Offsets from Forestry: Global and
US Perspectives
Brian C. Murray
Director for Economic Analysis
Nicholas Institute for Environmental Policy Solutions
Research Professor
Nicholas School of the Environment
Duke University
EPA/RFF Workshop: Modeling the Costs and Volumes
of GHG Offsets
May 12, 2009
Re-manipulating the Global Carbon Cycle
Goal is to
reduce
atmospheric
concentration
Increase
CO2
Stored in
Reduce
Industrial
emissions
Forests and
Soils
Oceans
Non-CO2 gases from agriculture and other sources are greenhouse gases too
Source: NASA
Global Sources of
Greenhouse Gases
IPCC Fourth Assessment Report
Top 21 CO2 Emitters in 2000:
The Contribution of Land Use Change and Forests
From Myers, Erin. 2007. Policies to Reduce Emissions from Deforestation and Degradation (REDD) in
Tropical Forests. Resources for the Future.
Reduced Emissions from Deforestation
and Degradation (REDD)
• Developing countries are seeking compensation for
voluntarily reducing emissions from reducing
deforestation (their largest source)
• UN Framework convention
• National policy (e.g.,. US)
• Voluntary markets
• Challenges
–
–
–
–
–
REDD left out of Kyoto Protocol
Developing effective compensation schemes
Measuring and monitoring
Establishing reference case (aka “baseline”)
Controlling for leakage
• Opportunities
– Revenue to pay for forests’ ecosystem services
– Brings down overall cost of mitigation
– Social and economic development
Another Option: Comprehensive
Coverage of all Forest Stocks
• Not just Deforestation/Degradation, but all
changes in forest C stock at the national
level
• Reduces leakage among activities
• Raises concerns about tradeoffs with nonGHG benefits of forests
– Biodiversity
– Water quantity and quality
Reducing tropical deforestation is among the most
economic options for cutting GHGs
IPCC Fourth Assessment Report
Global Carbon Sources and
Sinks
Net Emissions
+
Deforestation
and
degradation
Net source
Net sink
_
Sequestration
in growing
forests
U.S. National Greenhouse Gas
Inventory
GHG Emissions Sources and Sinks in US: 2007
Emissions
(MMT CO2)
% of total
Electricity Generation
2,445
34.2%
Transportation
1,995
27.9%
Industry
1,386
19.4%
Agriculture (mostly methane and N2O)
503
7.0%
Commercial Buildings
408
5.7%
Residential Buildings
355
5.0%
Other
58
0.8%
Gross emissions
7,150
100.0%
Forest/Ag Carbon Sinks
-1,062
-14.9%
Source: US EPA GHG Inventory, 1990-2007
http://www.epa.gov/climatechange/emissions/usinventoryreport.html
US Mitigation Potential: Forest and
Agricultural Offsets
Constant Prices Over Time
Activity
$1
$5
$15
$30
$50
Afforestation
0.0
2.3
137.3
434.8
823.2
Forest management
24.8
105.1
219.1
314.2
384.8
Agricultural soil carbon
sequestration
62.0
122.7
168.0
162.4
130.6
Fossil fuel mitigation from crop
production
20.5
31.9
53.1
77.6
95.7
Agricultural CH4 and N2O
mitigation
9.4
15.2
32.0
66.8
110.2
Biofuel offsets
0.0
0.1
57.2
374.6
560.9
All Activities
116.8
277.3
666.7
1,430.4
2,105.4
** New preliminary
model results (2009)
suggest smaller
potential due to other
land pressures
(EPA, Murray et al 2005,MM tons CO2 Annualized Averages, 2010–2110
Policies to make it happen
“Cap and Trade”
• Cap: An absolute limit on GHG emissions allowed
during a period
• Trade: Parties are allowed to bid among
themselves for the fixed emission “allowances”
• Advantages
– Efficiency
– Equity: Polluter Pays
• Examples
–
–
–
–
SO2
ETS
RGGI (NE States)
CCX
Offsets
• Reduction in emissions (increase in sequestration) of
greenhouse gases produced by an entity outside of
the compliance cap
• Used by a capped entity to offset its own emissions.
• Usually less expensive.
Forest offsets
Induce landowners to sequester more carbon (e.g., in forests) by
paying them for every ton they sequester or reducing tons
lost through forest clearing
Offsets and Environmental Integrity:
Are Reductions “Real”?
• Project-based offset system
– Voluntary transaction
– Idea is to offset emissions of the capped
party with an emissions reduction
(sequestration) project by uncapped party
– Factors that can undermine real reductions
• Leakage: diverted emissions beyond project
boundaries
• Within country
• International
• (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
Offsets in Waxman-Markey Bill
•
“Economywide” coverage of the bill
–
~85% of US emissions capped
–
Major non-capped sources (offsets potential)
•
•
•
Quantitative limits:
–
–
•
Agriculture and Forestry
Methane from landfills and natural gas processes
Domestic: 1 billion tons/International: 1 billion tons
Cross-board discount applied to all offsets: 5 credits for every 4 tons of emissions offset
Qualitative limits:
–
EPA/ Offsets Integrity Advisory Board to determine which activities qualify
• Forests are very likely allowed, but face challenges (e.g., estimating baselines)
• List to be reviewed every 5 years
– Certification and crediting standards
• Methodologies for additionality, leakage and permanence
• Buffer requirements
•
– Offset program evaluation every 5 years – are actual reductions occurring?
Other approaches (beside offsets) to tackle reductions from uncapped sectors
REDD in Waxman-Markey
• Focus on tropical deforestation
– Degradation and Afforestation/reforestation, forest
management excluded for now
• Three avenues for inclusion
– Offsets
• part of international pool
– Supplemental reductions
– Strategic carbon reserve auction
• Sector-based/National
– Compensation based on performance of all country’s
deforestation emissions relative to a national baseline
– May be some room for project-based REDD in early years and
with further discounts
Waxman-Markey Costs: Effect of
International Offsets (including REDD)
Meanwhile in the rest of the world…
• UNFCCC negotiating role of REDD in
post-Kyoto agreements
• Points of negotiation
–
–
–
–
–
–
–
National v subnational
Scope: RED, REDD, or REDD+
Market or fund-based
Baseline
Protecting indigenous rights
Financing for capacity-building
Developed v Developing country responsibilities
New report to be released
Murray
this month
Lubowski
Sohngen
Recap
• Forests are an important part of the carbon cycle and
therefore an important part of greenhouse gas
mitigation
• The carbon market has not delivered much
opportunity for forest carbon to date, but that
appears to be changing
• International post-Kyoto initiatives envision a large
role for tropical forest conservation
• Domestic US legislative proposals build a role for
international and domestic forest carbon mitigation
• Forest carbon initiatives will always arouse interest
and controversy
• Implementation challenges are difficult, but
surmountable