Contribution of Forest Management Credits in Kyoto Protocol Compliance and Future Perspectives

ADVANCES IN CLIMATE CHANGE RESEARCH 2(4): 171 177, 2011 www.climatechange.cn DOI: 10.3724/SP.J.1248.2011.00171 POLICY FORUM Contribution of Forest Management Credits in Kyoto Protocol Compliance and Future Perspectives Xiaoquan Zhang The Nature Conservancy China Program, Beijing 100600, China Abstract Article 3 paragraph 3 and paragraph 4 of the Kyoto Protocol (KP) allow parties to use credits from land-based activities for offsetting their emission reduction/limitation target committed in the KP. Forest management (FM) is the dominant activity accounted by Annex I parties of the United Nation Framework Convention on Climate Change in the first commitment period of KP (2008 2012). Data reported for 2008 and 2009 indicate that over half of the emission reduction target of 24 Annex I parties that expect to use FM removals can be offset by FM credits in the first commitment period. Especially the majority of the emission reduction target of Slovenia, Sweden, Latvia, Finland, Japan, and Croatia may be achieved through FM credits. The total FM CAP as contained in decision 16/CMP.1 in the first commitment period was over-estimated significantly by 50% for all KP parties and 36% for parties that elected FM. Some parties such as Russia, Japan, Italy, Germany, and Switzerland that elected FM activity may benefit largely from the over-estimated CAP. Presuming a significant increase of the harvest rate, the FM reference level (FMRL) for 2013 2020 is only 1/5 of the historical mean value of FM removals even though most parties show an increasing or a steady trend of net removals from 1990 to 2009. As a result Annex I parties would be able to use FM credits in the future that are over 4 times of FM CAP in the first commitment period. This potential FM credit would account for 7.7% of total emissions by sources without land use, land-use change and forestry activities (LULUCF) in the base year or 1990, and more Annex I parties would share the benefit from the FMRL accounting approach. Keywords: forest management; reference level; credits; Kyoto Protocol Citation: Zhang, X., 2011: Contribution of forest management credits in Kyoto Protocol compliance and future perspectives. Adv. Clim. Change Res., 2(4), doi: 10.3724/SP.J.1248.2011.00171. 1 Introduction Article 3 paragraph 4 (Art 3.4) of the Kyoto Protocol (KP) allows parties to the KP to use credits from additional human-induced activities related to changes in greenhouse gas (GHG) emissions by sources and removals by sinks in the agricultural soils and the landuse change and forestry categories that have taken place since 1990 to be added to, or subtracted from, the assigned amounts for parties included in Annex I. Forest management (FM) is one of the eligible activities under the Art 3.4 that the Annex I parties may choose, as contained in the annex to decision 16/CMP.1 which set definitions, modalities, rules and guidelines relating to land use, land-use change and forestry activities (LULUCF) under the KP, including those for FM activities [UNFCCC, 2005]. Over a half of the first commitment period (2008 2012) has passed and the latest KP LULUCF data for the year 2008 and 2009 have been submitted by respective KP parties. In the negotiation for the KP second commitment period since 2005, LULUCF negotiation have Received: 19 August 2011 Corresponding author: Xiaoquan Zhang, zxiaoquan@tnc.org 1

