Transcript Woodland carbon & incentives for climate change mitigation by the

Woodland carbon & Incentives
for Climate Change Mitigation by
the UK Forest Sector
Gregory Valatin
Forest Research
Centre for Human and Ecological Sciences
Roslin
Scotland
Change of presentation focus
The ‘comprehensive title in the programme:
Originally
international cooperation on climate change
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Early results from game theory literature suggested:
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a self-enforcing international environmental agreement
(IEA) may not exist (Barrett 1994)
where one does it is unlikely to:
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be signed by more than a few countries (Barrett 1997; Carraro
and Siniscalco 2001)
to significantly improve upon the non-cooperative equilibrium
(Barrett 1997; Carraro (Ed.) 2003).
Framing the problem as an issue of environmental
security reverses these results
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how we frame problems can drive the results we get!
Apologies for any disappointment due to change of focus!
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LEF Workshop, 1st June 2012
Overview
1) Significance of UK woodland Carbon
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UK National Ecosystem Assessment
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sequestration
storage
2) Cost-effectiveness of UK forestry for Climate Change Mitigation
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Marginal Abatement Cost Curves
Other studies:
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Flood risk management: ‘Slowing the Flow’ at Pickering
Agroforestry / farm woodland: Ammonia abatement
3) Incentives for Carbon sequestration by UK woodlands
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Regulatory frameworks
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EU Emissions Trading Scheme
recent Forestry Commission led initiatives
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Investigating potential for new financial instruments
Woodland Carbon Code
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Carbon Valuation, Discounting & Risk Management
Additionality of woodland carbon projects
4) Summary and Concluding remarks
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Variety of UK Forest Ecosystem Services
NEA Woodlands Chapter:
• Provisioning services
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Social & cultural services
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9 million tonnes of wood in 2009
250-300 million visits to UK
woodlands a year
Landscape amenity
Educational value
Regulating services:
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Detoxification/purification
• Water quality
• Soil quality
• Air quality
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Hazard reduction
• Flood risk
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Carbon sequestration
Biodiversity
http://uknea.unep-wcmc.org
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Carbon sequestration by UK woodlands
CEH / UK GHG inventory estimates
(UK forests planted since 1921):
● annual net carbon sequestration
rose from 2.4 MtCO2 in 1945 to a
peak of 16.3 MtCO2 in 2004,
falling back to 12.9 MtCO2 in
2009.
● mean net sequestration rates of
5.2tCO2/ha over 2001-2009.
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LEF Workshop, 1st June 2012
Carbon sequestration by UK woodlands
UK NEA (CEH/UK GHG inventory data):
● Social value of net carbon sequestration by UK woodlands
increased five-fold, from £124m in 1945, to £680m in 2009
assuming woodland carbon stock remains at least at current level in
perpetuity and does not account for forestry establishment or
management costs.
Figure 17 – Value of annual carbon sequestration by UK woodlands (at 2010 prices).
1000
900
800
£ millions
700
England
600
Scotland
500
Wales
400
N. Ireland
UK
300
200
100
2009
2005
2001
1997
1993
1989
1985
1981
1977
1973
1969
1965
1961
1957
1953
1949
1945
0
Note: based upon DECC (2010) social value of carbon central estimate of £53/tCO2 in 2009.
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Future UK carbon sequestration?
(1) UK NEA 2010-2050 BAU (‘business as usual’) scenario forecasts (based upon CEH estimates):
● indicate a drop of more than half in net carbon sequestration by UK woodlands from over 10 MtCO2 in 2010 to
under 4 MtCO2 in 2028.
● Forecast net carbon sequestration then falls further and becomes negative in the years 2030-2034 (as well as in
2048) with UK woodlands becoming a carbon source rather than a sink.
● once the net carbon sequestered in harvested wood products (HWP) is added, total net sequestration remains a
carbon sink over the entire period.
