Forests and Carbon: Opportunities for Climate and Conservation Benefits

1. Forests and Carbon:Opportunities for Climate and Conservation Benefits Stewart Elgie University of Ottawa Faculty of Law, and Institute of the Environment

2. Overview of Presentation Overview of forest carbon policy options; pros and cons • domestic focus (mainly) • Climate Lens: the role of forests in Climate Change • Decoding jargon: storage, source/sink, human impacts • Ways to increase forest Carbon (“C”) storage • Forest Lens: how CC measures will affect forests • Forest carbon policy options (and their impacts) • Forest C trading: global, national, voluntary markets • Designing forest C markets to benefit climate, conservation and communities • Key issues and options • What ENGOs can do

3. Key Take-Home Messages • Forests are 20-25% of the climate change problem; they must be a big part of the solution • The science: we know a lot, but some uncertainties • Kyoto’s rules for forest carbon are dumb; • domestic rules and voluntary markets will be key pre-2012 • getting better post-2012 global rules is vital (and possible) • Several policy options to enhance forest C storage; C markets are the option moving first • markets can be good for conservation if the rules are right • possible win/wins with industry and First Nations • Key rules being designed now; ENGOs should engage (fed, prov, global)

4. 20-25% of global C emissions are from forest loss -- mainly deforestation Frontier forests 8,000 years ago Frontier forests Today Current non-frontier forests

5. Forest Loss means Biodiversity Loss (Bird Decline by Forest Region) [Millennium Ecosystem Assessment, 2004] • If C rules reduce forest loss, benefits biodiversity

6. Context: Kyoto and Forests • Kyoto includes forests in 3 main ways • Must count gains/losses from re/aforestation and deforestation • May count gains/losses from FM (Canada isn’t) • CDM (trade w/ developing countries) includes forest projects, but only re/aforestation (bad) • Forest conservation largely excluded from Kyoto • Vol. markets and PNG proposal filling this void • Forests and trading were key part of Kyoto targets: Canada would not have agreed to -6 without these.

7. Forests and Climate Change Two lenses • Climate lens: how does forest management affect climate change? • Forest lens: how do climate rules affect forest management

8. Climate Lens:Forests and GHGs • Forest loss is 20-25% of total GHG problem • In many developing countries, forest loss is the main source of GHG emissions • In Canada it is a fairly small % of total GHGs • Deforestation < 10Mt • Forest mgmt (FM) is + or – overall (varies by year) • But, changes in FM could achieve signif C gains • ‘Forest Conversion’ (natural -> managed) is big issue • Re/aforestation could achieve moderate C gains

9. Climate Lens:Decoding the Jargon • Carbon storage • Carbon source / sink • C changes due to human actions

10. Climate Lens:Decoding the Jargon Like an investment account: • $1 million invested = total “storage” • Gaining/losing value annually = “source/sink” • largely due to market forces beyond your control • Your investment choices = impact of human actions • want to maximize gains / minimize losses (relative to mkt) • this is the key part: what we can control

11. Climate Lens:Carbon Storage • Forests store about 50% of Earth’s terrestrial C (1 trillion tonnes) • Boreal forest is largest storehouse (23%) • Canada’s forests store 88 billion tonnes of C. Our trees alone store 13 billion tonnes • twice the total global annual carbon emissions

12. Biome Area Carbon Stocks (Gt C) (106 km2) Veget’n Soil TotalRelative (Gt/106 km2)________________________________________________________________________________________________________________________________________________Tropical Forests17.6 212 216 42824Temperate Forests 10.4 59 100 159 15Boreal Forests 13.7 88 471 559 41Tropical Savannas 22.5 66 264 330 15 Temperate Grasslands 12.5 9 295 304 24Deserts/Semideserts 45.5 8 191 199 4Tundra 9.5 6 121 127 13Wetlands 3.5 15 225 240 69Croplands 16.0 3 128 131 8TOTAL 151.2 466 2011 2477 16Source: I.P.C.C.

