RECENT EFFORTS IN US CLIMATE POLICY: IMPLICATIONS FOR FORESTRY AND AGRICULTURELydia OlanderSenior Associate DirectorNicholas Institute, Duke University

5th Forest and Agriculture Greenhouse Gas Modeling Forum April 2009

STATE AND REGIONAL INITIATIVES

US CAP-AND-TRADE POLICY

CONFERENCE OF THE PARTIES

International

Policy

1. Annex 1 targets

2. Developing country participation

3. REDD

4. CDM

5. US Critical

U.S. CAP-AND-TRADE

Inside the cap Emissions: power plants, factories, oil

refineries (gasoline)

Outside the cap Domestic

Land management emissions and sinks: forestry, agriculture, landfills

Emissions: fugitive emissions, industrial N2O International

Industry and energy in developing countries Deforestation in developing countries

Offsets

OUTSIDE THE CAP

POLICY OPTIONS: OUTSIDE THE CAP

Offsets

Allocation

Complement

ary Policy Under a mandatory

policy the term offset describes a

reduction in emissions or increase in

sequestration of GHGs produced by an entity outside of a compliance cap that is used by a capped entity to

offset its emissions.

POLICY OBJECTIVES FOR OFFSETS

1. Achieve more mitigation without increasing costs

ALTERNATIVE OFFSET SCENARIOSEPA ANALYSIS OF THE CLIMATE SECURITY ACT OF 2008: S. 2191 (MARCH 2008)

No offsets

15/15

Unlimitedoffsets

ACTIVITY TYPES (AND METHODOLOGIES)

Forests Afforestation/reforestation Forest management Avoided deforestation

Landfills Livestock Urban Forests Co-digestion (anaerobic digestion of manure

and waste) Natural gas transport fugitive emissions Coal mine methane

FROM EPA (2005) GREENHOUSE GAS MITIGATION POTENTIAL IN U.S. FORESTRY AND AGRICULTURE

0 500 1,000 1,500 2,000 2,500

MMT CO2 reductions relative to baseline

$1

$5

$15

$30

$50

$/t

CO

2

National Mitigation Cost Curve for Agriculture, Forestry, and Biofuel Offsets

Agricultural soil carbonsequestration

Forest management

Fossil fuel mitigation fromcrop production

Agricultural CH4 and N2Omitigation

Afforestation

Biofuel offsets

POLICY OBJECTIVES FOR OFFSETS

1. Achieve more mitigation without increasing costs

2. Bring in important constituencies

3. Provide a bridge to low carbon technologies (provide rapid results) Land use critical for this

CONCERNS ABOUT OFFSETS

1. Will work too well Diverts effort away from capped sector,

reduces investment in technology Question of the cap not a problem with offsets.

2. Won’t work Projects too complicated or too costly, or too

discounted to bring in sufficient participation

3. Not real reductions

ENVIRONMENTAL INTEGRITY CONCERNS: ARE REDUCTIONS “REAL”?

Project-based offset system

Voluntary transaction between two parties

Factors that can undermine net real reductions

Leakage: diverted emissions beyond project boundaries

(Non)Additionality: parties being paid for actions they would have taken anyway

Permanence: release of stored carbon (intentionally or accidentally) before or after project ends

SOLUTIONS TO THE “REAL REDUCTIONS” PROBLEMS

Quantitative limits Qualitative limits Accounting Adjustments

Discounting credits for compliance useBuffers (set aside allowances to cover

losses) Accept: Systemwide adjustment of

aggregate cap

WAXMAN DRAFT BILL _ OFFSETS1. Allows maximum 2 billion tons, split evenly

between domestic and international offsets

2. Credits 4 tons for every 5 submitted

3. Domestic program• Integrity Advisory Board & Administrator• Additionality: legal, 2009, common practice• Performance Std Baselines• Impermanence coverage (buffers or

insurance)• Adjustments for uncertainty (discounts)• Adjustments for leakage (discounts)• Early credits _ State programs (CCAR/RGGI)

4. International programs• Bilateral/multilateral• Sectoral offsets• UNFCCC (CDM) offsets• Reduced Deforestation offsets• Reduced Deforestation supplemental

ELIGIBLE ACTIVITIES?