Figure 19 – Net carbon sequestration by UK woodlands & HWP.
Figure 20 – Forecast values 2010-2050 (at 2010 prices). .
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14
1000
12
10
800
Woodlands
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HWP
Total
600
4
2
-4
HWP
Total
200
Due to increasing social value of carbon
● per hectare value of net carbon
sequestration by UK woodlands projected
to increase overall from £200/ha in 2010
to over £250/ha in 2050 (at 2010 prices).
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Woodlands
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LEF Workshop, 1st June 2012
0
-200
2010
2012
2014
2016
2018
2020
2022
2024
2026
2028
2030
2032
2034
2036
2038
2040
2042
2044
2046
2048
2050
-2
2010
2012
2014
2016
2018
2020
2022
2024
2026
2028
2030
2032
2034
2036
2038
2040
2042
2044
2046
2048
2050
0
£ millions
MtCO2
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Note: based upon current woodland creation rates of 8,360ha per year and
woodland removals of 1,128ha per year continue throughout .
Future UK carbon sequestration?
(2) UK NEA 2010-2050 (based upon Read Report scenarios):
Figure 22 – Impact of scenarios on projected net CO2 uptake compared to BAU scenario:
a) woodlands only;
(b) total including HWP and substitution effects.
Figure 19 – Net carbon sequestration by UK woodlands & HWP.
Source: Adapted from Matthews & Broadmeadow (2009), p.148.
annual value of net carbon sequestered by UK woodlands under the enhanced afforestation scenario (EAS)
additional woodland creation of 23,000ha/yr under EAS could potentially rise by around £3,000m-£4,000m by 2060
at 2010 prices compared with the CEH BAU scenario (based upon valuing the additional net 12-15MtCO2
sequestered in 2060 at the DECC central value of £275/tCO2e recommended for that year).
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Significance of carbon sequestration
NEA finding:
Estimated social value of net carbon
sequestration per hectare of UK woodland
(£239/ha/yr) was more than three times
the market value of softwood produced
(£66/ha/yr) in 2009.
(NB mean market value of the carbon
sequestration in 2009 probably far below
1% of the market value of the timber).
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Carbon storage by UK woodlands
UK / NEA estimates:
● 803 MtC carbon stored in UK
woodlands in 1990.
● Social value (relative to permanent
loss) of £11,000/ha - £59,000/ha
at 2010 prices (range depends if
only above- and below-round
biomass included, or also soil
carbon).
.
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climate change mitigation cost-effectiveness?
Depends upon species planted, inclusion or
exclusion of carbon substitution
benefits, etc:
Read Report estimates (p.158)
Table 8.8: Cost-effectiveness of woodland creation and abatement over 100-year period
Forestry option
Costeffectiveness
(£/tCO2)
Abatement (tCO2
per ha per year)
-60.8
Costeffectiveness
(£/tCO2) excluding
traded carbon
value
24.8
SRF GYC36 (Eucalyptus nitens)
SRC GYC20 willow
-50.3
58.6
3.7
SRF GYC16 (Eucalyptus nitens)
SRF GYC20 (Eucalyptus nitens)
GYC16 SS/DF
-45.3
-30.6
41.3
44.6
8.4
9.5
-17.3
-2.8
12.9
GYC12 SS (continuous cover)
GYC12 SS/DF
-11.2
-0.1
9.7
-9.6
5.3
9.1
-4.7
8.1
9.1
11.2
25.9
7.9
21.1
21.1
7.0
34.3
114.6
4.5
40.7
72.7
40.7
75.8
8.4
5.2
GYC12 SS/DF (continuous cover –
selection)
Mixed broadleaf/conifer:
ACF (selection)
GYC4 native woodland SP
SRF GYC12 native species (SAB)
GYC4 native broadleaves
GYC6 broadleaf farm woodland
http://www.forestry.gov.uk/forestry/infd-7y4gn9
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15.1
climate change mitigation cost-effectiveness?
