Forestry: Additionality and
Baselines
Gordon Smith
April 28-29, 2009
Biological Sequestration through Greenhouse Gas Offsets:
Identifying Challenges and Evaluating Potential Solutions
Washington, DC
Outline
• Global context
• Concepts
• Current problems
• Possible solutions
Global context
• Forests are ~20% of global
anthropogenic emissions
• REDD: reducing emissions from
deforestation and degradation
More focus on deforestation than degradation
Tried project scale; now focusing on national scale
and sub-national
Considering funds phasing to credits
Total flux >60 bn tons C/year
Concepts:
Additionality matters
• 224 billion ton CO e BAU gross global
2
annual uptake by forests;
• Waxman-Markey 2012 goal:
~ 0.7 billion ton CO2e below BAU
Baseline
• What would likely have happened in the
absence of the project, “business as
ususal” (BAU)
• Requires guessing at net emissions
under the BAU activity
• May be performance standard or project
specific
Crediting baseline: rising
Project Credits
Baseline Stock
Declining baseline: REDD
Project Credits
Baseline Stock
Declining credits
Project Credits
Baseline Stock
Forest stocks change over time
Age Class Distribution
PNW Industrial Forest
14000
12000
Acres
10000
8000
6000
4000
2000
0
0 to 5 to 10
4
9
to
14
15
to
19
20
to
24
25
to
29
30
to
34
35
to
39
40
to
44
45
to
49
Age Class
50
to
54
55
to
59
60
to
64
65
to
69
70
to
74
75
to
79
80
to
84
Forest stocks change over time
Live Tree Carbon Stock
75,363 acres, Idealized Industrial Management
12.00
Million Tons CO2e
10.00
8.00
6.00
4.00
2.00
0
10
20
30
40
50
Project Year
60
70
80
90
Problems: afforestation
• Possible leakage
Significant if projects cause clearing elsewhere
May be negligible if combined with forest
management incentives* or international REDD
actions
*EPA. 2005. Greenhouse Gas Mitigation Potential in U.S. Forestry and Agriculture,
EPA 430-R-05-006.
Problems: forest management
• Baseline depends on absolute and
relative prices of different wood
products
• Prices change!
• Few can model profit maximizing
behavior
• Fewer can check modeling
• Actual management is not fully profit
maximizing
Forest management example
• 2006 housing boom: lumber prices high;
chip prices low
• Baseline: Cut Douglas-fir for lumber;
leave Alder for chips
• Project: Grow Douglas-fir; cut Alder and
replace with Douglas-fir
• 2008: Housing crash: lumber prices low;
chip prices high
• 2008 BAU is 2006 project activity
FM problem: voluntary opt-in
• BAU stocks rise and fall over time
• Those with low stocks that are about to
rise opt in
• Those with high stocks that are about to
fall stay out
Avoided deforestation baselines
• Immediate threat
Can be gamed
• Model trends
Trends change quickly
Gives modest incentive
Leakage generally >65% sometimes >90%*
*Gan, Jianbang and Bruce A. McCarl. 2007. Measuring transnational
leakage of forest conservation. Ecological Economics. 64: 423-432.
Solutions: afforestation
• Recognize offsets
• Forestry is low value use so all
afforestation can be declared additional
• Baseline can be carbon stock present at
time of project
• Carbon stock quantification methods
are well established and reliable
• Leakage treatment depends on FM rules
Solutions: deforestation
• Require projects to maintain supplies of
goods, to avoid leakage
• Deforestation fee (not offsets)
• No net forest loss policy
Maintaining supply
• Demand for crop land
Intensify crop production elsewhere
• Demand for wood products
Intensify wood production elsewhere, e.g.
plantations
• Demand for land for development
Up-zone other lands
Deforestation fee
• Apply to all conversions, including small
areas
• Set fee by average carbon stock for the
potential forest type and site
productivity
• Fee can be function of recent allowance
price
No net forest loss
• Model: wetland no net loss policy
We know better how to grow trees than how to
make wetlands
• Probably have net emissions in short
term, until new trees grow
• Can have trading factor, e.g. 2 new
forest acres for every acre converted
Solutions: forest management
• Comprehensive accounting
All tons above baseline are eligible to be tradable
credits
All emissions below baseline must be covered by
allowances
Avoids need to determine additionality
Captures leakage in comprehensive counts
• All properties above specified size are
included; not voluntary opt-in
Comprehensive forest accounting
• Baseline equal average carbon stock, by
forest type and site productivity
Avoids problems of modeling profit-maximizing
management
• Allow time to come up to average stock
• Allow banking on non-tradable “tonyears” to cover periodic dips in carbon
stocks
Comprehensive forest accounting
• Smaller entities are more likely to
sequester; need to identify how small to
set property size threshold for inclusion
• Rewards past good forestry
• Avoids need for early action crediting
• Necessary to achieve modeled sink
amounts
Additionality and selection bias limit offset benefit
Landowner fears
• High reporting cost
• Confidentiality
• Will have to pay to log
• Will pay for fire emissions
• Long rotation mandate
Low reporting cost
• Use timber inventory data
Add woody debris or soil organic layer in selected
ecosystems
• Five-year reporting periods
Could forgo reporting if no harvest
• Downloadable software tool calculates
carbon stocks and changes
• No third party verification necessary;
federal audits and penalties for lying
Confidentiality
• Landowners fear that competitors will
learn what trees they have available to
harvest
• Secure transactions only between
government and landowner
• Option for landowner to do calculations
in-house and report only total carbon
stock each period?
No fee for logging
• Liability based on cumulative carbon
stock on all stands, not single stand
• Banking non-tradable ton-year credits
covers periods with lower carbon stocks
• Time to meet initial requirement allows
re-growth on currently understocked
lands
Need research on effects on harvesting of
alternative grace period lengths
Insurance for fire emissions
• Natural disturbances include fire,
insects, and wind
Loss rate is small
• Create optional insurance fund
“Premiums” paid in credits
Need actuarial quantification of how many
ownerships go below average C stock because of
natural disturbance, how far, and how deficit varies
by ownership size
Prohibit rotation length mandates
• Mandating long rotations costs
landowners a lot because large harvest
revenues are deferred
• Prohibiting rotation length mandates
assures landowners that incentive
program will not mandate silvicultural
practices
How address existing California rotation minimums?
Summary
• Afforestation: Offsets
• Multiple avoided deforestation options:
Require projects to maintain supplies of goods
Deforestation fee
No net loss policy
• Forest management: comprehensive
accounting
Avoids additionality, baseline and leakage problems
Compatible with international REDD program
Thank you
Gordon Smith
Ecofor LLC
206.784.0209
13047 12th Ave NW
Seattle, WA 98177
USA