1. Climate Change and Forestry —Possible Legal and Policy Instruments to Address Potential Effects of Forest Carbon Offsets Ding Zhi (Department of Law of Beijing Forestry University, 100083)

2. INTRODUCTION Background: relationship between forestry practices and global climate change flexibility mechanisms under Kyoto Protocol Emerging Carbon market China, the biggest provider of carbon credits Objective: to analyze the potential effects of carbon sink market, and to find possible legal and policy instruments to address effects

3. Global Warming, Forest, and Forestry Activities Global warming caused by increasing CO2 seriously affected social and economic development around the world. Forest can absorb CO2 from the atmosphere as sink and mitigate global warming, but unsustainable forestry practices can emit the CO2 as sourse and contribute the global warming. UNFCCC and other relative international agreements required nations to take measures to increase "sinks" of greenhouse gases.

4. The Rules Framework Governing Forest Sinks Under the International Climate Change Legal Regime 1 UNFCCC 2 The Kyoto Protocol 3 Marrakesh Accords 4 Modalities and procedures for afforestation and reforestation activities under the CDM. 5 Simplified modalities and procedures for small-scale afforestation and reforestation activities under the CDM

5. three flexible mechanisms under Kyoto Protocol Emissions trading (ET), allowing Annex I parties to acquire carbon units from other Annex I parties and use them towards meeting their emissions target; Joint implementation (JI),allowing projects between two or more Annex I parties implemented in one of them; and Clean Development Mechanism(CDM),which allows Annex I parties to attain their emission targets by implementing projects such as reforestation and afforestation in non-Annex I countries. A carbon sink market was created by manmade regulations.

6. Emerging carbon sink market Kyotol market: under CDM, Some seek inexpensive ways to offset emissions reductions; and the others turn those required reductions into profit making as they reduce emissions more than required and are able to sell the remaining credits. Beyond the CDM, there is a non-Kyoto market Over the past few years, forest carbon offsets market has experienced tremendous growth

7. The Problem of the Rules Governing Forest Carbon Offsets under CDM The CDM's purpose is to: (1) assist non-Annex I Parties in achieving sustainable development; (2) contribute to the UNFCCC's overall objective; and (3) help developed countries achieve their quantified emissions limitation and reduction commitments in low cost

8. At the heart of the critique of current FCOs adaptation schemes is that FCOs are not often based on ecological necessity, sustainable development needs, or on the legal/ethical obligation of common but differentiated responsibility. Rather, they focus on economic efficiency.

9. Rules Governing Forest Carbon Offsets in non Kyoto marke: trade mechanism and shortcomings Three ways of carbon trade Single model bilateral model Carbon trade system cap-trade voluntary

10. No uniform rules: about 50 trade systems Credits from forestry activities cannot be tradable in some trade systems. More conserning about carbon accounting, baseline decision, less about host country’s sustainable development

11. Possible Effects of FCOs in Host Country without effective management Economic: Host country may acquire FDI and technical through FCOs, but with the price of carbon credits rising, host country may be in the uneconomic condition since it is in the lowest level of carbon industry chain. environmental: If matching site with trees, reforestation and afforestation will be opportunity for biodiversity and ecosystem, or, those forestry activities will be risk for biodiversity and ecosystem. Social: With the aid of north nations, poor community may adapt to global climate, but people may be thrown off their land and disconnected from their only source of food. This risk cannot be ignored.

12. Possible Domestic Legal and Policy Instruments to Address Potential Effects of FCOs Standard Setting and Regulation: Forestry activities which earning carbon credit must be regulated. For example, the use of GMOs or invasive species should be prohibited. A comprehensive catalogue of strict and binding standards for foreastry activities must be developed. These criteria should function as eligibility criteria for carbon sink projects.

13. Impact assessments: Ammending domastic regulation on EIA, actors in FCO must provide mandatory EIA for every forest sink project. Binding criteria and procedures for an EIA should be formulated. Emission trade: Domestic legal regimes may allow individual landowners to generate credits from carbon sink activities that may be traded on the international market. Domestic legal regimes could design the mechanism of emissions trade to induce both climate change mitigation and sustainable development.

14. Conclusion: FCO under CDM and voluntray market can help to promote China foresrty development, however, it can also pose potential risks to economic, environment and social development. Whether these risks are effectively addressed and the synergistic benefits of forest sinks for climate change mitigation and sustainable development are optimally promoted depends on the domestic legal and policy design.