Marginal Abatement Cost Curves (MACCs)
Interpretation:
UK Marginal Abatement Cost Curves for renewable heat in 2022.
A single line segment (or bar)
is used to represent each
measure.
Its horizontal width
represents the abatement
potential and its vertical
height the unit cost.
Carbon savings in 2022 (MtCO2)
Source: CCC (2011, p. 125).
Notes: ASHP air source heat pumps; DH district
heating; GSHP ground source heat pumps.
Where a technology appears more than once in a
curve, this reflects different applications.
E.g. for households
(url: http://www.theccc.org.uk spring 2010):
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Climate change mitigation cost-effectiveness
Estimates from MACCs covering UK forestry measures
Baseline land use
Radov et al
(2007)
i) 2009-12
ii) 2009-17
iii) 2009-22
Arable
Carbon benefits covered
Seq
Tree species & yield class
options considered
Rotation lengths for each
option
Discount rate applied
Woodland creation
cost-effectiveness
(£/tCO2e)
Forestry management
cost-effectiveness
(£/tCO2e)
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Moran et al ADAS (forthcoming)
(2008)
i) to 2022
i) to 2022
ii) to 2050
ii) to 2030
ii) to 2050
Sheep
Rough
grazing
uncultivated
a) Seq
a) Seq
b) SeqSbm
b) SeqSbm
c) SeqSbf
1
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1
2
Time period(s) covered
7%
~£20
~£40
3.5%
to a) -£7
b) -£6 to £12
c) -£2 to £1
Not
b) £1
considered
c) £12
/
1
3.5%
a) similar to b) in most
cases, but up to £103
b) -£60 to £73
c) -£52
Valatin G. (forthcoming, Tables 1 & 2): Marginal Abatement Cost Curves for UK Forestry: A review
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Climate change mitigation cost-effectiveness
Forestry MACCs: importance of agricultural opportunity costs
Radov et al.
(2007)
Moran et al.
(2008)
ADAS
(forthcoming)
Carbon pools covered
T,S
T,L and S
T,L,S and HWP
Opportunity cost (£/ha/yr)
£120–£148
£141
£50–£350
Present Value over 100 yrs
(*)
£3578–£4412
£4204
£1491–£10434
Loss in land value (£/ha)
£2500–£7500
Not included
separately
Not included
separately
Establishment cost(s)
(£/ha)
£1250–£3000
£1250
£1310–£5400
Timber price profile
n.a.
2.5% pa
increase
2% pa increase
Value of carbon
substitution in electricity
generation
Not included
Not valued
separately
£21 per tCO2e
(2009) – £200
per tCO2e (2050)
Carbon pools covered: T: Tree; L: litter; S: Soil; HWP: harvested wood products.
* If annual agricultural opportunity costs converted at Treasury Green Book discount rates
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Cost-effectiveness including other ES
Forestry measures at project level: (1) ‘Slowing the Flow’:
indicative cost-effectiveness
estimates for floodplain,
riparian farm woodland
creation for flood risk
management:
-£61.61 to £2.85/tCO2
(central estimate £28.83/tCO2).
(2) ‘SAMBA’:
indicative cost-effectiveness
estimates for woodland creation
for ammonia abatement:
-£608 to £23/tCO2
http://www.forestry.gov.uk/fr/INFD-7ZUCQY#final1
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(DECC cost-effectiveness comparator:
£44/tCO2 to £46/tCO2).
