Challenges and Opportunities in Developing Forest Carbon Accounting Approaches for Use in Regulatory and Financial Trading Schemes Biometrics Working Group New Orleans, March 2009 Alan A. Lucier, Ph.D. Senior Vice President, NCASI 1

Acronyms & Definitions GHG : Greenhouse Gas ERRs: GHG emission reductions and removals cap: Upper limit on GHG emissions in a “cap and trade” program. Offsets: ERRs affecting sources and sinks of GHGs that are not subject to a cap. 2

History 1980s: “Forest offsets” identified as cost-effective approach to GHG mitigation. 1990s: Intense international discussions of forest offsets in context of Kyoto Protocol negotiations. Post-Kyoto: Ongoing discussions and limited implementation of forest offsets in many contexts (CCAR, WCI, RGGI, CCX, etc.). 3

What do we know about forestry and greenhouse gases? 4

5 Sustainable Forest Management (SFM) is a cost-effective strategy for GHG control.

6 GHG benefits of SFM are associated with:  forest regrowth after harvest;  lower risk of wildfire;  production of energy-efficient materials and biomass energy;  carbon sequestration in forests & in wood products.

So, what’s the problem? 7

Barriers to Forest Offsets Political Technical 8

Political Barriers to Forest Offsets Strongly held differences among stakeholders regarding desired effects of offsets on forest management and climate policy.  SFM vs. forest preservation  “minimize cost of GHG mitigation” vs. “reduce fossil fuel consumption as soon as possible” 9

Technical Barriers to Forest Offsets Uncertainties about real GHG benefits Concern that supply of forest offsets will “flood the market” Cost of producing offsets – Transaction costs – Opportunity costs 10

Leading Conceptual Approach to Forest Offset Accounting GHG mitigation benefits of a forest offset project must be: Real  Additional (Beyond Business as Usual)  Measured  Verified Discounted or insured because benefits are not permanent and subject to leakage. 11

Problems with Leading Approach Political & technical barriers have not been overcome. Complex discussions of “additionality, leakage & permanence” can obfuscate the barriers. “Additionality” raises equity issues – e.g., granting offsets only to “new” tree planters seems unfair to those who plant trees routinely. Measurement and verification of forest C stocks: – Increase transaction costs – Do not substantially reduce overall uncertainty about real GHG benefits 12

Alternative Conceptual Approach to Forest Offset Accounting Offsets are created by implementing forestry activities with acknowledged GHG benefits. GHG benefits per ha of activity are determined a priori by regional authorities. – Lower transaction costs – Greater transparency in models of offset production costs and GHG benefits Offset project proponents report and verify implementation of activities. 13

Which Forestry Activities Provide GHG Benefits ? Recommended reading The Effects of Forest Management on Carbon Storage in Ontario’s Forests Climate Change Research Report 03 Ontario Ministry of Natural Resources by S.J. Colombo et al. 14

Forestry Activities with GHG Benefits (from Colombo et al.) Growth Enhancement – Planting and Competition Control – Genetic Improvement – Fertilization – Thinning ? – Site Preparation ? Forest Protection – Forest Fire Management – Insect & Disease Management – Minimize Area in Roads and Landings – Reduce Disturbance / Harvest 15

Key Technical Issue for Leading & Alternative Approaches GHG mitigation benefits of forest offset projects cannot be measured directly.  Important benefits occur offsite and in the future. Carbon storage in harvested wood Substitution effects 16

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Selected Components of GHG Profile of Canadian Forest Products Industry ComponentMt CO 2 eq per year in 2005 Direct and Indirect Emissions53 Sequestration - Forests? Sequestration – Products in Use Sequestration – Products in Landfills-40.6 Avoided Emissions – CHP & Substitution Effects for Building Products Only - 10 NCASI Special Report

Another Key Technical Issue for Leading & Alternative Approaches Time horizon is an important parameter in models of GHG benefits of forest offset projects. – For example, compare GHG mitigation benefits of two management scenarios: 1.old forest protection 2.harvest old forest & implement SFM  Protection > SFM in near term  SFM > Protection over the long term 19

Conclusions Opportunities for GHG mitigation exist across the continuum of forest management styles from strict protection to short-rotation plantations. Nevertheless, there are large political and technical barriers to realizing the potential benefits of forest offsets. – Disagreement about objectives – Concerns about “flooding the market” – GHG mitigation benefits cannot be measured directly 20

Conclusions The leading approach to forest offset accounting has been discussed for more than a decade but has not overcome political and technical barriers. Consideration should be given to alternative approaches including “activity accounting.” 21