Carbon Credits from Forests Managed for Timber Production. Dr Nick O Brien Carbon Accounting Officer Forests NSW, Grafton

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1 Carbon Credits from Forests Managed for Timber Production Dr Nick O Brien Carbon Accounting Officer Forests NSW, Grafton

2 Introduction Forests NSW has been involved in the development of carbon trading in forestry since 1999 negotiations with Sydney Futures Exchange lead author in the Interim Australian Standard (AS Int) contributed to NSW Greenhouse Gas Abatement Scheme rules provided expert advice to the ISO Working Group on Climate Change Development of carbon accounting methods specific research (e.g. biomass relationships) Forests NSW Carbon Accounting System

3 Introduction (2) February 2005 Forests NSW became the first organisation authorised to create and sell NGACs from sequestration activities March 2005 Registered 166,005 NGACs, and sold majority of these represents the 2004 sequestration within 10,000 ha of hardwood plantations

4 Carbon accounting system 3 main components estimation of carbon stocks and carbon stock change current year long-term trend (100 years) uncertainty analysis record keeping system

5 Key elements for sequestration projects

6 Project eligibility activity must be within an eligible forest on Kyoto consistent land within NSW at maturity: height > 2 m, projected cover > 20% area greater than 0.2 ha established (planted or sown) on or after 1 January 1990 on land that was predominantly non-forest on 31 Dec exclude areas that were forest on 31 December 1989

7 Project eligibility activity must be within an eligible forest on Kyoto consistent land within NSW at maturity: height > 2 m, projected cover > 20% area greater than 0.2 ha established (planted or sown) on or after 1 January 1990 on land that was predominantly non-forest on 31 Dec exclude areas that were forest on 31 December 1989 predominantly non-forest is not defined Forests NSW has assumed at least 80% must be non-forest on 31 December majority of stands in the Forests NSW Carbon Pool have > 95%

8 Project eligibility eligible plantation area retained native vegetation removed forest (ineligible)

9 Carbon pools Forests NSW have 3 separate pools Tree C stock above- and below-ground uses inventory data, growth models and biomass relationships Debris C stock transfer of C from tree pool due to harvesting and mortality Soil C stock uses a conservative model based on published trends excludes understorey vegetation limited data only a small proportion of total stock stocks likely to be greater under forest than pasture

10 Quantification of sequestration methods will vary between providers information available size of carbon pool not always practical to achieve high precision cost of sampling degree of variability assume a conservative approach

11 Long-term trends in C stocks required for 100-Year Rule ensures equivalence of NGAC types cumulative sale of NGACs limited by long-term minimum carbon stocks in stands managed for timber production highly influenced by age-class distribution and harvest timing

12 Long-term trends in C stocks (2) age-class distribution Year

13 Long-term trends in C stocks (3) effect of age-class distribution Year

14 Long-term trends in C stocks (4) in stands managed for timber production highly influenced by age-class distribution and harvest timing maximise NGAC creation by spreading age classes and/or timing of harvesting easier for large forest growers small growers may have to join a managed pool current implementation makes it difficult for carbon pool managers to attribute credits to individual stands proportional benefit of individual stands constantly changing as new stands are added to the pool increased transaction costs for managed pools

15 Uncertainty analysis required for 70% rule Forests NSW uses a Monte-Carlo simulation process incorporates errors in: system inputs (e.g. stocking, height, basal area) model parameters (e.g. growth models, biomass relationships) incorporates correlations among inputs not always possible to quantify all errors expert opinion assume conservative values to avoid overestimation use sensitivity analysis to identify important inputs

16 Restriction on Use of Land registered against each land title ensure maintenance of sufficient carbon stocks for 100 years, so that there is not a reversal in the sequestration aims to ensure replanting after harvest part of Forests NSW normal business practice may be a significant deterrent to farmers

17 Risk Management Procedures normal business practice for Forests NSW fire pests and diseases risk minimised in Forests NSW estate geographic spread of resource large resource overall potentially higher risk for small forest growers resource concentrated in one area limited resources to minimise effects of fire etc.. but, risk can be spread between owners in a managed pool

18 Risk Management Procedures normal business practice for Forests NSW fire pests and diseases risk minimised in Forests NSW estate geographic spread of resource large resource overall potentially higher risk for small forest growers resource concentrated in one area limited resources to minimise effects of fire etc.. but, risk can be spread between owners in a managed pool equally as important for environmental plantings

19 Conclusions Forests NSW carbon accounting system is complex incorporates information from a wide range of sources level of sophistication not necessarily appropriate for smaller growers key elements must be considered by all carbon pool managers however: structure of systems will vary between pools managers must weigh potential increase in financial return from increasing sophistication against the cost of developing the systems

20 Forests NSW Carbon Accounting Team Penny Baalman Manager Carbon Accounting Nick O Brien Carbon Accounting Officer nicko@sf.nsw.gov.au Jayne Fitzpatrick Carbon Officer jaynef@sf.nsw.gov.au