172 ADVANCES IN CLIMATE CHANGE RESEARCH proceeded very slowly and the FM accounting rules have been one of the main bottlenecks. Decision 2/CMP.6 requested each Annex I party to submit to the secretariat, by 28 February 2011, information on the FM reference level (FMRL) that shall be subject to a technical assessment by a review team in accordance with relevant guidelines as outlined in the Appendix II to this decision [UNFCCC, 2010a]. It is most likely that the FMRL will be an approach for FM accounting in case the agreement of KP second commitment period can be achieved. Questions arising are how much FM credits the Annex I parties are expected to use for the compliance of the KP first commitment period based on submitted KP LULUCF data for the period 2008 2009, and what is the implication of FMRL for the KP second commitment period. This paper collected latest relevant information submitted by Annex I parties and tried to answer the questions. 2 Data sources Data used for the analyses include national GHG inventory for 1990 2009 reported in 2011 by Annex I parties including common reporting format (CRF) and national inventory report (NIR) 1 and the FMRL submitted by Annex I parties in 2011 as requested by the decision 2/CMP.6 2. 3 Results 3.1 FM credits expected for the first commitment period In 2008 and 2009, 24 Annex I parties are expected to account for 246 million tons of CO 2 equivalent (Mt CO 2 -eq) per year in average from FM activity, which amount 2.32% of the total emissions by sources without LULUCF of these parties in the base year. This includes 34.6 Mt CO 2 -eq for offsetting the net emissions under Art 3.3 of 12 parties based on paragraph 10 of annex to decision 16/CMP.1, and 212 Mt CO 2 -eq for elected FM activity of 24 parties in terms of paragraph 11 of annex to decision 16/CMP.1. Other Annex I parties are not subject to account for FM credits (they did not elect FM). The total quantified emission reduction target of these 24 parties is calculated as 4.38% of the emissions in the base year according to Annex B of the KP. Assuming that the mean annual FM credits for 2010 2012 remain at the same level as 2008 2009, this implies that the FM credits may contribute to 53% of the emission reduction target. to party. The contribution of FM credits varies from party The FM credit of Slovenia is expected to account for 7.72% of its emissions by sources in the base year which means that almost all emission reduction target (8%) can be offset by FM credit in case the same level of FM credits can be achieved in 2010 2012. Similarly, FM credits of Sweden, Latvia, and Finland are expected to offset around 80% of their committed emission reduction target (8% of emissions in base year), and it is 65% for Japan, 62% for Croatia, 30% for Lithuania, 24% for Italy, 22% for Switzerland, and 8% for the European Union (15 member states). Russia committed zero emission reduction in the commitment period, but its FM credits are expected to allow it to increase 4.11% of emissions by sources compared to the base year (Table 1). 3.2 Assessment on FM CAP for the first commitment period To exclude removals resulting from elevated CO 2 concentrations above their pre-industrial level, indirect nitrogen deposition and the dynamic effects of age structure resulting from activities and practices before the reference year, paragraph 11 and appendix in annex to the decision 16/CMP.1 set a CAP for the FM credits that each Annex I parties is allowed to add to and subtract from the assigned amount of a party resulting from FM activity. The CAP was determined by the application of an 85% discount factor and a 3% CAP on FM, using a combination of data provided by parties and by the Food and Agriculture Organization (FAO) of the United Nations, as well as a consideration of national circumstances [UNFCCC, 2005]. Applying true values of FM removals in 2008 and 2009 submitted by each party in 2011 (for parties 1 http://unfccc.int/national reports/annex i ghg inventories/national inventories submissions/items/5888.php 2 http://unfccc.int/meetings/ad hoc working groups/kp/items/5896.php

