Conflicts between biodiversity and carbon sequestration programs: economic and legal implications

Transcription

1 Ecological Economics 46 (23) 143/157 ANALYSIS Conflicts between biodivesity and cabon sequestation pogams: economic and legal implications Alejando Capaós a, *, Fédéic Jacquemont b a Institute of Economics and Geogaphy (IEG), Spanish Council fo Scientific Reseach (CSIC), Pina 25, 286 Madid, Spain b Envionmental Law Reseach Cente (ELRC), Institut fü Offentliches Recht, Johann Wolfgang Goethe-Univesität, Seckenbeganlage 31, Postfach , 654 Fankfut am Main, Gemany Received 12 Apil 22; eceived in evised fom 24 Apil 23; accepted 24 Apil 23 Abstact The economic and legal implications of the inteelationship between cabon sequestation pogams and biodivesity ae analyzed. Fistly, the cuent teatment of this issue unde the Famewok Convention on Climate Change pocess is pesented. Secondly, the implications of cabon incentives fo existing foests ae studied (basing the analysis on an extension of the Hatman model including cabon sequestation and biodivesity values). Then, the expected influence of this policy on decisions about which type of foest to use fo affoestation and efoestation is discussed. An optimal contol model is used to analyze the choice between two types of foests: (i) one with high timbe and cabon sequestation values but lowe, o negative, biodivesity values; and (ii) one with lowe timbe and cabon sequestation benefits, but with high biodivesity values. Finally, the elationship between the Kyoto pocess and the Convention on Biological Divesity is investigated, to assess whethe o not the latte is expected to have any influence on the outcomes obtained in the analysis above. Results show that ceating economic incentives fo cabon sequestation may have negative impacts on biodivesity, especially fo affoestation and efoestation pogams. # 23 Elsevie B.V. All ights eseved. Keywods: Climate change; Biodivesity; Cabon sequestation; Economics; Law 1. Intoduction * Coesponding autho. Tel.: / ; fax: / addesses: acapaos@ieg.csic.es (A. Capaós), jacquemont@ju.uni-fankfut.de (F. Jacquemont). At the 1992 Eath Summit in Rio de Janeio, wold leades ageed on a compehensive stategy fo sustainable development, meeting ou needs without compomising the ability of futue geneations to meet thei own needs. Two key ageements adopted in Rio wee the United Nation Famewok Convention on Climate Change (UNFCCC) and the Convention on Biological Divesity (CBD). The ultimate objective 1 of the UNFCCC is to achieve the stabilization of geenhouse gas concentation in the atmosphee... within a time-fame sufficient to allow ecosys- 1 At. 2. (UNFCC, 1992a) /3/$ - see font matte # 23 Elsevie B.V. All ights eseved. doi:1.116/s921-89(3)138-1

2 144 A. Capaós, F. Jacquemont / Ecological Economics 46 (23) 143/157 tems to adapt natually to climate change. The fist goal 2 of the CBD is the consevation of biological divesity, undestood as the vaiety of plants, animals, mico-oganisms and ecosystems. Both conventions ae thus concened with the consevation of the existing vaiety of ecosystems. Additional inteelationships aise due to the fact that climate change can be seen as one of the majo theats to biodivesity and that some of the actions poposed to mitigate climate change potentially imply danges fo biodivesity (ESCBD, 2). These elationships between the two conventions should imply a high level of coopeation between them. Unfotunately, this has not always been the case 3, mainly because each efes to a specific envionmental issue. They adopt a sectoial appoach, without taking into account the significant ecological intedependence existing between global envionmental poblems (e.g. foests contibute to climate change mitigation as teestial sinks 4, but topical foests ae also the most substantial esevoi of biological divesity (Pontecovo, 1999)). The Kyoto Potocol (UNFCCC, 1997) developed the UNFCCC and its aim is to enable the pactical implementation of climate policy. Eventhough the Kyoto Potocol has not yet been enfoced, its chances to do so have significantly inceased since the ageements eached in Maakech in Novembe 21. Theefoe, the moment has come to caefully analyse the implications of the Kyoto Potocol and the Maakech Accods (UNFCCC, 21). At a fist glance, the UNFCCC pocess aims at potecting foests and complements the CBD. Howeve, as the pimay goal of the Kyoto Potocol is to educe geenhouse gas emissions to 5% below 199 levels, some activities poposed unde the Kyoto Potocol to emove geenhouse gas emissions by sinks may have an advese impact on biodivesity 5 (ESCBD, 2). Thus, poblems of compatibility with othe intenational ageements elated to foests, such as the CBD, may aise 6. The aim of this pape is to study the economics and legal issues behind the inteactions between biodivesity pesevation and climate policy, and moe pecisely teestial sinks altenatives. Economics and law have to wok togethe to analyze igoously this issue, since the UNFCCC and the CBD pocess have eached such a high degee of complexity that modeling the expected outcomes of the signed ageements makes intedisciplinay wok necessay. We fist pesent the teatment of cabon offsets and biodivesity in the UNFCCC pocess, analyzing the economic incentives and the limitations set out in the Maakech Accods. Aftewads, we study, by means of two stylized economic models, the implications of cabon incentives fo existing foests, as well as the expected influence of this policy on decisions elating to the type of foest to be used fo affoestation and efoestation. We find out that negative impacts on biodivesity ae not vey likely with the economic incentives ceated fo foest management, while the incentives fo affoestation and efoestation may have a negative impact on biodivesity. Since the limits set out in the Maakech Accods do not seem to be sufficient to pevent these potential negative impacts, we analyze the ole that the CBD could play to mitigate these impacts. This obliges us to discuss the issue of compatibility between two intenational teaties, since the Maakech Accods ae a development of the UNFCCC and theefoe not diectly elated to 2 At. 1. (UNFCC, 1992b). 3 Nevetheless, these elations have shown up in official documents (e.g. FCCC/SBSTA/21/INF.3 o FCCC/SBSTA/ 21/L.14). 4 Plants absob CO 2 fom the atmosphee though photosynthesis. A potion of this CO 2 is eleased again, but a pat is used by plants to build up thei biomass, libeating oxygen. This implies a eduction in atmospheic CO 2, but its effect is constained by the life-cycle of the biomass, since the cabon stoed is finally eleased though oxidation. 5 See FOEI et al. (2) fo an oveview of these potential negative impacts and thei eal-wold implications. 6 Othe elated instuments ae (non exhaustive list): the Foests Pinciples, Agenda 21 (section II, chapte 11), the United Nations Convention to Combat Desetification, the Intenational Topic Timbe Ageement, the Washington Convention on Intenational Tade of Endangeed Species of Wild Floa and Fauna, o the RAMSAR Convention on Wetlands of Intenational Impotance especially as Watefowl Habitat.

