Recent Efforts in US Climate Policy: Implications for Forestry and Agriculture

1. Recent Efforts in US Climate Policy: Implications for Forestry and Agriculture Lydia Olander Senior Associate Director Nicholas Institute, Duke University 5th Forest and Agriculture Greenhouse Gas Modeling Forum April 2009

2. State and Regional Initiatives

3. US Cap-and-Trade Policy

4. International Policy Annex 1 targets Developing country participation REDD CDM US Critical Conference of the Parties

5. U.S. Cap-and-Trade • Inside the cap • Emissions: power plants, factories, oil refineries (gasoline) • Outside the cap • Domestic • Land management emissions and sinks: forestry, agriculture, landfills • Emissions: fugitive emissions, industrial N2O • International • Industry and energy in developing countries • Deforestation in developing countries Offsets

6. Outside the cap

7. Policy Options: Outside the Cap Under a mandatory policy the term offsetdescribes a reduction in emissions or increase in sequestration of GHGs produced by an entity outside of a compliance cap that is used by a capped entity to offset its emissions.

8. Policy Objectives for Offsets • Achieve more mitigation without increasing costs

9. Alternative offset scenariosEPA Analysis of the Climate Security Act of 2008: S. 2191 (March 2008) No offsets 15/15 Unlimited offsets

10. Activity Types (and Methodologies) • Forests • Afforestation/reforestation • Forest management • Avoided deforestation • Landfills • Livestock • Urban Forests • Co-digestion (anaerobic digestion of manure and waste) • Natural gas transport fugitive emissions • Coal mine methane

11. From EPA (2005) Greenhouse Gas Mitigation Potential in U.S. Forestry and Agriculture

12. Policy Objectives for Offsets • Achieve more mitigation without increasing costs • Bring in important constituencies • Provide a bridge to low carbon technologies (provide rapid results) • Land use critical for this

13. Concerns about offsets • Will work too well • Diverts effort away from capped sector, reduces investment in technology • Question of the cap not a problem with offsets. • Won’t work • Projects too complicated or too costly, or too discounted to bring in sufficient participation • Not real reductions

14. Environmental Integrity Concerns: Are Reductions “Real”? Project-based offset system • Voluntary transaction between two parties • Factors that can undermine net real reductions • Leakage: diverted emissions beyond project boundaries • (Non)Additionality: parties being paid for actions they would have taken anyway • Permanence: release of stored carbon (intentionally or accidentally) before or after project ends

15. Solutions to the “real reductions” problems • Quantitative limits • Qualitative limits • Accounting Adjustments • Discounting credits for compliance use • Buffers (set aside allowances to cover losses) • Accept: Systemwide adjustment of aggregate cap

16. Waxman Draft Bill _ Offsets Allows maximum 2 billion tons, split evenly between domestic and international offsets Credits 4 tons for every 5 submitted Domestic program Integrity Advisory Board & Administrator Additionality: legal, 2009, common practice Performance Std Baselines Impermanence coverage (buffers or insurance) Adjustments for uncertainty (discounts) Adjustments for leakage (discounts) Early credits _ State programs (CCAR/RGGI) International programs Bilateral/multilateral Sectoral offsets UNFCCC (CDM) offsets Reduced Deforestation offsets Reduced Deforestation supplemental

17. Eligible Activities?

18. Activity questions • What types of activities should be eligible for the offsets program? • How much potential mitigation will it provide? • What is enough measurement certainty? • If we are sure about directional change but not quantity can we encourage activity based on the expected average benefit and a conservative discount? • Can we develop a reasonable performance standard against which to compare project performance? • Are sufficient data available at national and regional levels to develop a performance standard baseline? • Do we have enough information to be reasonably confident that leakage and impermanence risks can be estimated?

19. Methodology questions • What kind of performance baseline can we develop for an activity given the data we have? • How specific can we be to the context of that activity (region, legal setting)? • Do we know enough about drivers of leakage and elasticities to reasonably predict leakage for the activity nationally or regionally? • Can we develop look up tables to be used by methodologies? • Do we know enough about risks of impermanence to estimate buffer set-asides(frequency of fires, storms, pest outbreaks?)

20. Policy Questions • How much mitigation can domestic offsets supply? • How will an offsets program interaction with other policies? • Biofuels production and renewable fuels standards • Adaptation programs • CRP/WRP • Clean Water Act (TMDL) • Can we assess the effectiveness of an offsets program at a national level? • How large does the program need to be before we can distinguish its signal from the noise of other land use drivers? • Will we be able to distinguish leakage?

21. Emissions from Deforestation and Land Use Change

22. Meaningful participation by developing countries Meyer-Mediera, et al. 2009. Data from 2000

23. Areas of agreement • Voluntary participation of forest countries for foreseeable future • Payments by developed countries for reductions in developing country forest emissions • National level accounting • Can be measured against a national reference or baseline to determine performance • Allows reconciliation of subnational/project activities with national assessments • Helps address leakage and additionality

24. What Scope? Maintenance Management

25. Questions • Could the US do national accounting as an assessment of the land use portion of an offsets program? • Will we have the remote sensing capabilities to detect other land use changes? Which ones? • Do we have sufficient knowledge on carbon density and interactions with other GHGs to expand beyond deforestation? How far? • Deforestation->Degradation/Forest Management->Agricultural practices->pasture/grasslands->wetlands?

26. Thank You

27. 2007 Farm Bill SEC. 2709. ENVIRONMENTAL SERVICES MARKETS. USDA authorized to facilitate private sector markets for ecosystem services (b) Establishment- The Secretary shall establish guidelines under subsection (a) for use in developing the following: `(1) A procedure to measure environmental services benefits. `(2) A protocol to report environmental services benefits. `(3) A registry to collect, record and maintain the benefits measured. A new Office of Ecosystem Services and Markets

28. What baseline? ~~~~~~~~~~~~~~~~ Based on historic emissions from deforestation Or Estimating future risk of deforestation (based on stock) Figure from: Murray, Olander, and Lawlor. 2008. A Core Participation Requirement for Creation of a REDD market. Nicholas Institute Policy Brief

29. Griscom et al. 2008 Implications of REDD baseline methods for different country circumstances during an initial performance period Baseline approaches

30. Forest Management Protocols Examined Overview of key components of seven protocols. Carbon pools include: ■ – Live Tree; ■ – Belowground; ■ – Dead Tree; ■ – Litter; ■ – Soil; ■ – Wood Products. Optional pools are denoted with an asterisk.

31. Cumulative creditable carbon CCAR protocol Gross Carbon/yr Carbon in allowable pools Baseline Uncertainty (leakage, buffer)

32. COP 14 _ Catch 22 SBSTA: Subsidiary Body for Science and Tech Advice AWG-LCA: The Negotiators Can’t recommend methodologies for measuring, monitoring, baselines …until they know the policy scope Can’t develop policy scope until they better understand the methodologies