Xiaoquan Zhang / Contribution of Forest Management Credits in Kyoto Protocol Compliance... 173 Table 1 Credit for Annex I parties from FM activities in 2008 2009 (Gg CO 2-eq per year) Party FM GHG Offseting net Accountable Total FM National emissions Percentage of FM emission/ emissions under credits of FM credit expected by sources in credits in total removals a Art 3.3 by FM activity c to be used 1990 or base emissions by sources removals b year d in 1990 or base year Croatia 8,618 972 972 31,440 3.09% Czech Republic 5,423 1,173 1,173 195,523 0.60% Denmark KP 3,698 183 183 68,666 0.27% European Union (15) 273,904 28,490 28,490 4,263,716 0.67% Finland 44,126 3,796 587 4,383 70,364 6.23% France KP 75,204 4,112 3,227 7,339 562,207 1.31% Germany 20,541 4,547 4,547 1,247,901 0.36% Greece 1,995 330 330 104,365 0.32% Hungary 2,338 1,063 1,063 113,950 0.93% Italy 49,786 10,193 10,193 519,157 1.96% Japan 47,197 2,356 44,842 47,198 1,204,713 3.92% Latvia 22,350 451 1,247 1,698 26,576 6.39% Lithuania 4,382 174 1,027 1,201 49,559 2.42% Norway 32,733 581 1,467 2,048 49,767 4.12% Poland 42,039 3,007 3,007 563,231 0.53% Portugal 8,506 807 807 59,417 1.36% Romania 36,199 4,033 4,033 282,992 1.43% Russian 508,457 16,828 121,000 137,828 3,351,176 4.11% Slovenia 10,300 241 1,320 1,561 20,228 7.72% Spain 18,586 2,457 2,457 283,168 0.87% Sweden 41,207 2,655 2,127 4,782 72,490 6.60% Switzerland 920 241 678 919 53,122 1.73% Ukraine 59,372 3,179 4,070 7,249 930,586 0.78% United Kingdom of Great Britain and 10,254 1,357 1,357 779,387 0.17% Northern Ireland Total 1,054,231 34,613 211,714 246,324 10,639,986 2.32% a The mean value of 2008 and 2009 reported by parties in 2011. Blank indicates that the party did not elect FM. Minus represents net removals by sinks and plus means emissions by sources b Calculated based on paragraph 10 of annex to decision 16/CMP.1 c Calculated based on paragraph 11 of annex to decision 16/CMP.1 d Excluding LULUCF that did not elect FM in the first commitment period, emissions/removals for forest land remaining forest land are used), we found that the total FM CAP for all KP parties in the first commitment period was over-estimated by around 50%. FM CAP of 15 parties were over-estimated, including Canada by 10 times, Switzerland by 12 times, Japan by 5.7 times, Slovakia by 4.4 times, Hungary by 2 times, and Russia, Lithuania, Germany, Czech, and Italy by 59%, 56%, 48%, 44%, and 36%, respectively. New Zealand s FM was a net emission of 0.42 Mt C per year in 2008 2009 compared to a net removal CAP of 0.20 Mt C. When only parties that elected FM are accounted for, FM CAP is over-estimated by 36% or 15.70 Mt C per year. However not all parties with over-estimated FM CAP get benefit in the first commitment period as some of these parties did not elect FM activities. Russia and Japan would get benefit as high as 12.2 Mt C per year and 10.94 Mt C per year respectively, followed by Italy (0.74 Mt C per year), Germany (0.40 Mt C per year), Switzerland (0.21 Mt C per year), Hungary (0.19 Mt C per year), etc. Switzerland and Japan are able to use all their FM removals. Russia, Japan, and Italy are coincidently the parties that raised their CAP after the Marrakech Accord. Fortunately, the FM CAP of 23 parties was under-estimated as compared to existing FM removals by a 85% discount factor (Table 2).

