FOREST CARBON MANAGEMENT

1. FOREST CARBON MANAGEMENT OVERVIEW Paul Griss Winnipeg Kyoto Mechanisms Seminar March 14, 2003

2. POLLUTION PROBE FOREST CARBON MANAGEMENT WORKSHOP SERIES A series of five national workshops to enhance awareness and understanding of the role of FCM in mitigating GHG emissions. • Overview October 2001 (Toronto) • Opportunities December 2001 (Edmonton) • Research Needs January 2002 (Ottawa) • Policy and Infrastructure Needs February 2002 (Montreal) • Path Forward March 2002 (Vancouver) Final report available from: www.pollutionprobe.org/whatwedo/Kyoto.htm

3. Pollution Probe Government of Ontario / Forest Ecosystem Science Cooperative Canadian Forest Service BIOCAP Climate Change Secretariat Environment Canada Climate Change Central Alberta-Pacific Forest Products BC Ministry of Water, Land and Air Protection Industry Canada Abitibi-Consolidated Canfor Weyerhaeuser Domtar Quebec Ministry of Environment Saskatchewan Environment and Resource Management PARTNERS IN FCM WORKSHOP SERIES

4. THE ROLE OF FCM IN MITIGATING GHG EMISSIONS

5. WHY FCM? • FCM provides a bridging mechanism until new technologies that can substantially reduce greenhouse gas emissions can be developed and/or applied. • Most eligible FCM activities make sense to do anyway as they can: • enhance timber supply; • contribute to soil and water conservation; • protect wildlife habitat; and • provide social and economic opportunities.

6. WHY FCM? (Cont’d) • Federal and provincial governments have provided policy and financial support in the past for: • reducing deforestation • reforestation • afforesting marginal lands; and • improving forest management practices. • The new value of “carbon” potentially provides another revenue stream to support these long-held policy objectives. • Privately traded FCM credits in Canada could be worth over a billion dollars per year depending on our ability to move forward and the future price of carbon.

7. FORESTS AND THE FEDERAL PLAN • …current projections are that existing forest practices will result in a carbon sink of 20 MT. Investments in plantations, policy changes to reduce deforestation and changes in forest management practices…could significantly add to this sink. • …establish a framework that will enable agricultural and forestry sinks and emissions reductions to be sold as offsets into a domestic emissions trading system. Offsets would have to be measurable and go beyond business-as-usual practices. • Fast growing, high yield forest plantations could increase the rate of carbon storage in the first commitment period, with even greater results as trees mature in subsequent periods. The resulting sustained economic activity would provide increased employment and income diversification for rural and Aboriginal communities across Canada.

8. FORESTS AND THE ALBERTA PLAN Alberta proposes to: • explore the use of biological sinks (agriculture soils and forests) to store carbon; • address stakeholder uncertainty (ownership); • establish a provincial GHG emissions trading framework that links carbon enhancements to soil and forest sinks to the trading of emission reduction offsets; • overcome permanence and liability issues; and • pursue a coordinated approach to removing barriers associated with using biological sinks. The Alberta plan does not include deforestation.

9. ATTRIBUTES OF A CREDIBLE FCM INITIATIVE GHG emitters told the FCM Workshop series that they would be looking for offset investments that: • provide real net carbon benefits which can be accurately and simply measured, monitored and verified; • are eligible for policy recognition (domestically and/or internationally) by governments; • have sustainable development benefits (social, economic, environmental) with no significant tradeoffs; and • demonstrate benefits that are supplemental to what would have happened in the absence of the project.

10. ELIGIBLE FCM ACTIVITIES UNDER THE KYOTO PROTOCOL

11. AN ONGOING PROCESS • Articles 3.3 and 3.4 of the Kyoto Protocol describe the permitted FCM activities. • “Rules” governing these activities have been negotiated only for the first commitment period of the Kyoto Protocol (2008-2012). • These rules are reflected in the following slides. • Negotiations are ongoing on a number of issues and the rules may change for future commitment periods. • FCM proponents must thus consider the short term requirements of the Kyoto Protocol with an eye to the longer term implications of their activities.

12. REDUCING DEFORESTATION(D) • “Deforestation” is the direct human-induced conversion of forested land to nonforested land. • Under the Kyoto Protocol: • the spatial assessment unit for deforestation must be no more than 1 ha; and • all deforestation is considered to be an immediate emission of carbon into the atmosphere. • Deforestation thus has a major impact on Canada’s accounting for FCM • The treatment of the wood products carbon pool is still under negotiation, which may affect the treatment of deforestation in future commitment periods.

