1. 1 Consideration of Forestry Assets in Climate Change Legislation Cologne, 8 May 2007 Charlotte Streck c.streck@climatefocus.com

2. 2 Forests and Climate Change Forestry: Major contributor Potential for low cost abatement Source: IPCC Fourth Assessment Report 2007, using data adapted from Olivier et al. 2005 and 2006.

3. 3 Multi-benefits of Forestry Projects Environmental benefits Key to achieve the + 2°C target Helps to preserve biodiversity and avoid land degradation Watershed protection & restoration Control of soil erosion Builds the biomass resources for future renewable energy system Economic Benefits Creates additional flexibility under the EU ETS Gives companies breathing space for smooth transition to low carbon economy Development Benefits Ensures flow of capital to rural areas in developing countries Climate Policy benefits Provides for participation by least developed countries (rural economies) Allows world’s poor to participate in the carbon market Links the adaptation and the mitigation agenda

4. 4 International Consensus on the Importance of Forestry European Council Conclusions (March 2007) “The European Council invites the Commission to review the EU Emissions Trading Scheme in good time with a view to increasing transparency and strengthening and broadening the scope of the scheme and to consider, as part of the EU ETS review, a possible extension of its scope to land use, land-use change and forestry.” G8 Summit Declaration ( June 2007 ) “Reducing, and in the long term halting deforestation provides a significant and cost-effective contribution toward mitigating greenhouse gas emissions and toward conserving biological diversity, promoting sustainable forest management and enhancing security of livelihoods.” APEC Declaration on Climate Change (9 September 2007) “Forests can play a critical role in the carbon cycle. Ongoing action is required to encourage afforestation and reforestation and to reduce deforestation, forest degradation and forest fires, including by promoting sustainable forest management, combating illegal logging and addressing the underlying economic and social drivers.” Bali Declaration (December 2007) “Explore a range of actions, identify options and undertake efforts, to address the drivers of deforestation relevant to their national circumstances, …with a view to reducing emissions from deforestation and forest degradation and thus enhancing forest carbon stocks due to sustainable management of forests”

5. 5 5 New International Attention on AFOLU Focus on Reducing Emissions from Deforestation, little attention on A/R No recognition of the strong link between the desire to stop deforestation and the need to promote deforestation Negotiations need to be brought together in order to avoid contradictions that paralyze rather than stimulate action (accounting frameworks, crediting, intl and local incentives) –Reform of A/R in CDM and JI needed: Seek alternatives for temporary crediting Change verification rules Change definition of reforestation Remove need to replace credits at the end of the project’s crediting period Dynamic project boundaries Simplify methodologies

6. 6 6 AFOLU in regional and domestic ETS New Zealand –New Zealand Emissions Trading Scheme –Permanent Forest Sink Initiative Australia –New South Wales Greenhouse Gas Abatement Scheme –Proposed Australian ETS United States –None of the proposed bills exclude AFOLU credits –Bills of Senator Feinstein and Senators Lieberman and Warner explicitly domestic AFOLU offsets –US Northeast States Regional Greenhouse Gas Initiative –California Climate Action Registry Voluntary Schemes –Voluntary Carbon Standard (Climate Group, IETA, WEF) –Climate, Community and Biodiversity Standard –Chicago Climate Exchange

7. 7 AFOLU in the EU ETS Link to KP established. CERs and ERUs eligible for meeting commitments. However, AFOLUcredits are left out (uncertainty, technological problems, concerns about “flood” of credits, env concerns). Currently discussion of a revision of the EU ETS. Intention to consider LULUCF credits only in a context of the discussion of a post-Kyoto framework. Including AFOLU into the EU ETS: Can help to achieve the objectives of the EU ETS by adding additional flexibility to the system Replacement burden should be with the operator using temporary credits. Operator is in the best position to assess and mitigate the permanence risk and assume the replacement obligation.

8. 8 Questions? Charlotte Streck Phone +31 10 217 59 94 Mobile + 31 6 464 264 81 c.streck@climatefocus.com