174 ADVANCES IN CLIMATE CHANGE RESEARCH Table 2 Comparison of FM CAP and actual FM removals after applying 85% discount factor (Mt C per year) Party FM CAP in True values of removals of FM or Values after applying appendix of decision forest land remaining forest land 85% discount factor 16/CMP.1 in 2008 and 2009 a Australia 0.00 17.84 2.68 Austria 0.63 4.57 0.69 Belgium 0.03 0.85 0.13 Bulgaria 0.37 3.30 0.49 Canada 12.00 7.18 1.08 Croatia 0.27 2.35 0.35 Czech Republic 0.32 1.48 0.22 Denmark 0.05 1.01 0.15 Estonia 0.10 0.60 0.09 European Union (15) 7.77 74.70 11.21 Finland 0.16 12.03 1.81 France 0.88 20.51 3.08 Germany 1.24 5.60 0.84 Greece 0.09 0.54 0.08 Hungary 0.29 0.64 0.10 Iceland 0.00 0.03 0.00 Ireland 0.05 0.78 0.12 Italy 2.78 13.58 2.04 Japan 13.00 12.87 1.93 Latvia 0.34 6.10 0.91 Liechtenstein 0.01 0.005 0.00 Lithuania 0.28 1.20 0.18 Luxembourg 0.01 0.10 0.02 Netherlands 0.01 0.57 0.08 New Zealand 0.20 0.42 0.00 Norway 0.40 8.93 1.34 Poland 0.82 11.47 1.72 Portugal 0.22 2.32 0.35 Romania 1.10 9.87 1.48 Russian Federation 33.00 138.67 20.80 Slovakia 0.50 0.62 0.09 Slovenia 0.36 2.81 0.42 Spain 0.67 5.07 0.76 Sweden 0.58 11.24 1.69 Switzerland 0.50 0.25 0.04 Ukraine 1.11 16.19 2.43 United Kingdom of Great Britain and Northern Ireland 0.37 2.80 0.42 Total of all parties 72.74 323.53 48.59 Total of parties that 58.83 287.52 43.13 elected FM a Data in bold are mean emissions/removals for forest land remaining forest land in 2008 and 2009 as these parties did not elect and report FM. Minus represents removals and plus represents emissions 3.3 Assessment on FMRL Forest land remaining forest land (FL-FL), a land use category under the national GHG inventory reported to UNFCCC that basically represents FM land, showed an increasing net removal from 1990 to 2009, with a mean annual value of 1,166 Mt CO 2 (excluding Canada). However, due to the increasing harvest rate presumed by most parties, FMRL for 2013 2020 submitted by Annex I parties show only a removal of 252 Mt CO 2 -eq (excluding Canada), accounting for 21.6% of FL-FL CO 2 removals (Fig. 1). This percentage

Xiaoquan Zhang / Contribution of Forest Management Credits in Kyoto Protocol Compliance... 175 is only 0.5% for Australia, 4.1% for Germany, 6.4% for Ireland, 9.8% for Slovakia, 13.3% for Austria, and 56.8% for European Union 15 member states. FL- FL of most parties historically shows increasing trend of net removals (such as Austria, Bulgaria, Croatia, Finland, Greece, Ireland, Italy, European Union 15, Latvia, Norway, Poland, Portugal, Russia, Slovenia, and United Kingdom) or no obvious decreasing trend (such as Australia, Belgium, Hungary, Japan, Slovakia). FL-FL in Russia historically showed huge and increasing net removals with an annual mean value of 488 Mt CO 2 -eq, but FMRL is set as a net emission of 94.7 Mt CO 2 -eq. Similarly, Japan sets its FMRL as zero compared to a huge historical net FL-FL removals (87.4 Mt CO 2 -eq per year). The FMRL of New Zealand is set as an emission of 11.15 Mt CO 2 -eq per year, which is 7 times of its mean annual emission for FL-FL 1990 2009. Only a few parties to the KP such as Belarus, France, Iceland, and Spain have set their FMRL as net removals that are a bit higher than historical mean annual FL-FL removals (Table 3). 