3 A. Capaós, F. Jacquemont / Ecological Economics 46 (23) 143/ the CBD. We finish ou discussion by exploing appoaches to ovecome potential conflicts between these two intenational teaties. 2. The Maakech Accods Sinks wee one of the majo concens that esulted in the failue to each an ageement at the Sixth Confeence of the Paties (COP6) in The Hague (Novembe 2). In the inteest of consensus, the opposition of the Euopean Union and othe sink-skeptics in Bonn (COP6.bis) and Maakech (COP7) was significantly educed (Mülle, 21). This led to an ageement with geneous ules in egad to sinks. Nevetheless, some limitations wee aised and some efeences to biodivesity wee included in the Maakech Accods 7 (UNFCCC, 21) Limitations 8 Foest management cabon cedits o debits 9 can be accounted, fistly 1, up to the amount of debits esulting fom aticle 3.3 of the Kyoto Potocol (i.e. affoestation, efoestation and defoestation), with a maximum amount of 9. megatons of cabon times five 11 (enabling thus to compensate defoestation by foest management). Additional cedits fo foest management can be 7 If no special efeence is made all decisions and daft decisions mentioned heeafte can be found in UNFCCC (21). 8 Caps wee set in Bonn (COP6.bis) in Decision 5/CP6 (FCCC/CP/21/L.7) and incopoated, with some modifications, in the Maakech Accods (UNFCCC, 21). Heeafte the paagaphs ( ) will efe to the Maakech Accods. Nevetheless, in most cases, the fomal decision emains the Bonn ageement, since seveal paagaphs have been included in the Maakech Accods in the daft decision -/ CMP.1 Land use, land-use change and foesty (fom now on DD-/CMP1), which is not yet fomally adopted (this is a daft poposed fo adoption in the fist Meeting of the Paties to the Kyoto Potocol). 9 Cedits is used whee emovals ae lage that emissions on a unit of land and debit when the opposite is tue. 1 1 of the Annex DD-/CMP1. 11 The commitment peiod is 5 yeas long. In Bonn, the limit was set at 8.2 MtC (D5/CP6; FCCC/CP/21/L.7). issued 12 up to the paticula cap established 13 fo each Annex I county (OECD and economies in tansition), including cedits eaned fo foest management by means of Joint implementation 14 in othe Annex I counties. The cap 15 set to the clean development mechanism 16 (CDM) equies that cedits eaned by a Paty though eligible land use, land use change and foesty (LULUCF) activities unde the CDM shall not exceed 1% of base yea emissions of that Paty times five. This cap has to be undestood in conjunction with the limitation 17 of the CDM to affoestation and efoestation, implying hence a cap to these activities. All caps can be seen as absolute limits. This featue is highly elevant fo ou analysis, as shown below. It is also wothwhile to emak that caps do only efe to foest management and to affoestation and efoestation while undetaken as CDM (not when they ae caied out inside an Annex I county, diectly o via joint implementation). Othe LULUCF activities 18 ae fee of limitations (i.e. copland management, gazing land management and evegetation ). Hence, no cap on sinks was decided in Bonn /Maakech Biodivesity Some diect efeences to biodivesity can be found in the Maakech Accods. Paties 19 affim as one of the pinciples that goven LULUCF Annex DD-/CMP1. 13 Appendix to the Annex DD-/CMP1. The limit fo Russia was aised fom to 33 MtC in Maakech (D12/CP7). 14 Joint implementation (at. 6 Kyoto Potocol) is the name given to the flexible mechanism that enables to account in one Annex I county (OECD and economies in tansition) the eduction of emissions achieved in anothe Annex I county Annex DD-/CMP1. 16 The clean development mechanism (at. 12 Kyoto Potocol) is the flexible mechanism that enables to account in one Annex I county emission eductions achieved in Non- Annex I counties Annex DD-/CMP1. 18 Paties themselves decide which of these activities ae applied duing the fist commitment peiod ( 6 and 7 Annex DD-/CMP1).