ACTIVITY QUESTIONS

What types of activities should be eligible for the offsets program? How much potential mitigation will it provide? What is enough measurement certainty?

If we are sure about directional change but not quantity can we encourage activity based on the expected average benefit and a conservative discount?

Can we develop a reasonable performance standard against which to compare project performance? Are sufficient data available at national and regional

levels to develop a performance standard baseline? Do we have enough information to be reasonably

confident that leakage and impermanence risks can be estimated?

METHODOLOGY QUESTIONS What kind of performance baseline can we develop

for an activity given the data we have? How specific can we be to the context of that activity

(region, legal setting)? Do we know enough about drivers of leakage and

elasticities to reasonably predict leakage for the activity nationally or regionally? Can we develop look up tables to be used by

methodologies? Do we know enough about risks of impermanence

to estimate buffer set-asides(frequency of fires, storms, pest outbreaks?)

POLICY QUESTIONS

How much mitigation can domestic offsets supply?

How will an offsets program interaction with other policies? Biofuels production and renewable fuels standards Adaptation programs CRP/WRP Clean Water Act (TMDL)

Can we assess the effectiveness of an offsets program at a national level? How large does the program need to be before we

can distinguish its signal from the noise of other land use drivers?

Will we be able to distinguish leakage?

Energy supply; 26%

Transport; 13%

Residential and commercial buildings 8%

Industry; 19%

Agriculture; 14%

Forestry; 17%

Waste and wastewater 3%

Energy supply

Transport

Residential and commercial build-ings

Industry

Agriculture

Forestry

Waste and wastewater

EMISSIONS FROM DEFORESTATION AND LAND USE CHANGE

Meaningful participation by developing countries

USA

China

Indo

nesia

Brazil

Russia

Japa

nIn

dia

Germ

any

Mal

aysia

Canad

a

-1000

0

1000

2000

3000

4000

5000

6000

7000

Forestry and land use change CO2 emissions

Other CO2 emissions

Meyer-Mediera, et al. 2009. Data from 2000

AREAS OF AGREEMENT

Voluntary participation of forest countries for foreseeable future

Payments by developed countries for reductions in developing country forest emissions

National level accounting• Can be measured against a national reference or baseline

to determine performance• Allows reconciliation of subnational/project activities with

national assessments • Helps address leakage and additionality

WHAT SCOPE?

Maintenance Management

QUESTIONS

Could the US do national accounting as an assessment of the land use portion of an offsets program?

Will we have the remote sensing capabilities to detect other land use changes? Which ones?

Do we have sufficient knowledge on carbon density and interactions with other GHGs to expand beyond deforestation? How far? Deforestation->Degradation/Forest Management-

>Agricultural practices->pasture/grasslands->wetlands?

THANK YOU

2007 FARM BILL SEC. 2709. ENVIRONMENTAL SERVICES MARKETS.

USDA authorized to facilitate private sector markets for ecosystem services

(b) Establishment- The Secretary shall establish guidelines under subsection (a) for use in developing the following:

`(1) A procedure to measure environmental services benefits.

`(2) A protocol to report environmental services benefits.`(3) A registry to collect, record and maintain the benefits

measured.

A new Office of Ecosystem Services and Markets

WHAT BASELINE?