3.4 Potential FM credits for 2013 2020 Under the reality of increasing or steady historical FL-FL removals of Annex I parties as a whole or most of the individual party, assuming that the FM emissions/removals for 2013 2020 keep at the same level as the mean value in 1990 2009, expected FM credits relative to FMRL are up to 919 Mt CO 2 -eq per year for all Annex I parties in 2013 2020, accounting for 7.7% of total emissions by sources without LULUCF in the base year or 1990. This credit is 4 times that of the FM CAP set for the first commitment period. In case that gross emission reduction is 20%, over 1/3 of the emission reduction target would be offset by FM credit. Russia is expected to get 583 Mt CO 2 -eq per year or 63% out of the total FM credits of all parties, amounting 17.4% of its emissions by sources in 1990. Compared to the 15% 25% of emission reduction submitted by Russia [UNFCCC, 2011b], most or all of its emission reduction target would be offset. Excluding Russia and Canada, FM credits would amount to 3.9% of total emissions by sources in 1990 or base year. FM credits of Norway are expected to account for 20.3% of its total emission by sources in 1990 and offset 1/2 2/3 of its submitted emission reduction target (30% 40% reduction relative to 1990). Japan, by a zero FMRL, would get FM credits worth 87 Mt CO 2 -eq per year that would offset 29% of its submitted emission reduction target (25% reduction relative to 1990). FM credits of New Zealand are expected to account for 16.2% of its total emission by sources in 1990 and would offset 54% 81% of its submitted emission reduction target (20% 30% reduction relative to 1990). Figure 1 FMRL relative to historic emissions/removals of FL-FL in Annex I parties (minus represents net removals) 4 Conclusions and discussion CO 2 removals by sinks from afforestation and reforestation are very limited for Annex I parties. Many parties to the KP are even unable to offset emissions by sources from deforestation, resulting in net emissions under Art 3.3 as a whole. Similarly, except FM, all other Art 3.4 activities are expected to contribute very limited credits for KP compliance because few parties elected these activities and net-net accounting rule (net GHG emissions/removals in commitment period minus those in the base year or 1990) is applied. However, existing managed forest since 1990, with its huge CO 2 removals, provides an opportunity for parties to offset their emissions by sources by defining specific accounting rules, as a result to reduce emission mitigation efforts in source sectors. Data in the first two years (2008 2009) of the first commitment period of the KP indicates that FM credits from 24 Annex I parties account for 2.32% of total

176 ADVANCES IN CLIMATE CHANGE RESEARCH Table 3 FMRL relative to historic FL-FL emissions/removals and potential FM credit of Annex I parties a for 2013 2020 (minus represents net removals) Party FL-FL mean FMRL 2013 2020 Potential FM credit Submitted emissions/ for 2013 2020 emission removals (Mt CO 2 -eq Percent of (Mt CO 2 -eq Percent of national reduction 1990 2009 per year) FL-FL emissions/ per year) emissions without target relative (Mt CO 2 -eq per year) removals LULUCF in base year to 1990 Australia 37.3 0.200 0.5% 37.063 8.9% 5% 25% b Austria 15.9 2.121 13.3% 13.807 17.7% Belarus 28.7 30.50 106.4% 0.000 5% 10% Belgium 3.1 2.435 79.2% 0.638 0.4% Bulgaria 12.5 9.522 76.0% 3.010 2.4% Croatia 7.4 5.149 69.7% 2.239 7.1% 5% Czech 6.6 3.577 54.0% 3.049 1.6% Denmark 0.7 0.243 33.4% 0.971 1.4% Estonia 4.4 1.728 39.2% 2.684 6.5% EU(15) 304.7 173.042 56.8% 131.694 3.1% Finland 29.7 19.30 65.0% 10.410 14.8% France 62.2 62.741 100.8% 0.000 Germany 50.7 2.067 4.1% 48.657 3.9% Greece 1.8 0.80 43.7% 1.030 1.0% Hungary 3.1 0.572 18.4% 2.537 2.2% Iceland 0.034 0.154 452.6% 0.000 30% Ireland 1.1 0.073 6.4% 1.073 2.0% Italy 56.6 14.331 25.3% 42.273 8.1% Japan 87.4 0.00 0.0% 87.366 7.3% 25% Latvia 18.1 14.293 79.1% 3.768 14.2% Liechtenstein 0.019 0.0001 0.5% 0.019 8.2% 10% 20% Lithuania 5.0 4.034 81.2% 0.931 