4 146 A. Capaós, F. Jacquemont / Ecological Economics 46 (23) 143/157 activities that the implementation of LULUCF activities contibutes to the consevation of biodivesity and sustainable use of natual esouce (emphasis added). Paties 2 also equest the subsidiay body fo scientific and technological advice (SBSTA) to develop definitions and modalities fo including affoestation and efoestation pojects unde the CDM in the fist commitment peiod, taking into account... envionmental impacts on biodivesity and natual ecosystems. Neithe contibutes no taking into account can be undestood as concete limitations, especially not the latte, so that biodivesity consevation has not been included as a clea constaint to LULUCF activities (see Section 5 fo a discussion of the possibility to see the CBD as such a constaint). In addition, a diect efeence to biodivesity is included in the definition 21 of foest management. Howeve, including biodivesity only in the definition of foest management and not in the definitions of othe activities, such as affoestation o efoestation, has the dangeous intepetation that biodivesity consevation is only necessay in the case of foest management. Nevetheless, aticle 2 of the Kyoto Potocol balances this assetion by efeing to sustainable management pactices in elation to affoestation, efoestation and defoestation as a policy of potection and enhancement of sinks 22. Howeve, the intepetation of what sustainable management coves is left to the Paties. Finally, the SBSTA is equied to investigate the application of biome-specific foest definitions fo the next commitment peiods 23. Hee, the elaboation of the definition and modalities fo sinks pojects unde the CDM seems to adopt the concen of bio-divesity potection, but this is just a wish fo the futue. 3. Foest management If the Kyoto Potocol finally comes into foce, Paties will ean cedits fo LULUCF activities. Theefoe, Paties will pobably establish incentive schemes to incease the amount of cabon units issued by means of these activities. We now tun to analyze the expected outcomes of these incentives, focusing on foest management and on affoestation and efoestation (since these ae the activities expected to account fo the lion s shae). In this heading we assume the existence of a foest, that the type of foest is not going to be changed and that no eal isk of disappeaance exists. These ae ealistic assumptions in contexts whee defoestation is no longe elevant and whee foests ae potected by effective laws. In this scenaio, the main 24 decision of the agent is the havesting age (the otation). Binging this scenaio to the Kyoto famewok, we ae examining a foest management altenative that could be incopoated by means of aticle 3.4 of the Kyoto Potocol. If the foest type is changed (i.e. changing the species), the analysis is close to the situation descibed in the next section. This possibility has not been explicitly uled out by the definition of foest management poposed in the Maakech Accods. Nevetheless, and as stated above, the definition of foest management includes a diect efeence to biodivesity, so that aggessive stategies should be uled out 25. In the following sub-headings we discuss the diffeent objective functions of the agent if he: (i) takes into account timbe values exclusively; (ii) incopoates cabon sequestation values; and (iii) integates also biodivesity values of the DD/-CMP (e) of D11/CP (f) in Annex DD-/CMP1. 22 At. 2.1(a)(iii) Kyoto Potocol (UNFCCC, 1997) (b) D11/CP7. 24 An altenative foest management stategy to incease sequestation is to use fetilisation poducts. Fetilisation can have negative impacts on biodivesity (ESCBD, 2), but we do not conside it in this study (it supposes a change in gowth functions). 25 In addition, cedits fo foest management can only be eaned inside Annex-I counties (OCDE and economies in tansition).

5 A. Capaós, F. Jacquemont / Ecological Economics 46 (23) 143/ Timbe It is well known that the coect objective function to maximize timbe values is the Faustmann fomula, which maximizes the infinite flow of net evenues (Samuelson, 1976). The Faustmann objective function can be witten in a simple fom as (assuming clea-cutting): PV W G(T) e T [1e T e 2T ] G(T)eT (1) 1 e T whee PV W is the pesent value of timbe; G, the timbe net value function 26 ;, the discount ate; and T, the otation peiod. The typical fom of the timbe value function inceases with age up to a point whee timbe is too old fo most commecial uses and its value deceases with age, mainly due to the influence of diseases and malfomations (we assume G?(T)/ in the fist stages and Gƒ(T)B/, assuming that G?(T) 5/ is possible fo long otations) Cabon sequestation 26 G(T) is used, instead of P w W(T) with P w constant, as in the following heading, to allow fo the influence of age on timbe pice. Englin and Callaway (1993) and Van Kooten et al. (1995) poposed, independently, vey simila appoaches to modify the Faustmann fomula in ode to incopoate cabon sequestation values. Basically, thei poposal consists in valuating each ton of cabon sequesteed with a given pice P c, which is paid to the foest owne when cabon is sequesteed and is paid by the owne when cabon is eleased. The fist question that aises is whethe this appoach is adequate to model the expected outcomes of the Maakech Accods. Accoding to the Maakech Accods, and fo units issued by means of aticle 3.4 of the Kyoto Potocol, cabon sequesteed in a given yea is added to total allowances (added to the assigned amount of the Paty, neglecting any tempoality issue) and cabon libeated is consideed as an emission 27 (subtacted fom the assigned amount). Hence, if incentives ae established to maximize national sequestation though foest management, the schema descibed above is appopiate 28. Concentating only on cabon elated tems, the objective function can be witten as follows (the oveall objective function fo the agent would be fomed summing up Eqs. (1) and (2)): PV c g T P c g?(t) e t dt P c h?(t) e t dt g T 1 e T (2) whee PV c is the pesent value of cabon sequestation; P c, the cabon pice; g(t), the cabon sequesteed at each moment duing the gowth of the tees (incopoating above-gound biomass and below-gound biomass in the teminology of the Maakech Accods 29 ); h(t) is the cabon sequesteed in deposits afte havesting (including litte, dead wood and soil oganic cabon 3 ); and t is time. As it occus fo timbe in the fist stages, the ate of cabon sequestation is positive and deceases with the age. Howeve, the total amount of cabon in the foest does not necessaily decease, as it occus fo the value of timbe in old foests. Diseases and malfomations influence the commecial value of timbe but they do not significantly educe the cabon content of the biomass. Hence, we assume 31 g?(t)]/ and gƒ(t)b/. Since Annex DD-/CMP1. 28 Howeve, the cap imposed on foest management (see pevious section) implies that incentives ae only necessay if the cap is not supassed without additional measues. If no incentive measues ae established no negative impacts fo biodivesity will occu by definition (since we only conside distotions not pesent in the cuent situation) Annex DD-/CMP.1. 3 idem. 31 g ƒ(t)b/ might not be tue fo the fist yeas, but it is an adequate assumption fo the ages whee the otation is decided.

