Forests in the Balance Sheet: Lessons from Developed Country Land Use Change and Forestry Greenhouse Gas Accounting & Reporting

Executive Summary

The world’s forests, both their use and loss have a critical role for international efforts to counter climate change. Recognizing this, Parties to the United Nations Framework Convention on Climate Change (UNFCCC) included in the 2007 Bali road map a mandate to develop a mechanism that would create incentives for developing countries to reduce emissions from deforestation and forest degradation (REDD).

In order to ensure that a REDD mechanism is both effective and credible in protecting and restoring forests and reducing carbon dioxide emissions, a range of accounting and methodological challenges will have to be solved. In assessing the scale of those challenges many commentators have looked to pilot projects. However, while instructive, these projects do not get at the larger issues involved in national accounting. It is interesting therefore to look for lessons from the experience of Annex I (developed) countries in accounting for forest-related emissions and sequestration as part of their national emission reduction commitments. This working paper thus analyzes developed country experience to date in relation to implementation of the LULUCF (land use, land use change and forestry) provisions of the Kyoto Protocol.

Key Findings

The paper draws conclusions and recommendations around including the GHG emissions and removals from developing country forests and other relevant land uses into an international climate architecture. We hope this information will inform the negotiations both at and beyond the Copenhagen Conference of the Parties to the UNFCCC in December 2009. Lessons learned from Annex I LULUCF accounting point to the need to design an international REDD mechanism that differs significantly from the current LULUCF model.

Lesson 1: Current LULUCF rules have resulted in the significant under-reporting of forest-related greenhouse gas emissions. This is because Annex I countries are only required to report on greenhouse gas emissions from deforestation and greenhouse gas removals due to afforestation and reforestation. Negotiations for the post-2012 arrangements are debating whether to make inclusion of emissions and removals from forest management activities mandatory for Annex I countries. Initial research suggests that if only deforestation is considered for developing countries, the same under-reporting that developed countries have experienced will result.

Recommendation 1: To account more accurately for forest-related emissions and removals, reporting requirements of a forest mechanism for both developed and developing countries should be broader than the current mandatory requirements under LULUCF.

Lesson 2: Current accounting systems under LULUCF rules do not yet provide the accuracy and precision needed for credibly including land use emissions in emission trading. Annex I countries are actively seeking to improve quantification and accounting for emissions and removals in relation to forest management activities under LULUCF, but this has proven challenging. These difficulties will also exist in a forest mechanism that includes activities such as degradation, sustainable management of forests and enhancement of carbon stocks. Such imprecise accounting may prove problematic for effective functioning of a carbon market mechanism.

Recommendation 2: A system that relies wholly on carbon markets to finance REDD would greatly sacrifice accuracy and/or inclusiveness among countries. Parties should implement a range of means for financing REDD. This should include a fund to finance activities that cannot be precisely accounted for. In some cases changing the definition of deforestation in order to capture significant land conversion activities may address some of the accuracy issues.

Lesson 3: Significant improvements in transparency and consistency are needed in the way countries report on land use change and emissions from forest activity. In addition, reporting is scant on the biodiversity and human welfare impacts of policies designed to reduce emissions. Both of these factors reduce the credibility of, and support for, country actions.

Recommendation 3: Parties should undertake full and consistent reporting of all relevant data for quantifying emission reductions or greenhouse gas removals. This includes data on the basis for setting a reference level and on non-carbon factors, such as biodiversity and impacts on forest stakeholders, specifically related to tenure. This reporting should include actions as well as emissions data and assumptions.

Lesson 4: Inventories of greenhouse gas emissions have been critical in helping countries understand where their most significant land use emissions come from. They also help identify “leakage” between land use activities.

Recommendation 4: Any country that engages in voluntary REDD Plus activities as part of its commitments under an international climate agreement should undertake a full land use emissions inventory. In accordance with the Convention, support should be provided to developing countries to produce these inventories.

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