Cost-effectiveness: summary
UK Forestry measures generally highly cost-effective:
● recent results draw upon current UK guidance including:
● DECC social values of carbon
● central estimate £53/tCO2 in 2012 (2009 prices, non ETS)
● rising to £469/tCO2 in 2100
● Treasury Green Book discounting protocol
● decline from 3.5% (0-30yrs) to 1% (>301 yrs)
● results also dependent upon wider feasibility considerations
● e.g. landowners’ motivations & land availability
● cost-effectiveness estimates are sensitive to approach adopted:
● e.g. discounting protocol & assumed social values
● whether discounted social values of carbon rise
● inclusion of wider benefits
● standardising methodology across studies (& countries) would aid comparability
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Incentives (Payments for Ecosystem Services)
Q: How to ensure the social
value of carbon sequestration
(and other benefits) of
woodlands are taken account
in practice? (especially in an era
of limited public finance)
US 2007 study visit:
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Wetland Mitigation:
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Clean Water Act 1977 (section 404):
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Conservation Banking:
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Endangered Species Act 1973 (Section 10)
requirements for a Habitat Conservation Plan
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Clean Water Act 1977
Carbon Trading:
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Requirements to avoid, minimise and
compensate
Conservation banks established in 1990s
Water Quality Trading:
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‘No net loss of wetlands’
Mitigation banks emerged in the 1990s
Regional initiatives
EU Emissions Trading Scheme
UK woodland carbon is not currently covered by regulatory (e.g. capand-trade) schemes.
E.G EU ETS (a “cornerstone” of the EU's policy to combat climate change):
• does not currently cover forest carbon due to:
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Focus as technological driver for emission abatement by energy and
industrial sources
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potential impacts on incentives to reduce emissions
permanence
leakage
quantification, monitoring and verification
high transaction and administrative costs
added complexity
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temporary nature of some forestry credits (CDM)
potential liability issues for Member States
potential for future inclusion of forestry remains a discussion point
EU ETS could be a potential funding source for forestry projects
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≥50% of government proceeds from auctioning EU allowances
earmarked for nine activities
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these include forestry carbon sequestration
COST E51: Ciccarese, L., Elsasser, P., Horattas, A., Pettenella, D. and Valatin, G. 2011.
Innovative market opportunities related to carbon sequestration in European
forests?, Chapter 9 of Weiss, G. et al (eds) Innovation in Forestry, CABI, Wallingford.
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Forestry Commission initiatives (1)
Investigating new business models &
financial instruments for funding
woodland creation
• ‘forest bonds’
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Potential models:
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community bonds (e.g. renewable energy retailer
issue of bonds to customers)
charity bonds (low risk social housing projects,
with donation to charity dependent upon investor’s
chosen level of return).
social impact bonds (public sector commissioners
pay if/when outcome specific milestones met for
defined population)
examples for woodland creation in other
countries include:
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Investor view that funding potential for woodland
creation in England too small?
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Bamboo bond launched in by EcoPlanet Bamboo
(UK) Ltd in 2011 aimed at establishing 1,800 ha
of Guadua Bamboo plantation in central America
Forest Bonds offered by Planting Empowerment
based in Washington DC
Potential for wider base forestry bonds (e.g.
European)?