6 148 A. Capaós, F. Jacquemont / Ecological Economics 46 (23) 143/157 the libeation of cabon is gadual, though oxidation, h(t) is a deceasing function (with h?5/ and hƒb/, indicating that cabon libeation occus mainly in the fist moments afte cutting). This last function is not applicable if Havested Wood Poducts 32 ae finally not taken into account, since this option is equivalent to assuming instantaneous libeation of the sequesteed cabon (the decision on Havested Wood Poducts has been left fo futhe negotiation ounds 33 ) Biodivesity As it is known, a standing foest can have othe values apat fom timbe and cabon sequestation. The theoetical incopoation of these values was poposed by Hatman (1976), using eceational values as an example (biodivesity is anothe example of a value of a standing foest). The Hatman objective function can be witten (showing again only the non-timbe pat of the equation): PV B g T P b B(t) e t dt (3) 1 e T whee PV B is the pesent value fo biodivesity values; B, the biodivesity function; and P b, the biodivesity shadow pice. The biodivesity value function typically inceases monotonically with age (in geneal no easons exist to expect it eve to decease; thus, we assume B?(t)]/). The aggegate objective function (PV S ) is constucted summing up the diffeent objective functions (Eqs. (1) /(3)) (Englin and Callaway (1995) analyze numeically a simila equation and Capaós et al. (23) pesent an application with eceation): 32 It efes to the accounting of the cabon stoed in wood poducts afte havesting. 33 FCCC/SBSTA/21/L.12. PV S T G(T)e g T P c g?(t) e t dt gt 1 e T T P c h?(t) e t dt g P b B(t)e t dt Fist ode conditions can be shown to be (afte diffeentiating with espect to T, setting it equal to zeo and eaanging): [G?(T)P c (g?(t)h?(t))p b B(T)] 1 e T G(T) P c g T g?(t) e t dt h?(t) e t dt P b g T B(t) e t dt gt (4) (5a) Intepetation of this fomula follows conventional lines, weighting the value of waiting an additional yea (left hand side) against the inteest fogone by not investing the futue monetay steam associated to felling at T (ight hand side). The fist tem of the left hand side accounts fo the incease in the value of timbe, the second (in backets) fo the incease in cabon sequesteed and the thid fo the value of biodivesity. The fist tem of the ight hand side accounts fo the inteest ate on the numeato and fo the multiple otation aspect of any vesion of the Faustman fomula on the denominato. The second tem incopoates the monetay steam associated to futue otations fo each of the thee benefits consideed. That is the outcome if the agent intenalizes cabon sequestation as well as biodivesity. If this is the case, its decision will lead to the social optimum (we assume that the society s objective function is Eq. (4)). The poblem is that cuently only G(T) is intenalized by pivate agents and that the implementation of the Kyoto Potocol will only intenalize cabon values, leaving biodi-

7 A. Capaós, F. Jacquemont / Ecological Economics 46 (23) 143/ vesity out of the maket and theefoe out of the decision pocess. To coect this deviation, the conventional appoach is to estimate P b in ode to establish an incentive to ensue that the agent s stategy coincides with the social optimum. The poblem aises fom the difficulty to estimate P b and B (especially P b ), which will pobably imply that biodivesity will emain outside of the makets. The influence of patial intenalization of extenal costs and benefits on optimal management is not easy to establish egadless of the paticula fom of the diffeent valuation functions involved and of the discount ate applied by the agent. Howeve, a moe detailed discussion of Eq. (5a) enables to detemine which ae the oveall tendencies. Fo this pupose it may be useful to use a less simplified vesion (Eq. (5b)): [G?(T)P c (g?(t)h?(t))p b B(T)] (1e T e 2T ) G(T) P c g T P b g T g?(t) e t dt h?(t) e t dt g T B(t)e t dt (5b) Setting P c /P b / ineq. (5b) o Eq. (5a) the oiginal Faustman fomula is ecoveed. The left hand side of Eq. (5b) simplifies to G?(T), which declines with age. This is weighted up, on the ight hand side of Eq. (5b), with a non-discounted value (G(T)), and a set of discounted values (accounting fo the futue otations). Contay to the est of the benefits analyzed below, the timbe pat of the function offes a positive undiscounted value at the moment of felling. This usually implies that the timbe pat of Eq. (5b) holds fo elatively shot otations, especially with high discount ates as used by pivate agents (since G(T) is not discounted fo the cuent otation, it inceases togethe with the discount ate ). Setting G(T)/P b / the cabon pat of Eq. (5b) is isolated. The left hand side, waiting one additional yea, has two positive tems which only slightly decline with age (ecall h? B/). On the ight hand side of Eq. (5b), all futue benefits ae discounted since they ae associated with the gowth of the next geneations, while costs also appea (the integal of h?(t) is negative since h?(t)b/, in addition, since hƒ(t)b/ the costs ae close to the time of felling). This enables us to expect that, at least fo high discount ates, the optimal otation focusing on cabon sequestation will be eached at an olde age than fo the commecial benefits (if it is at all optimal to cut at any moment in time). This is especially tue if gadual payment associated to cabon libeation is substituted by an instant payment fo all the cabon contained in the timbe felled, as is the case if Havested Wood Poducts ae not consideed (this would imply an undiscounted cost associated with felling). Finally, setting G(t)/P c /, Eq. (5b) focuses on biodivesity. The compaison is now between the full value fo biodivesity in the yea (left hand side)*/not only the incease in this value*/vesus a discounted value epesenting the futue benefits of biodivesity associated with the gowth of the next geneation of tees afte felling (ight hand side). In addition, since the value of biodivesity does not geneally decease with age (B?(t)]/) the left hand side of Eq. (5b) inceases with time (contay to the case descibed fo timbe above). The ight hand side also inceases, but at a lowe ate (due to the influence of the discount ate), so that the two sides will in geneal neve equalize. Hence, the expected outcome is that the optimal stategy, fom a biodivesity point of view, would be to neve cut (once moe, this is especially tue fo high discount ates). To sum up, the expected outcome if only cabon is intenalized*/in addition to the commecial values aleady povided*/is that the optimal otation age would incease; since the new tems incopoated in Eq. (5b) tend to aise this otation. But this incease is expected to be lowe than the one that would occu if biodivesity wee also intenalized. Thus, poviding incentives to pivate agents to take into account cabon sequestation when setting the otation peiod of a managed foest should have positive effects fo climate

