic alternative energy source to replace fossil fuels. This paper aims to analyze the CDM implementation on forestry projects as a strategic alternative to the Local Development on underused areas focused so far only for grazing.