European State Forest Association ‘Sinks’ in the EU Emissions Trading Scheme 26/06/08

1. European State Forest Association ‘Sinks’ in the EU Emissions Trading Scheme26/06/08 Erik Kosenkranius – EUSTAFOR Executive Director Marianne Rubio - ONF

2. Content Who is EUSTAFOR ? 1. Background • The role of forests in the carbon balance • How the Kyoto Protocol deals with the forestry sector • 2007-2008, IPCC report and EU “legislative package” proposal 2. Using forestry credits in the EU ETS • Response to EU concerns • Response to stakeholders concerns • Proposal for amending the directive 2003/87/CE 3. Conclusion

3. Who is EUSTAFOR ?

4. About EUSTAFOR • 28 members registered from 21 countries • Total forest area ~ 46 Mha (27% of EU forest area) • Protected forest area ~ 10 Mha • Certified forest area ~ 28 Mha (PEFC, FSC) • Annual increment ~ 155 Mm3 • Annual harvest ~ 117 Mm3 • Number of employees ~ 113 100

5. The main Objectives • Analyse and investigate the existing framework conditions within the EU • Serve as a contact body to give direction in any situation relating to the development of EU regulations • Facilitate and expand an exchange of ideas and contacts between the state forest organisations of Europe • Keep members regularly informed of the topics and issues that concern the whole of Europe

6. 2007-2008 : Strategic issues • Wood production – Balance between economic and environmental concerns, promotion of the use of wood and wood products • Bio-energy – Promotion of the use of renewable energy, active involvement in national programs • Research – Participation in the FTP initiative and 7th Research Framework Program • The Kyoto protocol- Revision of ETS directive 2003/87/EC • EU Forest Action Plan – Active participation on some actions

7. 1. Background

8. Increase of wood demand Increase of forest harvesting Increase of carbon stock in harvested wood products The role of forests in the global carbon balance (1) ~ 20 % global GHG emissions (tropical deforestation: -7,3Mha/year) Growing Forest = Carbon « sink » Wood Products = Carbon « pump » Global balance = sink of 2,3 GtC02/year thanks to Northern hemisphere forests 1 t of wood ~ 1 tCO2eq avoided emissions ~ world stock: 4500 billion teqCO2 in forest 1 m3 of wood ~ sequestration of 1 teqCO2 Increase of forest area Forest management Increase of carbon stock in forests Forest and Wood Products = Carbon « stocks » Forests = 50% of carbon stock in terrestrial ecosystems

9. The role of forests in the global carbon balance (2) IPCC : Cumulative effects of the forestry and wood sector (carbon changes for a scenario involving afforestation and harvest). Marland and Schlamadinger 1999

10. The Kyoto Protocol and the forestry sector Annex 1 countries Non-Annex 1 countries Commitment of industrialised countries: EU: -8% Harmonised rules for inventories and accountability Kyoto « Flexibility mechanisms » Art. 6 & 12 CDM Clean Development Mechanism JI Joint Implementation Afforestation, Forest management, Permanent crediting Afforestation or reforestation, Temporary crediting

11. 2007 -2008 : IPCC report and EU proposal • Directive 2003/87/CE: does not allow European industrial companies subject to NAP to use CDM and JI forest credits. • Council (June 2007):INVITES the Commission, as foreseen by the "Linking Directive", to consider a possible extension of the scope of the EU ETS to land use, land-use change and forestry. • IPCC 4th Assessment Report (2007): “Forestry can make a very significant contribution to a low-cost global mitigation portfolio that provides synergies with adaptation and sustainable development. However, this opportunity is being lost in the current institutional context and lack of political will to implement, which has resulted in only a small portion of this potential being realised at present”. • (high agreement, much evidence). • Legislative package on climate and energy (January 2008) : Proposal for a Directive to improve the EU ETS + Proposal for a decision on the effort sharing : “only credits from project types which were accepted by all Member States during the 2008-12 period will be eligible for use » => 2008-20 : exclusion of CDM and JI forestrycredits.

12. 2. Using forestry credits in the EU ETS

13. Using Forestry credits in the EU ETS: Response to EU concerns 1. “Inclusion of forestry credits might distract Member States from their true responsibilities”: • + 2°C target: the forestry sector can make a significant contribution • The use of CDM credits is limited to 1% of the allocated quotas 2. “Influx of forestry credits => fall in the market value” : Only very few forestry based projects have entered the CDM/JI process : • 836 registered CDM projects BUT ONLY one forestry based project (China) • No forestry based JI project determined, one project with (pre-)validation (Romania Afforestation of Degraded Agricultural Land Project) 3. “Difficulties to integrate temporary credits into the EU ETS” • Operator will be liable for replacement of credits • Temporary credits were designed to address the issue of permanence of carbon sequestration in forest

14. Using Forestry credits in the EU ETS: Response to stakeholders concerns (1) • Environmental and economic benefits : • Financial incentives for forest owners to promote sustainable management of forest, and when carbon sequestration in wood products is included in the system to promote the sustainable production of biomass and wood products • Co-benefits for water, soil, biodiversity, etc. • Political benefits : • Forestry projects adapted to the rural context in less developed countries • Social co-benefits of forestry projects => The full value of forests and forest products in combating climate change should be acknowledged.

15. Using Forestry credits in the EU ETS Response to stakeholders concerns (2) Forest mitigation strategies do not lead to a decrease in wood supply : “In the long-term, sustainable forest management strategy aimed at maintaining or increasing forest carbon stocks, while producing an annual yield of timber, fibre, or energy from the forest, will generate the largest sustained mitigation benefit”(IPCC –2007). 1 m3 of wood substitution Energy substitution Carbon store 0,9 t CO2 1,1 t CO2 Total CO2 saving from carbon store and substitution effect combined University of Hamburg Centre for Wood Science and technology- October 2002

16. 3. Conclusion

17. Conclusion: Recognition of Forestry in climate change negotiations EUSTAFOR view : • To promote the major and positive role of forests and forestry in climate change mitigation and to propose practical solutions to maximise the value of forestry in regard to climate change issues. How ? • Through the modification of the directive organising the EU Emissions Trading System in order to include forestry credits • To prepare the negotiations on forest issues in the post-2012 international context for improving the current system (REDD, sustainable forest management, sustainable production and use of wood products and biomass, etc)

18. Thank you for listening!