8 15 A. Capaós, F. Jacquemont / Ecological Economics 46 (23) 143/157 change and positive impacts on biodivesity (o at least no majo negative impacts). Empiical studies confim these expectations. Englin and Callaway (1993), Van Kooten et al. (1995), Romeo et al. (1998) and Campos and Capaós (1999) have shown that incopoating cabon sequestation in the objective function of the agent implies longe otation peiods, at least fo high discount ates. Englin and Callaway (1995) analyzed numeically the envionmental impacts of cabon sequestation maximization egimes, finding that, fo high discount ates, the extenalities associated with old foests ae enhanced in egad to timbe maximization stategies. 4. Affoestation and efoestation Unde this heading the choice between two types of foests, when efoesting 34 agicultual land, will be fomalized and analyzed (Van Kooten (2) analyses the efoestation with one species, leaving biodivesity out). Accoding to the Maakech Accods, Paties can issue cedits though affoestation and efoestation by means of aticle 3.3 of the Kyoto Potocol if the land is located in an Annex I county that atifies the Potocol (o eventually via aticle 6 and Joint implementation) and by means of aticle 12 (clean development mechanism) if the land is located in any non-annex I Paty. Thus, and as discussed in the pevious section, incentives will pobably be ceated to get foest manages to take cabon sequestation into account. Fo affoestation and efoestation undetaken inside an Annex-I county the incentive schema will be pobably simila to the one descibed in the pevious section (associating payments with the actual cabon budget). On the contay, fo cedits eaned by pojects (CDM) seveal methods have been poposed, but not in all of them payments ae stictly elated to the cabon budget. The decision on which method to use has not been taken yet. Nevetheless, the model 34 Affoestation and efoestation will be teated as synonyms, official definitions can be found in 1(f) Annex DD-/CMP1. poposed in this heading coves all of them and the esults obtained ae not influenced by the method finally adopted. It is usually accepted that biodivesity inceases when degaded and agicultual lands ae conveted into foests (IPCC, 2). Howeve, this is only tue in egad to indigenous foests and not when the efoestation is actually the setting up of apidly gowing alien species plantations. It is also not tue whee pe-existing land uses have high biodivesity values (IPCC, 2). Matthews et al. (22) have quantified bid biodivesity associated to efoestations in the US and have found futhe evidence of the potential negative impacts of efoestation egimes. To fomalise the decision pocess, we will assume that the agent can choose between two types of foest and that type 1 has a geate cabon sequestation potential while type 2 has geate biodivesity values (C 1 /C 2 and B 1 B/B 2 ; using the notation intoduced below). A typical example of this situation is when efoestation with a fast gowing alien species 35 (foest, o plantation, type 1) is compaed with a natual indigenous species altenative (foest type 2). Define: L / total land available fo efoestation; a(t) / agicultual land at t (state vaiable); f 1 (t)/efoested land of foest type 1 (state vaiable); f 2 (t)/efoested land of foest type 2 (f 2 (t) can be eliminated fom the model as state vaiable, since f 2 (t)/l/a(t) f 1 (t)); u i (t)/total aea efoested at time t of foest type i (i/1, 2) (contol vaiables); k i (u i )/efoestation cost of type i (function of the amount of land efoested in a given yea); /discount ate; A(x): a spaceelated function descibing annual net evenues associated to pesent agicultual uses (this vaiable includes commecial as well as non-commecial values). Define futhe F i (x) as a space-elated function fo the annual net evenues of foest land type i 35 Fast gowing species do not always yield highe cabon sequestation pe hectae when matue, but since sequestation occus faste the pesent value fo these species of the sequestation is geneally highe, due to the effect of the discount ate.

9 A. Capaós, F. Jacquemont / Ecological Economics 46 (23) 143/ (i/1, 2). These functions ae supposed to have thee tems: F i (x)/p w W i (x)/p c C i (x)/p b B i (x), whee W i (x), C i (x) and B i (x) epesent physical quantities associated with timbe, cabon sequestation and biodivesity, espectively and P w, P c and P b the pices, eal o shadow ones, associated with these thee components. Foest-elated data ae stongly time-elated but, fo modeling easons, it is inteesting to annualize them, ensuing that investment incentives ae not changed 36. This has the additional advantage, aleady mentioned, that the model woks egadless of the final method adopted to intenalize cabon sequestation fo poject-elated units (as fo the CDM). The objective function if the agent incopoates all benefits can be witten: max V 2 g P(t) ga(t) P(t) e t dt A(x) dx gf1 Laf g 1 F 1 (x) dxk 1 (u 1 ) u 1 (t) F 2 (x) dxk 2 (u 2 ) u 2 (t) (6a) (6b) and fist ode conditions fo the optimal contol model can be shown to be (see Appendix A): F 2 (L a f 1 ) k 2 () A(a) F 2 (L a f 1 ) k 2 () F 1 (f 1 ) k 1 () (7a) (7b) Taking Eq. (7a) and Eq. (7b) togethe and witing them out: 36 Calling z(t) to the eal flow of net benefits associated to any of the values descibed above (z (t ) could also be decomposed in quantity times pice), the pesent value of the investment is: PV z f z(t) et dt and the annualised value Z which assues equal investment incentives is: PV z Z ; ZPV z f z(t)e t dt:/ P w W 2 (L a f 1 ) P c C 2 (L a f 1 ) P b B 2 (L a f 1 ) k 2 () P w W 1 (f 1 ) P c C 1 (f 1 ) P b B 1 (f 1 ) k 1 () A(a) (8) The intepetation of Eq. (8) once moe follows conventional lines. In the steady-state equilibium the evenues of efoesting one additional hectae of foest type 2 have to be equal to the evenues associated to one additional hectae efoested of foest type 1, and to the evenues associated to the agicultual use of that hectae. The poblem hidden in Eq. (8) is again that only P w and the commecial pat of A ae actually povided by existing makets and that the poposed maket fo cabon will intenalize only P c C. Howeve, if this is caied out egadless of the influence on P b B, the social optimum will be eached only by coincidence. The issue is moe elevant since C and B will geneally go in opposite diections, so that an altenative established in ode to maximize C would educe B, o even make it negative. If only P c C is intenalized, and with the assumptions made fo foests types 1 and 2, the expected outcome is a suboptimal oveplantation of foest type 1. That is, in equilibium the agent will equalize Eq. (8) egadless of the biodivesity tem, and since P b B 1 B/P b B 2 the last unit would have gone to efoest with foest type 2 if all benefits wee consideed. Depending on the fom of the cabon and biodivesity functions, exclusive intenalization of cabon would lead to an even wose situation fom the point of view of society than the cuent one (if the loss in biodivesity is highe than the gain due to the incease in cabon sequestation). As stated in the pevious section, the conventional solution to this deviation equies the economic valuation of biodivesity, with the poblems aleady mentioned. An altenative appoach is to wok with the imposed constaints, to assess whethe o not this could bing the agent s stategy close to social optimality (the possibility to see the CBD as such a constaint is discussed in the next section). As descibed above, the Maakech Accods have set an absolute cap fo affoestation and