13. Climate Lens:Carbon Source / Sink Key Factors (trees): • It is unclear whether Canada’s forests are currently a C source or sink – varies by year (usu small sink) • For Kyoto period (and beyond), gov’t projects that forests likely to be a net source (more losses than gains) • This is why Canada did not count FM under Kyoto • Largely a red herring re ‘what to do’ (relevant due to dumb Kyoto rules) • Has no effect on key issue: how human actions affect C levels Decrease forest C Fire, bugs, logging, old age Increase forest C Tree growth

14. Canada Forest Carbon Budget (Draft) All Timber Productive Forests – Accessed (‘A’) plus Unaccessed (‘P’) (243 million ha) Scenario 2012 2017 2022 2027 2032 Climate Lens:Human-caused impacts on forest C levels CFS Carbon Budget Model Analysis (2001, Draft) • Harvest level changes can have significant effects on C levels • Fire / insect changes (combined) can have somewhat greater effect • Biggest effect is from age class cycle (falling) • Kyoto requires countries to count total C changes (most is windfall) *

15. Climate Lens: Key issue: how do we incent forest management that increases C storage? • current Kyoto rules focus on total source/sink; no incentive to improve management dumb • Big reason for bad forest C rules and projects • rules should focus on changes from human actions • fix this in domestic rules (pre-2012); and global rules (post-2012)

16. Climate Lens:Effects of logging on forest C levels • Logging in Canada’s releases over 150 mT of CO2 each year (per Kyoto accounting rules) • all passenger cars emit about 50mT • forest will regain most of lost C over 100+ years • Converting a ‘wild’ forest to ‘managed’ typically results in significant C loss over time [Kurz ‘98] • Boreal = about 10-25% C loss (most in first 50 years) • Coastal = about 25-50% C loss (ditto) • e.g., converting 20 million acres of boreal means about 600-1200 mT of CO2 loss over time (most in 50 yrs) * Counting product C would lower the net C loss (25%?) * Counting 2ry emissions would increase net C loss

17. Climate Lens:Effects of logging on forest C levels • In tropics, key C issue is deforestation • lose 50-75% [?] of forest C • global proposal: payment for avoided tropical deforestation (UNFCCC) • In temperate/ boreal, key C issue is conversion • lose 10-40% of forest C (per Kyoto rules) • science group agreed: big issue even w/ full C acct’g • 90 million ha productive forest unallocated (Canada) • getting little focus

18. Key Uncertainties 1. Science (re forests and climate change) • Albedo effect (not big concern for boreal FM; more for ARD) • Hydrology, evapotranspiration • Climate change effects on forests (fertilization, fire) 2. Carbon Accounting Rules

19. Full Forest C Accounting vs Kyoto

20. Effects of Full Forest C Accounting Net Carbon release levels from FM, depending on what is counted: Kyoto Count Count 2ry Count Rules product C emissions product (cut = (depends (roughly substitution release) on decay doubles ( + or - , rate) C release) varies) (Same issues often arise with fossil fuel reduction projects) • Overall Net effects will vary (+ & -): • Not likely to change overall pro-conservation direction • Substituting recycled / planted wood for virgin fibre (i.e. increased conservation) very likely to be attractive C strategy

21. Forest Lens:How CC measures could affect forests • Basically: • more timber volume = more C storage • more soil = more C storage • (more C in lasting products = more C storage) • Rule of thumb: 1 m3 of timber = 1 tonne of CO2

22. Ways to Store CO2 in Forests = • Reduced logging (of virgin forests) • e.g. protected areas and/or longer rotations • Changes in forest management (e.g. preserve soil) • Reduce fire or insect loss • Increase forest growth (intensive management) • Plant new forests (50% more expensive) • = likely most cost-effective in short run[e.g. Van Kooten ’04] Sum: Most cost-effective way to increase CO2 storage is via reduced logging / conservation • esp. where forest is econ. marginal or high in biodiversity • Win/win: combined approach (conserve forest + new plantations or intensive mgmt) is good for timber, CO2 and biodiversity

23. How will C Markets Affect FM?Preliminary Results The Model (inputs): • ‘Typical’ western boreal forest (DMI data) • Use Woodstock model • Factor in carbon (CFS CB model) • Variables • carbon price • initial forest age • regulated harvest constraints • regulated regeneration constraints • silviculture expenditures • stand productivity, haul length

24. Incentive: Harvest Older & Smaller Area Harvested areas (ha) at different incentive levels for carbon management, by age-class at time of harvest. Results included are averaged across model scenarios with different discount rates and harvest constraints.

25. Incentive: Conserve More of Land Base Regression results predicting the percentage of initial area for each forest cover type conserved (never harvested over the planning horizon) at different incentive levels for carbon management. Trends show changes in the percentage of un-accessed area for each forest cover type while holding the aggregate number of hectares harvested of that species constant. Scenario is for a normal initial age-class distribution, a discount rate of 3% and no regulatory constraints. Aggregate harvested hectares are included at their mean value for each cover type.

