On the Durban COP17 Outcome for LULUCF (Part II)

Download the advance unedited Durban LULUCF conclusions:

Download the paper on The incentive gap model:

• Commitment period 2 (CP2) will go into effect starting in 2013 and will end either in 2017 or 2020.

The principal disadvantage of the new Post-Durban framework is that it remains unclear how effective commitments will be since they have not been placed in a legally binding framework. However, some regard the fact that any framework at all remains in place as a positive outcome. Kyoto will not disintegrate completely after 2012. For CP2 and LULUCF, it is important to note that the US, Canada, Russia and Japan will not be part of this framework.

• Art. 3.4 FM activities are now considered mandatory and the addition of Wetland drainage and re-wetting represents a new electable activity.

Mandatory FM reporting appears to represent an advantage, since a few Annex I countries were clearly attempting to take advantage of this gap in the rules. Now all Kyoto Protocol signatory countries must report Forest Management activities. Further, the addition of a new electable activity represents a step forward. However, the ideal outcome would be if all LULUCF activities were mandatory, without distinctions across categories, in one all-encompassing national inventory. In this regard, the SBSTA has been granted a mandate to further consider a more inclusive activity-based approach.

• FM accounting will now be calculated relative to a baseline reference level (see Appendix in the new ruling) and restricted by a new cap on credits (3.5% of base year (1990) emissions, excluding LULUCF). Parties will gain credits up to the new cap if reported removals are higher than the baseline reference level net removal. Parties will be debited if reported removals are lower than the baseline reference level.

This represents an important step forward—a new procedure has now been formally adopted that, along with mandatory FM reporting, significantly reduces the potential to abuse FM and/or the cap ruling. The new approach using reference levels is significantly different from previous rules and represents a significant increase in the total potential incentive to pursue increased carbon sequestration in the context of the forest management sector. As illustrated in the following graphic, the overall increase in the total amount of incentivized forest-based carbon sequestration is significant (difference in CP1 and CP2 caps). Only Slovenia, Latvia, Russia, Japan and Canada (though Russia, Japan, Canada will not be part of the second Commitment period) would have CP2 caps smaller than under CP1. Though the US would have a slightly larger CP2 cap, it will also not be a part of the KP.

Likewise, incentives not to harvest below the reference level have been significantly enhanced. Since countries will now be debited for net removals below the reference level, the former double-sided cap no longer protects them.

All together, the total amount of “incentivized" carbon sequestration under FM would be substantially increased by some 10 times (for all the countries represented in the graphic plus the US and Russia, though some of these countries have already signaled they will not be part of CP2). Moreover, total potential carbon sequestration under this new model includes both the amount below the reference level and the new cap (FMRL + the new cap). This should be regarded as a significant change.

On the other hand, as we have argued both in our paper (Ellison et al 2011) and in Durban, amendments of this type have a less than ideal impact on the overall “Incentive Gap"—that portion of FM-based carbon sequestration that is not incentivized under the old nor the new carbon accounting framework. Although the new rule means that incentives are significantly enhanced, we would still propose eliminating the cap altogether, collapsing Art´s. 3.3 and 3.4, and including all LULUCF sources and sinks. As we will demonstrate in our next paper, the new rules remain a good distance away from this goal.

• HWP is now mandatory and can be accounted based either on the current instant oxidation approach, or based on the Production approach. However HWP leading to deforestation will be counted as instant oxidation.

This does indeed represent a step forward. Accounting for HWP will help place the traditional forest biomass sector on a more equal footing with the forest-based bioenergy sector. However, the limitation created by the 3.5% cap on carbon credits in FM will also apply to HWP accounting since HWP is included in the reference level. This will impede or eliminate some or most of the potential effectiveness and motive force of this ruling. The same argument applies with even more rigor to the option of accounting on the basis of instant oxidation.

• A new natural disturbances mechanism has been approved that allows Parties to withdraw emissions from land areas associated with natural disturbances from accounting when they exceed a set background level. The background level is set based on historical information on disturbances.

We think this represents a significant step forward. Including this mechanism has certainly had a positive influence on the acceptance of mandatory accounting for FM. This removed the necessity for a cap on the debit side for the handling of natural disturbances. 

• Finally, a new mechanism has been introduced (under Art. 3.4) that allows countries to trade new afforestation against deforestation.

This may represent an improvement over the previous system since it now makes it easier to convert some land uses to FM.

• The potential for offsetting net emissions under Art. 3.3 (ARD) with excess carbon sequestration under Art. 3.4 (FM) has been eliminated.

We see this as an advantage, since it strengthens the force of incentives to increase carbon sequestration outside of FM.

All in all, since many or most of the concerns we have raised about carbon accounting practices in the LULUCF sector have not been addressed by the most recent Durban AWG-KP decisions, perhaps the most interesting question is what will be discussed in future AWG-KP meetings and who will define the agenda? Since we believe that much still needs to be accomplished, we hope to have a say in this process and will soon complete our second contribution to this debate.