10 152 A. Capaós, F. Jacquemont / Ecological Economics 46 (23) 143/157 efoestation in the CDM (not fo affoestation and efoestation in Annex I counties). Howeve, this altenative povides no incentive to favo foest type 2. This kind of estiction implies that the choice between species is done egadless of the constaint until it becomes binding, favoing theefoe foest type 1. Once the estiction becomes effective, no additional foestation occus at all. Anothe altenative would be to limit the total amount of cabon sequestation pe unit of land to which an economic value may be given. This is a staightfowad stategy to educe o emove the influence of the diffeent amounts of cabon sequesteed by the two types of foests. If the maximum amount of cabon pe unit of land taken into account (C m ) is set such that C m /C 2, the diffeences in cabon sequestation between the two species disappea and the agent will choose the type of foest to set up focusing on timbe (since biodivesity is not intenalized). Nevetheless, both types of foest would be favoed compaed to agicultual land due to the intenalization of cabon sequestation, so that the total aea efoested would incease (maintaining the cuent popotions between foest type 1 and 2). This kind of estiction is justified as long as the diffeence in biodivesity values is highe than the values intenalized by the maket and theefoe consideed by the pivate agent (timbe and cabon sequestation). Retuning to the legal texts, in the Kyoto-Maakech Potocol no pe hectae cap was included. This option was timidly poposed by the IPCC, acknowledging at the same time the difficulties to incopoate non-cabon envionmental and social concens into quantitative limits on cabon cedits (IPCC, 2). Nevetheless, a consevative value fo the majo types of egions could educe the incentives to plant fastgowing alien species. impact on biodivesity. Such a esult may conflict with the aims of the Biodivesity Convention o othe intenational noms elated to foests. The question that aises is, which instument should pevail when two ovelapping conventions diffe with egad to thei objectives o the actions to be undetaken An oveview of the Convention on Biological Divesity The Convention on Biodivesity (CBD) aims at the consevation of biological divesity, the sustainable use of its components and the fai and equitable shaing of the benefits aising fom the utilization of genetic esouces 37. The convention (Wolfum, 1996) applies to all pocesses and activities which have o ae likely to have a significant impact on the consevation and sustainable use of biological divesity undetaken within Paties juisdiction o contol 38. The CBD calls upon Paties to adopt national policies consistent with the consevation and sustainable use of biological divesity 39. It equies Paties to: (i) egulate o manage biological esouces elevant to the consevation of biological divesity; (ii) pomote the potection of ecosystems; (iii) ehabilitate and estoe degaded ecosystems; and (iv) pevent o eadicate alien species, which theaten ecosystems. In addition, it equies identifying, monitoing and egulating pocesses and activities likely to have a significant advese impact on biodivesity 4. Unfotunately, the woding used by the CBD to attain these objectives is athe weak 41. Theefoe, the CDB fails to povide stong binding ules and its implementation only elies on the good faith of the States (as long as they have soveeign ights ove thei own biological esouces). The CBD 5. Inteelations between the Convention on Climate Change and the Convention on Biological Divesity As seen above, some foest pactices with the view to enhance cabon sinks may have an advese 37 At. 1 CBD (UNFCC, 1992b). 38 At. 4 CBD. 39 At.6 CBD. 4 At. 8 c), 8 d), 8 f), 8 h), & 7 c) CBD. 41 Each Contacting paty shall in accodance with its paticula conditions and paticulaities... o, Each Contacting Paty shall, as fa as possible and as appopiate... is used in at. 7 & 8 CBD. See Swanson (1999).