Table 1. Carbon Emissions and Carbon Stocks: Top 20 Countries

Forest carbon Emissions Per Year 2000-2005 (MtC)a Carbon Stocks in 2000 (MtC)c

Country MtC/yr Rank % of Total Reportedb

Country MtC Rank % of Total Reportedd

Brazil 519.1 1 24.81% Brazil 82510 1 26.40% Indonesia 485.7 2 23.21% Congo Dem. Republic 36672 2 11.73% Nigeria 123.2 3 5.89% Indonesia 25397 3 8.12% Congo Dem. Republic 86.6 4 4.14% Peru 13241 4 4.24% Burma (Myanmar) 65.7 5 3.14% Angola 11767 5 3.76% Zambia 63.5 6 3.03% Colombia 11467 6 3.67% Cameroon 60.4 7 2.89% Bolivia 9189 7 2.94% Philippines 49.6 8 2.37% Venezuela 7886 8 2.52% Venezuela 46.1 9 2.21% Central African Repub. 7405 9 2.37% Bolivia 41.3 10 1.97% Papua New Guinea 7075 10 2.26% Ghana 41.1 11 1.97% Zambia 6378 11 2.04% Tanzania 37.6 12 1.79% Cameroon 6138 12 1.96% Ecuador 34.6 13 1.65% Mexico 5790 13 1.85% Papua New Guinea 32.6 14 1.56% Congo 5472 14 1.75% Honduras 32.3 15 1.55% Mozambique 5148 15 1.65% Malaysia 31.3 16 1.50% India 5085 16 1.63% Paraguay 28.2 17 1.35% Burma (Myanmar) 4867 17 1.56% Uganda 26.3 18 1.26% Malaysia 4821 18 1.54% Angola 24.6 19 1.17% Gabon 4742 19 1.52% Cambodia 23.2 20 1.11% Nigeria 3952 20 1.26%

~~~~~~~~~~~~~~~~

Based on historic emissions from deforestation Or

Estimating future risk of deforestation (based on stock)

Figure from: Murray, Olander, and Lawlor. 2008. A Core Participation Requirement for Creation of a REDD market. Nicholas Institute Policy Brief

BASELINE APPROACHES

Griscom et al. 2008 Implications of REDD baseline methods for different country circumstances during an initial performance period

Entity Type Baseline Additionality Pools Included A Reversal-Uncertainty-Leakage

1605(b) Registry Base-year Base-year ■ ■ ■ ■ ■ ■ - - -

GFC Registry Base-year Base-year ■ ■ ■*■* - - -

CCX FullProtocol

Base-year Base-year ■ ■ ■* X X -

CCAR FullProtocol

Single-practice Performance Standard

Regulatory ■ ■ ■ ■* ■* ■* - X X

VCS FullProtocol

Single-practice Performance Standard

Regulatory, Barriers, Common Practice

■ ■* ■*■* ■* ■* X - X

HFF FullProtocol

Cohort Group Performance Standard

Cohort Group Performance Standard

■ ■ ■ ■ ■ ■* - - X

RGGI FullProtocol

Base-year Regulatory,Base-year/ FIA mean

■ ■ ■* ■* X - X

Overview of key components of seven protocols. Carbon pools include:■ – Live Tree; ■ – Belowground; ■ – Dead Tree; ■ – Litter; ■ – Soil; ■ – Wood Products.Optional pools are denoted with an asterisk.

FOREST MANAGEMENT PROTOCOLS EXAMINED

CUMULATIVE CREDITABLE CARBON

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

CCX GFC 1605b HFF CCAR VCS RGGI

av

ea

rag

e a

nn

ua

l cre

dit

ab

le c

arb

on

(me

tric

to

ns

ha

-1 y

r-1

)

Required Pools

All Pools

0

5,000

10,000

15,000

20,000

25,000

0 25 50 75 100

Year

met

ric to

ns c

arbo

n

CCAR protocolGross Carbon/yrCarbon in allowable poolsBaselineUncertainty(leakage, buffer)

COP 14 _ CATCH 22

SBSTA: Subsidiary Body for Science and

Tech Advice

AWG-LCA: The

Negotiators

Can’t recommend methodologiesfor measuring, monitoring, baselines …until they know the policy scope

Can’t develop policy scopeuntil they better understandthe methodologies