Call Agenda: 1. Introductory Comments —Marcia Patton-Mallory, WFLC and USFS

1. Welcome!Challenges and Opportunities in Developing Forest Carbon Accounting Approaches for Use in Regulatory and Financial Trading SchemesWebinar: Presentation by USDA Forest Service & WFLCMay 1, 2009 Please…. Participate fully & share the air (use hand-raising feature) Listen to learn & understand Say your name when you talk Minimize multi-tasking Call Agenda: 1. Introductory Comments —Marcia Patton-Mallory, WFLC and USFS 2. Speaker – Alan Lucier, PhD, Senior Vice President, National Council for Air and Stream Improvement (1) and FIA Biometrics Working Group 3. Questions and Answer Session- Moderated by Marcia Patton- Mallory, WFLC and USFS Please Mute Phone When Not Speaking!

2. Challenges and Opportunities in Developing Forest Carbon Accounting Approaches for Use in Regulatory and Financial Trading Schemes Western State Climate Change Working Group May 1, 2009 Alan A. Lucier, Ph.D. Senior Vice President, NCASI

3. History • 1980s: “Forest offsets” identified as cost-effective approach to greenhouse gas mitigation. • 1990s: Intense international discussions of forest offsets in context of Kyoto Protocol negotiations. • Post-Kyoto: Ongoing discussions and limited implementation of forest offsets in many contexts (CCAR, WCI, RGGI, CCX, etc.).

4. What do we know about forestry and greenhouse gases (GHG)?

5. Sustainable Forest Management (SFM) is a cost-effective strategy for GHG control.

6. GHG benefits of SFM are associated with: forest regrowth after harvest; lower risk of wildfire; production of energy-efficient materials and biomass energy; carbon sequestration in forests & in wood products.

7. “In the long term, a sustainable forest management strategy aimed at maintaining or increasing forest carbon stocks, while producing an annual sustained yield of timber, fiber or energy from the forest, will generate the largest sustained mitigation benefit.”  IPCC 2007

8. So, what’s the problem?

9. Barriers to Forest Offsets • Political • Technical

10. Political Barriers to Forest Offsets • Strongly held differences among stakeholders regarding desired effects of offsets on forest management and climate policy. • SFM vs. forest protection (avoidance of harvest) • “minimize cost of GHG mitigation” vs. “reduce fossil fuel consumption as soon as possible”

11. Technical Barriers to Forest Offsets • Concern that low-cost forest offsets will “flood the market” • Cost of producing forest offsets • Transaction costs • Opportunity costs • Uncertainties about effects of forest offset projects on GHG sources and sinks

12. Uncertainties • Some important consequences of forest offset projects cannot be measured directly. • Carbon storage in harvested wood • Product substitution • Leakage • Effects of forest offset projects depend on time horizon of analysis.

13. Importance of Time Horizon – Example Compare GHG mitigation benefits of two management scenarios: • Forest Protection (FP) • Sustainable Forest Management (SFM) • FP > SFM in near term • SFM > FP over the long term

14. Leading Conceptual Approach to Forest Offset Accounting GHG mitigation benefits of a forest offset project must be: • Real • Additional (Beyond Business as Usual) • Measured • Verified • Discounted or insured because benefits may not be permanent and are subject to leakage.

15. Problems with Leading Approach • Political & technical barriers have not been overcome. • Complex discussions of “baselines, additionality, leakage & permanence” can obfuscate the barriers. • “Additionality” raises equity issues • e.g., granting offsets only for “additional” tree planting seems unfair to those who plant trees routinely. • Rigorous requirements for measurement and verification of forest C stocks: • Increase transaction costs • Do not substantially reduce overall uncertainty about real GHG benefits of forest offset projects

16. Alternative Conceptual Approach to Forest Offset Accounting • Offsets are created by implementing forestry activities with acknowledged GHG benefits. • GHG benefits per ha of activity are estimated a priori by regional authorities. • Lower transaction costs • Equal treatment of ongoing and additional activities • Greater transparency in models of offset production costs and GHG benefits • Offset project proponents report and verify implementation of activities.

17. Conclusions • Opportunities for GHG mitigation exist across the continuum of forest management styles from strict protection to short-rotation plantations. • Nevertheless, there are large political and technical barriers to realizing the potential benefits of forest offsets. • Disagreement about objectives • Concerns about “flooding the market” • GHG mitigation benefits cannot be measured directly

18. Conclusions • The leading approach to forest offset accounting has been discussed for more than a decade but has not overcome political and technical barriers. • “Activity accounting” is an alternative approach that has potential to reduce transaction costs, increase transparency, and reduce equity concerns.