Gordon Smith

April 6-9, 20095th Forestry and Agriculture Greenhouse Gas Modeling Forum

Shepardstown, West Virginia

Leakage Accounting in Forestry and Agriculture

Outline

• Concepts, current practice & offset supply implications

• Needed research and modeling

Outline

• Concepts, current practice & offset supply implications

• Needed research and modeling

Leakage definition

• Displacement of emissions from project area to outside project acrea

Kyoto accounting: Increased emissions within the project boundary

• Caused by project activity

Cause of leakage

• If a project reduces supply of a good without reducing demand, the market will replace much of the lost supply

Leakage greater for smaller projects because no price increase decreasing consumption

• If replacement supply creates new emissions, leakage occurs

Emissions per unit of production may be higher, lower, or same as pre-project emissions

Factors affecting leakage rate• Project type/activity

• Project location

• GHG accounting rules

• Project size

• External economic changes

Example: FASOM GHG shows US forest management large sink or source across recent variation in agricultural product prices

Leakage by activity: Agriculture• Plowing to no-till: Little or none

May reduce yield in some situations, displacing production

• Reducing fertilizer use: Little or none

May reduce yield, displacing production

• Changing fertilizer use: None (possibly positive?)

• Changing manure management: None

Leakage by activity: Forestry• Avoided deforestation: High

• Forest management: DependsGenerally high if reduces harvest

May only shift emissions in time

May be negligible if harvest maintained

• Afforestation: DependsSignificant if causes clearing elsewhere

May be negligible if combined with forest management**EPA. 2005. Greenhouse Gas Mitigation Potential in U.S. Forestry and Agriculture, EPA 430-R-05-006.

Current treatment of leakage• Econometric estimates with cross-

sectoral interactions (EPA Climate Leaders)

• Address specific activities (CDM)

• Ignore (1605(b), RGGI)

• State that should be dealt with, but give no guidance (CCAR)

• Assign flat rate (VCS)

Leakage varies by program

Climate Leaders 40.6%

CCAR (proposed forestry rules)

24%

CCX Not addressed

RGGI Not addressed

CDM Grazing analysis

Florida afforestation example

Rules affect offset supply

• Reducing number of offsets credited increases cost of creating each offset

•Want policies to make actors responsible for their actions

Credit actual GHG benefits

Don’t credit actions without GHG benefit

When GHG benefit occurs

• Current rules credit forest rotation extension with GHG benefit as carbon stock increases within project boundary

• Leakage indicates GHG benefit occurs when harvesting resumes

Credit actual GHG benefits

Don’t credit actions without GHG benefit

Credit timing effect

When award offset Management change commitment

Harvest resumption

Project years offsets accrue

11-20 35

Tons CO2e/acre credited 19.4 19.4Levelized $/ton CO2, Year 11

$9.17 $31.12

Florida: extend pine rotation 20 to 35 years

6% discount rate

Policy recommendations

• Assign low-leakage activities zero leakage rate

No-till, fertilizer N2O, manure management

• Deforestation fee (not offsets)

Applies to all conversions, including small areas

Fee set according to average carbon stock, by potential forest type and site productivity

Forest management• Determining project additionality and

baseline is problematic

Modeled baseline depends on wood product prices

• Cap sector, not voluntary opt-in

Baseline can be set at average carbon stock by forest type and site productivity, avoiding problems of modeling profit-maximizing management

Avoids additionality and leakage problems

Smaller ownerships more likely to sequester; need to identify how small to set property size threshold for inclusion in cap

Policy recommendations

• If forest management is capped, can assign afforestation zero leakage

Rewards entities that do good

• If no cap on forest emissions, more research is needed…

Outline

• Concepts, current practice & offset supply implications

• Needed research and modeling

Forest management research• US mapping of potential forest type and

site productivity

• Quantification of average carbon stocks, by forest type and site productivity

• Tool for overlaying map and land parcel boundaries to set baseline for each ownership

Forest management research 2• Decadal variation in C stocks at

property scale, relative to average

How long and how far do C stocks go below average because of normal harvest, and how does this vary by ownership size?

• Natural disturbance

How many ownerships go below average C stock because of natural disturbance, how far, and how does this vary by ownership size?

National-scale monitoring

• Needed for REDD

• Terrestrial C quantification protocols

For all land cover types

Must detect small % change

Must be repeatable

Must be do-able by developing countries

Desirable to be compatible with developed country methods

“Factoring out”

• Can carbon effects of natural disturbance be separated from effects of human actions?

Used retrospectively to determine compliance with REDD & A1 targets

Use to allocate REDD payments between entities that control lands and national governments

At minimum, inventory “unmanaged” forest

Global modeling

• How comprehensive must accounting be to avoid having to estimate leakage?

What other sectors should be addressed to limit leakage?

Which countries (for international leakage)?

Comprehensive accounting•What land types must be counted to

get realistic counts?

Peat estimated to be 6% of global emissions: how measure area and depth of loss?

Develop inexpensive protocols for non-forest lands

Avoid things like recent Russian claim of a new billion ton sink

REDD program design

•What are effects of alternative consequences for later reversal of REDD?

Cost in tons of emission

Cost in dollars to meet net emission target

Program evaluation

•What REDD programs work, and why?

• Do soil protection programs enhance soil carbon stocks?

• Do educational programs affect GHG emissions?

No-till, fertilizer management, water management

Model calibration

•What is correlation between actual behavior and profit maximizing behavior?

Necessary for constructing mitigation supply curves

Most important needs• Support comprehensive GHG

accounting

Methods for counting, esp. non-forest lands

Volatility of fluxes

• Address fears of cap on forests

Which landowners have deficits from natural disturbance, and for how long?

Show banking can cover normal management

Climate feedbacks on unmanaged forest

• REDD: effects of alternative consequences for reversals

Gordon Smith

Ecofor LLC206.784.0209

13047 12th Ave NWSeattle, WA 98177

USA

Thank you