13. AFFORESTATION / REFORESTATION (AR) • “Afforestation” is the direct human-induced conversion of land that has not been forested for a period of at least 50 years to forested land through planting, seeding and/or the human-induced promotion of natural seed sources. • “Reforestation” is the direct human-induced conversion of non-forested land to forested land through planting, seeding and/or the human-induced promotion of natural seed sources, on land that was forested but that has been converted to non-forested land. For the first commitment period, reforestation activities will be limited to reforestation occurring on those lands that did not contain forest on 31 December 1989. • There is no limit on the amount of carbon that can be sequestered through AR under the Kyoto Protocol.

14. FOREST MANAGEMENT (FM) Under the Kyoto Protocol: • if Canada chooses to do so (by 2006), it can claim increases in carbon stocks on a declared area of “managed forest” in its national accounting for the first reporting period (2008-2012); • an FM sink can be used to offset net ARD emissions (i.e. when deforestation emissions exceed reforestation / afforestation removals) up to a maximum of 33 Mt CO2/yr (9 Mt C/yr); and • any remaining FM sink can be counted up to Canada’s country specific cap of 44Mt CO2/yr (12 Mt C/yr).

15. EXAMPLES OF FM ACTIVITIES • Canada has the option of enhancing FM to close the gap between what will occur through business-as-usual and the country cap imposed by the Kyoto Protocol (approx. 24+ Mt CO2/yr). • Some ways of doing this include: • increased fire suppression; • increased protection from insects; • increased pre-commercial thinning (PCT); • increased commercial thinning; • tree improvement; and • biomass substitution.

16. FCM PROJECT OPPORTUNITIESBAU = Business-as-Usual: Regulatory Compliance (FM) or Existing Activities (D) Projects= Voluntary Actions Beyond BAU

17. FCM POLICY CHALLENGES

18. POLICY AND MARKET ROLES OF FCM Carbon sequestered (and possibly carbon prevented from being emitted) through FCM activities can be used to: • meet an emissions reduction target imposed on the landowner or the land manager by government; or • create “credits” that can be sold into an emissions trading program if they are “surplus” to regulatory requirements and to the emissions reduction needs of the owner or manager. An impediment to discussions of FCM is that the policy application of FCM credits and the trading of FCM credits in an emissions trading mechanism are frequently confused. They are complementary and not mutually exclusive.

19. WHAT IS AN FCM “CREDIT”? Important to distinguish between carbon “credits” for the purposes of reporting and carbon “credits” for the purposes of trading. From Slide #16: Reporting - Canada can report the total of Projects and BAU secured through FM, the total of AR Projects (as there is no BAU) and the net of Projects and BAU under D. On a sub-national basis (provinces/sectors/companies), who is accountable for and reports carbon sequestered or emitted through BAU is a matter of negotiation. Trading - Project proponents may sell credits resulting from Projects within an emissions trading mechanism. BAU activities are not eligible.

20. ESTABLISHING OWNERSHIP OF TRADABLE CREDITS • Where a tradable credit is to be created through investment in FCM activities, ownership of that credit must be established. • Likely a matter of negotiation between the investor and the landowner. • On Crown lands, the government could transfer the resulting credit to a forest company or could provide another incentive of commensurate value. • As long as the credit is traded domestically, the government (federal and/or provincial) still gets to report the increased carbon associated with the credit (ensuring no double counting).

21. WHAT CARBON IS ELIGIBLE? • The first reporting period of the Kyoto Protocol is 2008-2012. FCM activities must have been initiated since 1990, but carbon sequestered between 1990 and 2007 is not eligible for reporting or trading. • As FCM projects must report incremental improvements over BAU, determining an acceptable baseline for calculating the increment is important. • Canada’s proposed Domestic Emissions Trading system is expected to be operational by 2005. From 2005 to 2007, only forward trades relating to FCM will be eligible (see above).

22. ENSURING ADDITIONALITY • FCM “credits” will not be acceptable if they create a liability for others. • Proponents need to ensure there is no “leakage” of carbon, i.e. an increase in deforestation on another part of the landscape to compensate for the increased carbon sequestered through a project. • Defining defensible project boundaries is thus critical.

23. ADDRESSING PERMANENCE • Once FCM credits are reported in national accounting, the land on which they are based must remain in the national inventory. • Over the course of time, forests may vary from sinks to sources of carbon and the additional fibre generated through FCM projects may be removed through logging (currently considered an emission). • The disposition of carbon at the end of the project must therefore be addressed as it poses a future liability to Canada and (possibly) the landowner.