equity investment in community shares
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may be preferred by local communities as does not
put land purchased for woodland creation at risk
NB equity is an unsecured investment so that if enterprise fails,
investors stand to lose entire investment whereas bonds
are generally secured against some form of collateral such
as the land purchased
http://http://www.forestry.gov.uk/forestry/INFD-8FPHL8
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Forestry Commission initiatives (2)
Woodland Carbon Code
aims to:
• help underpin emerging
market for UK forestry
carbon sequestration
• not ‘offsets’
• help meet government
climate change mitigation
targets
http://www.forestry.gov.uk/carboncode
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Non-permanence risk management
Approaches to non-permanence risk:
• (i) Discounting
• E.g. future carbon benefits with a risk of x% that they fail
to materialise may be valued at (100-x)% of a benefit that
is certain by a risk-neutral decision-maker
• (ii) Maintaining a Buffer
• Credit issuers withhold proportion of credits to cover risks
• akin to discounting but increases rather than decreases
value of a credit
• (iii) Temporary crediting
• Excludes benefits accruing beyond specified time
• eliminates need to consider some more distant risks
• (iv) Ex-post (rather than ex-ante)
crediting
• Reduces/eliminates need to consider future risks
• (v) Insurance
• (vi) Portfolio management
http://www.forestry.gov.uk/fr/INFD-7WTDFQ
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Carbon Additionality
Meaning
• Positive ‘net benefits’ compared to
• baseline (‘business-as-usual’)
• Climate change context:
• GHG savings above those
expected anyway
• within specified project boundary
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Distinguished from ‘leakage’ and
‘displacement’
Rationale
• avoid carbon credits being issued for
benefits that would have arisen
anyway
• avoid purchasers paying for activities
providing no extra savings
• Key determinant of quality of carbon
units
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Additionality: a multi-faceted concept
Legal, Regulatory & institutional:
1)
2)
3)
4)
5)
6)
7)
8)
9)
Barrier: Overcomes implementation barrier
Compliance: Exceeds statutory requirements
Date: Occurs after a particular date
Incentive: exceeds benefits associated with incentives provided by regulatory
framework
Institutional: Independent of statutory targets
Jurisdiction: specific location/communities or social groups
Practice: not common practice
Reporting: national GHG accounting/reporting rules
Technology: specific technology used
Financial & Investment:
10) Financial: would not be financed without sale of carbon units (type of barrier)
11) Investment: not viable /most financially attractive without sale of carbon units
12) Sales: Income from sale of carbon a decisive factor in decision to proceed
Environmental:
13) GHG: Positive impact on GHG balances
14) Unit: Emissions per unit below specified level
15) Project: e.g. forests unable to establish themselves in the absence of planned
activities or project
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Additionality: summary
transaction costs: influence of trade-offs between cost and precision
determining additionality is an imprecise art for many aspects
• comparing hypothetical scenarios (e.g. BAU determination)
• variety of methodologies (e.g. investment additionality)
Aspects seldom covered by additionality tests can be significant:
• Institutional additionality
• precipitous drop in the total EU voluntary carbon units sold from 2.3
mtCO2e in 2007 to 0.2 mtCO2e in 2008 due partly to concerns of doublecounting associated with reductions being covered by national reporting under
the Kyoto Protocol (Hamilton et al, 2009)
Additionality tests can provide perverse incentives in some cases:
• Classic example often focused upon:
• trifluoromethane (HCF-23) destruction projects under the CDM
• Incomplete coverage of climate change mitigation or wider
woodlands benefits may provide perverse incentives
(Forthcoming journal article in Forestry).
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LEF Workshop, 1st June 2012
Summary & concluding remarks (1)
Woodland carbon cost-effectiveness as ‘work
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in progress’:
Carbon sequestration is a significant ecosystem service
provided by UK forests which existing estimates suggest
increased five-fold from 1945-2009.
Carbon storage by UK forests is also very significant.
Available evidence points to UK forestry options being
relatively cost-effective, although estimates vary & are
sensitive to the method used, & approaches could usefully
be standardised to aide comparability.
Evidence gaps remain in comprehensive assessment of
the cost-effectiveness of UK woodland options (e.g.
accounting for the entire range of ecosystem services
associated with woodland carbon projects, spatial &
temporal variations, & future climate impacts).
LEF Workshop, 1st June 2012
Summary & concluding remarks (2)
Woodland carbon incentives as ‘work
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in progress’:
Little incentive exists from regulatory frameworks at
present for UK owners to account for forestry carbon in
making decisions
New instruments and mechanisms to help realise the
societal benefits of woodland carbon are being explored.
A Woodland Carbon Code to help underpin emerging
markets for UK forestry carbon has been developed.
Gaps remain in incentives for owners to account for
forestry carbon in making decisions (e.g. the Woodland
Carbon Code focuses on carbon sequestration associated
with woodland creation, and does not extent to forest
management, carbon substitution or storage benefits) and
disparities remain between market and social values.
LEF Workshop, 1st June 2012