Forest carbon offsets

Transcription

1 Compensation based on National Performance Establishment of a reference national carbon emissions rate (i.e., baseline) Direct measurement and monitoring of actual rates after policy in place Compensation for going below the reference rate Emissions Rate Observed vs Baseline Emissions Year $ Baseline Observed Helps address major integrity concerns (additionality, leakage, permanence) Forest carbon offsets What is a carbon off-set? How do forests offset carbon emissions? Policy motivation for offsets? Reduce costs Immediate option Co-benefits Current off-sets? CDM and ETS US states have cap & trade for limited sectors CCX and bi-lateral trades in voluntary market

2 Carbon offsets must be Certain Unique Additional Permanent (or discounted for impermanence) No leakage (or discounted for leakages) Co-benefits VCS

3 Until recently, emphasis has been project-based approaches Transaction between a buyer and a seller Specific location and time period Adjusts carbon accounting to ensure real reductions Additionality Leakage Permanence National approach Compensation based on national performance relative to a national baseline, with international payments to countries based on performance Hybrids/Transitional Projects in the near term and national programs in the long term National programs can still deploy projects to achieve national performance (for example: Amazon Fund in Brazil) Lecture by Dr. Brian Murray Nicholas Institute, Duke Univ Overview/discussion of 4 difficult issues (1) Additionality (2) Baselines (3) Leakage (4) Permanence Some reference to how standards (such as VCS) address these issues and initial comments on best practices and possible areas for innovation

4 Offsets and Environmental Integrity: Are Reductions Real? Factors that can undermine real reductions in a project-based offset system (Non)Additionality: parties being paid for actions they would have taken anyway Requires a baseline Leakage: diverted emissions beyond project boundaries Within country International Permanence: release of stored carbon (intentionally or accidentally) before or after project ends Additionality Paying for reductions what would not otherwise occur under business-as-usual VCS and other standards require various multi-step tests for projects, legal test is practice required? common practice test is the practice out of the norm? performance test does practice perform (emissions wise) better than standard? barrier analysis are there impediments to adoption that the project overcomes? These may be unnecessary steps: For REDD, proving additionality is part of baseline establishment

5 Compensation based on Emissions below the Baseline Establishment of a reference emissions rate (i.e., baseline) Observed vs Baseline Emissions 1.2 Direct measurement and monitoring of actual rates after project in place Emissions Rate $ Year Baseline Observed Compensation for going below the baseline Baselines Establishing project baseline is challenging because it predicts a counterfactual Past does not perfectly predict the future

6 VCS Approach for Project Baselines planned defor = conversion rates for alt. land use in area (unspecified in VCS guidance) unplanned mosaic = model using historical land use patterns unplanned frontier = model based on theory/data of frontier expansion

7 National Baselines International policy discussions on REDD have been focusing on national programs and national baselines Why? Captures sub-national leakage Deals with additionality at a more aggregate level where it is more easily determined Setting National Baseline Deforestation Emissions High rate declining Observed rate during reference period Baseline Set Country A Reference Period Average: A Negotiated target BAU Projection Down? Low rate, unexploited Country B BAU Projection - Up? Negotiated target Reference Period Average: B Reference Period Time

8 What is Leakage? Efforts targeted to reduce emissions in one place simply shift emissions to another location or sector where they remain uncontrolled or uncounted. Types International: shifting from an uncapped country to a capped country Subnational: Shifting from a capped source to an uncapped source Shifting from an offset project to a source in the same uncapped sector to a source in another uncapped sector Leakage Example Avoid Deforestation for agriculture in one place Deforestation elsewhere for agriculture

9 Why Leakage Occurs Leakage occurs whenever the spatial scale of the intervention is inferior to the full scale of the targeted problem (Wunder 2008) Rules, regulations, and incentives for action affect only part of the potential participants or emissions sources Economic forces: Supply/demand (for food, fuelwood, ) supplanted by the project is met elsewhere Formal markets Other institutional arrangements Leakage in forestry and agriculture projects Leakage is not unique to forest and agriculture projects But, features of forestry and agriculture make them susceptible Fixed land base: Land use change has spillover effects Commodity markets are often broad in scope (regional, national, global) 18

10 Leakage Myths Leakage is the same as activity shifting false Only if it causes the emissions to shift outside of the accounting/policy boundaries All leakage is bad false You can get positive spillover effects (but they seem rarer) Leakage does not occur if projects are too small to affect the market price false Actually, small projects don t affect market price because of leakage there are a lot of other market participants who can replace the project s contribution to the market without disruption What can we do about leakage? Manage locally Improve monitoring Minimize through project design Discount projects for it Estimate leakage (e.g., econometrically)/hold back credits No discounts if participation is sufficient Systemwide accounting Expand the scale and scope of accounting to sector/national level System-wide true-up Adjust the cap Tighten to make up for leakage Expand the cap to include more uncapped sectors Forgive and Forget Ignore the leakage Decouple from compliance system Exclude offset compensation from GHG target compliance

11 Standards Approaches to Leakage VCS approach: 1) planned defor = monitor landowner s other lands; any leakage identified subtracted 2) unplanned defor = - must implement activities to minimize leakage (e.g., agroforestry, woodlots) - measure any activity-shifting leakage that may occur despite activities and subtract - if claiming credits for avoiding illegal logging, discount credits based on leakage look-up tables provided There is nothing permanent except change Heraclitus

12 (Im)permanence Example Avoid Deforestation in Year 0 Deforestation delayed to Yr 5 Receive credits Replace credits? Time Project accounting can address permanence 700 Deforestation Emissions Baseline Actual Time - indicates reduction credit + indicates emission debit

13 Addressing Permanence Reversals need to be replaced to maintain the environmental integrity of the system VCS approach: % of credits withheld in pooled buffer account based on projectspecific risk evaluation (10-40% may be withheld) Risk rating based on: - tenure clarity - $ sharing w/ govt. and defor. agents - pop. growth rates - likelihood of crop failure in vicinity - likelihood of new roads, - project $ viability and tech. capacity mineral extr. in vicinity Addressing Permanence Comments on VCS and ideas from other approaches: Buffer pool is thorough, yet simple approach used by all project standards VCS: potential free-riding by weak performers in the buffer pool is guarded against by periodic true-up and reassessment of risk rating at each verification VCS: if risk rating improves, % of withheld buffer credits may be released for sale, incentivizing strong performance VCS and CAR leave door open to using insurance products as alternative to buffer pool

14 Group discussion Intuitive explanation of the problem Compare and contrast: Project to reduce deforestation on the frontier by better enforcement of environmental laws Project to improve logging practices in a remote area of tropical forest through incentive payments System of paying entire countries to reduce deforestation Memo REDD+ (avoided defor, improved forest management, restoration/ regeneration) Pick your topic Baselines & additionality Leakages Permanence and liability Pick your country 1. AOSIS (Alliance of Small Island States) 2. Lots of forest, historically high deforestation 3. Lots of forest, relatively low deforestation 4. Not much forest left

15 Memo