11 A. Capaós, F. Jacquemont / Ecological Economics 46 (23) 143/ also lacks of any eal financial incentives, which could have balanced the economic benefits esulting fom timbe and cabon sequestation maximization stategies (Wolfum, 1996; Bothe, 1996; Swanson, 1999). In tems of the models pesented above, P b will be zeo in the maximization poblems faced by pivate agents. Nevetheless, the CBD has ecognized biodivesity loss as a global envionmental poblem and has pomoted its consevation to being a global concen fo humankind. As well, the CBD has established a quasi-univesal egime, encompassing an ecosystem appoach 42. Futhemoe, the Thid Confeence of the Paties to the CBD ecognized foests as playing a cucial ole in maintaining global biological divesity The compatibility issues of two ovelapping teaties and the intenational law of the teaties It is commonly admitted that thee is no hieachical stuctue to intenational law and that teaties ae equally binding, with the exception of teaties endosing ules of jus cogens that poduce an ega omnes effect (Nguyen et al., 1987). Neithe the CBD no the Kyoto Potocol contains such a ule. Theefoe, if the Kyoto Potocol finally entes into foce, the Kyoto Potocol and the CBD will be on equal standing. In the case of conflict between these two intenational ageements, aticle 3 of the 1969 Vienna Convention on the Law of the Teaties (1969 Vienna Convention), which egulates such situations, seems athe inappopiate 44. Fistly, the lex posteio pinciple applies only to successive teaties that goven the same subject matte 45. The CBD and the Kyoto Potocol do not 42 In Octobe 21, the CBD had 183 paties ( Concening the ecosystem appoach, see Decision V/6, UNEP/CBD/5/ UNEP/CBD/COP/3/16, 12 Septembe The 1969 Vienna Convention on the Law of the Teaties applies to witten ageements govened by intenational law concluded between States (at. 1). (Nguyen et al., 1987). 45 If all paties to the late ageement ae also paties to the ealie, the ealie is only applicable as fa as it is consistent with the late (at Vienna Convention). goven the same envionmental matte, they meely ovelap on one issue, while thei pimay aims ae diffeent. This featue also excludes the application of the lex specialis pinciple 46. Secondly, the Kyoto Potocol lacks a conflict clause, which would pevent conflicts of obligation by establishing a pecedence of those instuments adopted befoe the espective teaty (Wolfum and Matz, 2). In contast, the CBD contains such a clause (aticle 22.1), which allows fo the pecedence to a cetain extent of ights and obligation that bind the contacting Paties at the time of atification. Howeve, this exemption applies to obligations and ights that existed befoe the CBD was atified. Futhe, this exemption is stictly limited to the extent that the execise of these ights will not theaten biological divesity, leading to the de facto pecedence of the CBD in elation to othe ageements (Wolfum and Matz, 2). A conflict between the Kyoto Potocol and the CBD would appea if the fome would impose any obligation to violate the ules of the latte. As the use of sinks in the Kyoto Potocol is voluntay, such a conflict will pobably not occu. Nevetheless, the Kyoto Potocol may povide incentives that could violate the CBD, and these incentives could be seen as a souce of conflict between the two Conventions. A good example fo such a situation is the intoduction of alien species: (i) as we have shown in the section on affoestation and efoestation, the Kyoto Potocol povides incentives fo affoestation and efoestation pactices with fast gowing species, geneally alien species; and (ii) the CBD bans the intoduction of alien species which theaten ecosystems. In pinciple, the limitations included in the CBD should be sufficient to avoid the use of alien species in LULUCF activities 47. Howeve, the lack of concete and stingent ules in the CBD and the vague language used implies that this povision cannot 46 In the case of two teaties govening the same subject matte, the moe specialised ules pevail. 47 In this egad, the CBD could be seen as an additional limitation only applicable to thei Paties, so that Paties to the Kyoto Potocol not included in the CBD could have a compaative advantage (howeve, almost all counties have signed the CBD).

12 154 A. Capaós, F. Jacquemont / Ecological Economics 46 (23) 143/157 be seen as a eal limitation to the maket foces invoked by the Kyoto Potocol. That is, the espect of biodivesity may not be seen as a constaint in the maximization poblem faced by the pivate agents which was discussed above (in addition, and as aleady stated, P b will be peceived as being equal to zeo by these agents) A econciliation appoach at the state level Fom the pinciple of intenational law pacta sunt sevanda 48, paties to an intenational ageement ae equied to fulfill thei commitments in good faith, without violating existing obligations fom pevious intenational instuments. Stating fom this assumption, some authos (Pontecovo, 1999) ague that States, in implementing potentially-conflicting intenational obligations, must adopt a hamonizing appoach, taking into account pe-existing commitments. Futhemoe, instuments such as the CBD and the Kyoto Potocol ae common inteest teaties 49, which implies that Paties to both ageements ae unde the moal obligation to econcile the povisions of these teaties in the light of a common inteest clause 5. This appoach seems to be endosed by the Kyoto Potocol, which contains such a common inteest clause in aticle 2.1: taking into account its commitment unde elevant intenational envionmental ageements 51. Howeve, the fact that States ty to avoid a binding egime fo foests, delaying the adoption of a biodivesity foesty egime unde the CBD, shows that States eject to be bound by intenational stingent standads fo the sustainable use of foesty (Taasofsky, 1996; Henne and Faki, 1999). 48 Pacts have to be honoued (at. 26 of the 1969 Vienna Convention). 49 Because they deal with global envionmental poblems, establish geneal egimes, pinciples and specific standads. 5 Moeove, the intepetation by States of sinks-elated povisions should encompass non-legally binding instuments elevant to foests, such as the Foest Pinciples, as they expess the opinio juis (Taasofsky, 1996). 51 This intepetation is coheent with the histoical elaboation of this aticle (Depledge, 2). On the contay, this aticle is too geneic to be consideed a conciliation clause in the sense discussed in the pevious sub-heading. Thus, they define themselves, in good faith with elevant intenational envionmental ageements, national citeia fo a sustainable use of foest An integated appoach though inteinstitutional co-opeation Aticle 5 of the CBD invites Paties to coopeate whee appopiate though competent intenational oganisations on mattes of mutual inteest fo the consevation and sustainable use of biodivesity. Such co-opeation should enhance the implementation of coodinated measues on common aeas of action such as foesty. This appoach was endosed by the Secetaiat of the CBD, when issuing a note that was addessed at the Sixth Confeence of the Paties of the Climate Change Convention. The note distinguishes two goups of collaboation activities 52 : (i) one is concened with the analysis of the impacts of climate change on biological divesity and possible esponse measues; and (ii) the othe goup exploes the possibility of using Kyoto Potocol incentive measues as a vehicle to integate biodivesity concens. In pinciple, the UNFCCC pocess seems favoable to such integation. In the Maakech Ministeial Declaation, Paties decided to exploe such synegy between the two conventions 53 and, as stated above, the Maakech Accods include seveal efeences to biodivesity. Howeve, this concen is athe vague (see Section 2). Futhe, the Maakech Accods finally only equie fom Annex I Paties to list thei national laws on LULUCF activities which contibute to the potection of biodivesity and sustainable use of natual esouces (the equiement to epot on actual measues and esults fo biodivesity potection was finally set aside duing the negotiations). In addition, compliance with epoting equiements fo LULUCF activities is not an eligibility citeion fo the use of the flexible mechanisms anymoe (such as emission tading). Theefoe, the Maakech Accods ely mainly on 52 UNEP/CBD/SBSTTA/6/ D1/CP7.