1.9% Luxembourg 0.4 0.418 116.1% 0.000 Malta 0.049 0.049 100.7% 0.000 Netherlands 2.4 1.578 65.2% 0.842 0.4% New Zealand 1.6 11.150 705.2% 9.569 16.2% 20% 30% Norway 21.5 11.400 53.0% 10.107 20.3% 30% 40% Poland 33.9 22.750 67.2% 11.107 2.0% Portugal 8.5 6.480 76.6% 1.984 3.3% Romania 37.7 28.044 74.5% 9.611 3.4% Russian 487.9 94.735 19.4% 582.674 17.4% 15% 25% Slovakia 2.2 0.216 9.8% 1.998 2.7% Slovenia 9.8 3.033 30.8% 6.810 33.7% Spain 18.6 21.442 115.0% 0.000 Sweden 43.5 36.057 82.9% 7.440 10.3% Switzerland 2.3 0.220 9.8% 2.473 4.7% 20% 30% Ukraine 57.0 50.0 87.8% 6.959 0.7% 20% UK & Northern 9.3 3.442 36.8% 5.907 0.8% Ireland Total 1,165.8 252.16 21.6% 919.006 7.7% a Canada was excluded from the analysis because its FMRL submission includes carbon stock changes in harvest wood product that could not be separated from total FMRL b Emission reduction relative to 2000 emissions by sources without LULUCF in the base year, compared to 4.38% of emission reduction target. This implies a contribution to over a half of the emission reduction target. The contribution of FM credits in Slovenia, Sweden, Latvia, Finland, Japan, and Croatia is above the average level. The total FM CAP

Xiaoquan Zhang / Contribution of Forest Management Credits in Kyoto Protocol Compliance... 177 for all KP parties in the first commitment period was over-estimated by 50%. Some parties that elected FM activity would benefit from the over-estimated CAP, such as Japan (10.94 Mt C per year), Italy (0.74 Mt C per year), Germany (0.40 Mt C per year), Switzerland (0.21 Mt C per year), Hungary (0.19 Mt C per year), etc. By presuming a significant increase of the harvest rate, FMRL for 2013 2020 submitted by Annex I parties is about 1/5 of the historical mean value of FM removals, even though most parties show an increasing or steady trend of net removals from 1990 to 2009. This would create a huge amount of FM credits for the second commitment period. Assuming FM removals/emissions keep at the same level as historic mean value, we found that potential FM credits relative to FMRL would be over 4 times that of FM CAP for the first commitment period that has been significantly over-estimated. This FM credits would account for 7.7% of total emissions by sources without LULUCF in the base year or 1990. In addition to parties that are expected to get unreasonable benefits from FM activity in the first commitment, more Annex I parties would join the group sharing the potential benefit by creating a bigger loophole for FM accounting rule. Acknowledgements This work is supported by Integrated Monitoring and Assessment on Carbon Sequestration Potential of Terrestrial Ecosystem in China (No. XDA05050602). References UNFCCC, 2005[2011-06-26]: Decision 16/CMP.1. Land use, land-use change and forestry. FCCC/KP/ CMP/2005/8/Add.3, accessed http://unfccc.int/ documentation/decisions/items/3597.php beg. UNFCCC, 2011a[2011-06-26]: Decision 2/CMP.6. The Cancun agreements: Land use, land-use change and forestry. in: Report of the Conference of the Parties serving as the meeting of the Parties to the Kyoto Protocol on its sixth session, held in Cancun from 29 November to 10 December 2010. Addendum: Part Two: Action taken by the Conference of the Parties serving as the meeting of the Parties to the Kyoto Protocol at its first session, FCCC/KP/CMP/2010/12/Add.1, accessed: http://unfccc.int/documentation/ decisions/ items/ 3597.php beg. UNFCCC, 2011b[2011-06-26]: Compilation of economywide emission reduction targets to be implemented by parties included in Annex I to the Convention. FCCC/SB/2011/INF.1/Rev.1, accessed: http://unfccc.int/documentation/documents/items/3595.php beg.