26. Less Volume, Different Species Mix • Adding Carbon incents lower harvest (if allowed), and changes species harvest mix towards deciduous (generally)

27. Incents Small Increased Silviculture

28. Model Limitations • Ignores stranded capital, vertical integration (will moderate harvest decline) • Ignores fire (slightly reduces carbon value) • Does not count product stored C (model) • Does not count secondary GHG emissions

29. Sum: Carbon Price Effects on FM • Generally will incent: • Older harvest age • Greater conservation (even if same volume) • Small silviculture increase (mainly native regen.) • Less logging volume (declines as C price rises) • C incentives align with biodiversity values • Rules matter (harvest, regen, biodi)

30. Forest Lens:Domestic Policy Options • Offset trading (i.e. private parties buy credits) • should include forest mgmt and conservation • Government payment / incentive / pilot program • should include forest mgmt and conservation • Factor C into Forest Mgmt Planning Rules • re cut levels, practices, regen., etc. • Factor C into Land Use Planning • discourages new allocations, rewards protection

31. Forest Carbon Trading • In 2006, over 1.4 billion tonnes of carbon credits were traded worldwide, with a value of over $30 billion (U.S.). • forest C trading small but growing • That amount is expected to increase dramatically after 2008, when Kyoto comes fully into effect.

32. Forest Carbon Trading • Canada actively considering including forests in domestic emission trading (feds and several provs) • Ont. has said it will be included • US: forests included in most major U.S. climate bills (offsets) • actively considered in regional schemes

33. Forest C Trading: Sask Example • Sask Power project (forest conservation) • Give up logging on 206,000 ha (set aside) • Potential revenue of $25-75 million (40 yrs) [*based on proponents’ carbon numbers @ $5-15/tonne]

34. Forest C Trading: Innu Example • 2 million ha area • Developed land use plan: conservation-based • Ecology protected areas • Cultural use areas • Careful logging in rest • 50% lower cut • Challenge: Profitability

35. Innu: Forest Carbon Gains

36. Forest Carbon Trading:4 Key Concerns • ensuring carbon gains are real (ii) trade-off for fossil fuel emissions (iii) potential adverse biodiversity impacts (iv) potential adverse community impacts

37. Concern #1: Ensuring carbon gains are real • There are genuine methodological concerns about ensuring projects generate real CO2 gains • Not unique to forest projects (fossil fuel ones too) • These are solvable (if use best practice): • Require proof of additionality • Rigorous requirement for establishing baseline • Require avoidance / mitigation of leakage • Discount # of credits if uncertainty exists • Existing credible trading systems address these • voluntary systems highly variable

38. Concern #2: Trade-off for fossil fuel emissions • Main concern is that carbon is safer stored underground than in trees (risk of impermanence) • This risk also exists for many fossil fuel projects • Solutions: • Simple: only give credit for period of actual storage • many ways to do this (insurance, discount, temporary credits, etc.) • Could also put cap on total credits from forests (20-25%) • Points to Consider: • forests are 20-25% of climate problem • forests likely to be < 10% of emissions trading • Kyoto targets based on expectation of some forest credits • Gov’t payment programs avoid this trade-off

39. Concern #3: Biodiversity Impacts • Establishing a forest C market should benefit biodiversity overall • But some projects could have adverse effects (herbicides, non-native plantations) • usu not economically attractive • Solutions: • Require projects show net biodiversity benefits • System should include conservation & reduced logging • CDM excludes these

40. Concern #4: Community (aboriginal) impacts • Establishing a forest C market could signifi- cantly benefit forest-based aboriginal people • Conditions to enhance aboriginal benefits: • Key is allocating forest C rights to aboriginal people • Not addressed in CDM; domestic rules? • Must include conservation & reduced logging • Or else excludes communities in still-intact forests • Market for cutting trees, but not for conserving

41. Key Messages (reprise) • Forests are 20-25% of the climate change problem; they must be a big part of the solution • Science: we know a lot, but uncertainties exist • Kyoto’s rules for forest carbon are dumb • domestic rules and voluntary markets will be key pre-2012 • Putting value on C likely to enhance conservation overall • Several policy options to enhance forest C; markets are the one moving first • C markets can be good for conserv’n & CC if the rules are right • possible win/wins with industry and First Nations • there are downside risks, but big upsides • Key rules being designed now; ENGOs should engage (fed, prov, global)

42. What ENGOs Can Do • Communicate: include carbon in arguments for forest conservation, better management • Weigh in to create good forest C rules • esp C trading rules (domestic and voluntary) • imminent for feds, some provs, and regional • also, include C in FMP and LUP • Weigh in on post-Kyoto rules • e.g. count avoided logging, improve FM rules (isolate human changes), product-stored C(?) • next 12-24 months key

43. The Future: new opportunities, new choices …