13 A. Capaós, F. Jacquemont / Ecological Economics 46 (23) 143/ the good faith of the Paties to define and to implement nationally the notion of sustainable use and the pesevation of biological divesity. biodivesity concens togethe with geenhouse gas mitigation. 6. Conclusion This pape has shown that putting an economic value on cabon sequesteed by means of foest management is not expected to have a geat negative influence on biodivesity. On the contay, ceating economic incentives fo cabon sequestation by affoestation and efoestation is expected to yield a sub-optimal ove-plantation of fast gowing alien species with a potential negative impact on biodivesity. The possibility to avoid this theat with the egulations adopted in the Maakech Accods and in the Convention on Biodivesity has been investigated. The limits to land use, land use change and foesty activities set in the Maakech Accods ae mainly oveall caps in tems of quantity of cabon, with almost no influence on the situation discussed above (an altenative quantitative pe hectae cap could educe the sub-optimal incentives ceated to establish fast gowing plantations). Diect efeences to biodivesity have also been included in the Maakech Accods, but they ae geneal guidelines and cannot be seen as effective limitations. The Convention on Biological Divesity lacks economic incentives which could ensue that agents will follow the optimal social stategy, wheeas the Kyoto Potocol ceates such economic incentives. In addition, the Convention on Biodivesity does not povide stingent enough ules to make the consevation of biodivesity a eal constaint. Howeve, the Convention on Biodivesity povides ules elevant to foesty which should be consideed while futhe elaboating the ules unde the Kyoto Potocol. In paticula, attention should be paid to limitations on the use of alien species in ode to avoid conflicts between the Conventions and to ensue that no incentive measues will esult in a violation of the Convention on Biodivesity. An integated appoach, using the synegy of both egimes at an institutional level, offes an oppotunity to enfoce Acknowledgements Both authos ae membes of the Enfocing Envionmental Policy Netwok (EEP), funded by the Euopean Commission. The pape was witten while Alejando Capaós was post-doctoal eseach fellow at CIRED (CNRS-EHESS, Fance). A pevious vesion of this pape was pesented at the EEP Side Event to COP-7 (Maakech, Moocco), at the Seventh Biennial ISEE Confeence (Sousse, Tunisia), at the Second AERE- EAERE Wold Congess (Monteey, USA) and in seminas at CIRED (Pais, Fance) and the UIMP (Santande, Spain). Authos ae gateful fo useful comments and suggestions by thee anonymous efeees and by Michael Bothe, Pablo Campos, David Matín, Philippe Quiion and Eckad Rehbinde, as well as by paticipants to the confeences and seminas whee the pape was pesented. The usual disclaime applies. Appendix A: The objective function The objective function can be witten: max V 2 P(t) e t dt g P 2 (t) ga(t) A(x) dx gf1 Laf g 1 F 1 (x) dxk 1 (u 1 ) u 1 (t) F 2 (x) dxk 2 (u 2 ) u 2 (t) and the optimal contol poblem is: max H c P 2 l 1 (u 1 u 2 )l 2 u 1 s:t:: ȧu 1 u 2 f 1 u 1 (A1) (A2) (A3) (A4) (A5)

14 156 A. Capaós, F. Jacquemont / Ecological Economics 46 (23) 143/157 l 1 l l 1 [A(a)F 2 (Laf 1 )] F 2 (L a f 1 ) k 2 () F 1 (f 1 ) k 1 () l 2 l l 2 [F 1 (f 1 )F 2 (Laf 1 )] (A6) A(a) (A15) (A7) o witing F i out: P w W 2 (L a f 1 ) P c C 2 (L a f 1 ) P b B 2 (L a f 1 ) k 2 () P w W 1 (f 1 ) P c C 1 (f 1 ) P b B 1 (f 1 ) k 1 () A(a) (A16) Initial condition: a() L Assuming inteio 1 k 1 (u 1 )k? 1 (u 1 )u 1 l 1 l 2 (A8) c k 2 (u 2 )k? 2 (u 2 )u 2 l 1 2 Solving Eq. (A1) fo l 1 and substituting it in Eq. (A9), l 1 and l 2 can be witten: l 1 k 2 k? 2 u 2 (A11) l 2 k 1 k? 1 u 1 k 2 k? 2 u 2 (A12) In equilibium no additional efoestation occus and since the tansvesality condition fo infinite hoizon poblems is lim t l(t); in the steady-state: l 1 l 2 u 1 u 2 :/ Hence, substituting Eq. (A11) in Eq. (A6) gives, afte eaanging: F 2 (L a f 1 ) k 2 () A(a) (A13) and substituting Eq. (A12) in Eq. (A7) gives, again afte eaanging: F 2 (L a f 1 ) k 2 () F 1 (f 1 ) k 1 () Taking Eq. (A13) and Eq. (A14) togethe: (A14) Refeences Bothe, M., The evaluation of enfocement mechanisms in intenational envionmental law. In: Wolfum, R. (Ed.), Enfocing Envionmental Standads: Economic Mechanisms as Viable Means?. Spinge, Belin, pp. 13/38. Campos, P., Capaós, A., Análisis económico de la fijación de cabono po el pino silveste. In: Henández, F. (Ed.), El Calentamiento Global en España: un Análisis de sus Efectos Económicos y Ambientales. CSIC, Madid, pp. 141/162. Capaós, A., Campos, P., Matín, D., 23. Influence of eceational sevices and cabon dioxide (CO 2 ) abatement on optimal bio-economic detemination of foest otation. Intenational Jounal of Sustainable Development (fothcoming). Depledge, J., 2. Tacing the Oigins of the Kyoto Potocol: an Aticle-by-Aticle Textual Histoy. FCCC/TP/2/2. Englin, J., Callaway, J.M., Global climate change and optimal foest management. Natual Resouce Modeling 7 (3), 191/22. Englin, J., Callaway, J.M., Envionmental impacts of sequesteing cabon though foestation. Climate Change 31, 67/78. Executive Secetay of the Convention on Biological Divesity (ESCBD), 2. Climate Change and Biological Divesity: coopeation between the Convention on Biological Divesity and the United Nations Famewok Convention on Climate Change. Fiends of the Eath Intenational (FOEI), Wold Rainfoest Movement, FERN and Futue in Ou Hands, 2. Tee Touble. FOEI: 1 /76. Hatman, R., The havesting decision when a standing foest has value. Economic Inquiy 14, 52/58.