24. FCM MECHANISMS AND INFRASTRUCTURE Some of the mechanisms that need to be put in place include: • carbon accounting protocols (nationally/provincially); • methodologies for calculating tradable credits at the project level (consistent with national/provincial accounting); • monitoring and verification procedures; • research and technology development; • registration process for tradable credits; • authorization of FCM credits for emissions trading; and • institutional structures and capacity building.

25. PROPOSED PATH FORWARD The Pollution Probe FCM Workshop series called for immediate efforts in: • supporting coordinated FCM projects in a wide range of forest types and including different forms of land ownership; • increasing policy certainty, particularly surrounding ownership of carbon, the establishment of baselines and appropriate approaches to risk management; • supporting FCM research and the development and application of new technologies; • providing incentives to reduce deforestation or enhance the business case for proponents of FCM, recognizing the multiple values that FCM can secure;

26. PROPOSED PATH FORWARD (cont’d) • developing standardized measurement, monitoring and verification procedures consistent with IPCC guidelines, to ensure the credibility of FCM projects; • authorizing FCM carbon credits registration and/or trading for FCM projects, to enable proponents to secure benefits from enhancing carbon stocks, potentially including a revenue stream relating to carbon; and • initiating outreach programs to further understanding of FCM and to ensure that learning informs relevant policies and strategies.

27. FCM PILOTS SERIES

28. FCM PILOTS SERIES Objective • To initiate and coordinate a Forest Carbon Management Pilots series in Canada that will develop a standard protocol for measurement and monitoring of carbon and contribute to increased certainty in the creation of carbon credits through FCM activities. Description • A network of sites that will be representative of eligible FCM activities, differing forest types and differing land ownerships to share learning, standardize approaches and allow outstanding policy and infrastructure issues to be explored in more depth.

29. FCM PILOTS SERIES STEERING COMMITTEE • Pierre Boileau, Environment Canada • Darcie Booth, Canadian Forest Service • Francine Dorion, Abitibi-Consolidated • Paul Gray, Ontario Ministry of Natural Resources • David Layzell, BIOCAP • Ken Ogilvie, Pollution Probe • Ken Plourde, Alberta-Pacific Forest Products • Errick Willis, ICF Consulting

30. Abitibi-Consolidated Al-Pac BIOCAP BC Ministry of Water, Land and Air Protection Canadian Forest Service Climate Change Central Climate Change Secretariat Environment Canada ICF Consulting J.D. Irving Lignum Natsource Nova Scotia Power OMNR Pollution Probe Sudbury / Tree Canada Foundation Others considering participation include: FPAC Industry Canada Ontario Power Generation Saskatchewan ERM PARTNERS IN FCM PILOTS SERIES

31. FCM PILOTS SERIES APPROACH Phase One (to end of 2002) • Inventory of projects, programs and funding opportunities • Outline of draft standard protocol Phase Two (to June 2003) • Workshops with prospective pilots to develop draft standard protocol and identify key policy and infrastructure issues to be explored • Facilitating funding of prospective pilots Phase Three (Summer 2003 on) • Implementation, refinement and sharing of learning • Policy inputs to federal and/or provincial governments

32. FCM PILOTS SERIES – PHASE ONE • Establish steering committee • committee representative of partners and major interests established (some spots still open). • Establish an inventory of FCM initiatives in Canada • approximately 14 potential pilots identified covering FM, AR and reducing D in a variety of forest types and ownership regimes. • Develop a draft template for a standard FCM protocol • outline completed by ICF Consulting. • Liaison established with a variety of FCM-related programs and funding opportunities.

33. FCM PILOTS SERIES – PHASE TWO • Engagement of prospective pilots in the development of a draft standard protocol and in the identification of policy and infrastructure issues to be explored • series of workshops with prospective pilots and key agencies • Assessment of prospective pilots against draft standard protocol • tailor standard protocol to individual projects • decision to proceed by prospective pilots • Facilitate funding for prospective pilots • assist pilots to access research and project funding • Assist prospective pilots in securing policy support for proposed activities

34. FCM PILOTS SERIES – PHASE THREE • Testing of draft standard protocol by pilots • Examination of key policy and infrastructure issues • Periodic meetings of participants to review progress and refine draft standard protocol • Provision of policy inputs to government based on learnings • Communication and outreach with other potential projects • Possible pooling of pilots for the purpose of generating a “trade”

35. FURTHER INFORMATION Paul Griss FCM Pilots Series Coordinator pgriss@boldon.org 403-678-9956