Land-Use, Land-Use Change and Forestry - the IEA Bioenergy Task ...

Task 25Greenhouse Gas Balances of Bioenergy SystemsSummary of the joint Task 25 and COST E21Workshop sessionLand-Use, Land-Use Change and Forestry:the Road to COP628 September 2000Joensuu, FinlandK.A. Robertson, and B. Schlamadinger (eds.)October 2000

Table of ContentsPresentationsSession 3: Land Use, Land-Use change and Forestry Activities under Articles 3.3 and 3.4.J.Liski, T.Karjalainen, A.Pussinen, G.J. Nabuurs and P.KauppiTrees as carbon sinks and sources in the European Union 1D.BradleyDomestic options for carbon management 5S.SubakAddressing COP6 decisions on agricultural soil carbon accumulation 9A.Cowie and K.LambMeasuring and marketing carbon sequestration in planted forests in NewSouth Wales, Australia 17

Liski et al – Trees as carbon sinks and sources in the European Union 1Trees as carbon sinks and sources in the European UnionLiski J 1) *, Karjalainen T 1) , Pussinen A 1) , Nabuurs G-J 2) & Kauppi P 3)1) European Forest Institute, Torikatu 34, FIN-80100 Joensuu, Finland2) Institute for Forestry and Nature Research, Postbus 23, NL-6700 AA, Wageningen, The Netherlands3) Department of Limnology and Environmental Protection, P.O. Box 27, FIN-00014 University of Helsinki,FinlandABSTRACTThe carbon (C) sinks and sources of trees that may be accounted for under Article 3.3 of the Kyoto Protocolduring the first commitment period from 2008 to 2012 were estimated for the countries of the EuropeanUnion (EU) based on existing forest inventory data. Two sets of definitions for the accounted activities,afforestation, reforestation and deforestation, were applied. Applying the definitions by the Food andAgricultural Organization of the United Nations (FAO), the trees were estimated to be a C source in 8 and aC sink in 7 countries, and in the whole EU a C source of 5.4 Tg year -1 . Applying the definitions by theIntergovernmental Panel of Climate Change (IPCC), the trees were estimated to be a C source in 3 and a Csink in 12 countries, and in the whole EU a C sink of 0.1 Tg year -1 . These estimates are small compared withthe C sink of trees in all EU forests, 63 Tg year -1 , the anthropogenic CO 2 emissions of the EU, 880 Tg Cyear -1 , and the reduction target of the CO 2 emissions, 8 %. In individual countries, the estimated C sink of thetrees accounted for under Article 3.3 was at largest 8% and the C source 12% compared with the CO 2emissions.Key words:Kyoto Protocol, Article 3.3, carbon sink, carbon source, stock change, forest, CO 2 emission, afforestation,reforestation, deforestation.

2 IEA Bioenergy Task 25 Workshop, Joensuu, Finland: LULUCF: The Road to COP6OutlineTrees as carbon sinks andsources in the EuropeanUnionJari Liski 1) , Timo Karjalainen 1) , Ari Pussinen 1) , Gert-JanNabuurs 2) & Pekka Kauppi 3)1)European Forest Institute, Joensuu, Finland2)Institute for Forestry and Nature Research, Wageningen,The Netherlands3)Department of Limnology and Environmental Protection,University of Helsinki, FinlandE U R O P E A N F O R E S T I N S T I T U T E1 Introduction- “Kyoto forests” (Article 3.3)2 Material and methods- definitions, calculations, data3 Results- whole EU, countries- area, carbon- ARD lands, all forests, CO2 emissions4 Summary and Conclusions1E U R O P E A N F O R E S T I N S T I T U T E2Kyoto forestsObjectives of thepresent studyto estimate in EUcountries•the area of the ARDlands•the carbon balance oftrees on the ARD landsApplied definitions of ARDFAOIPCCIGBP Terrestrial Carbon Working Group. 1998. Science 280: 1393-1394.to relate the area and thebalance to•all forests•CO 2emissionsE U R O P E A N F O R E S T I N S T I T U T E3E U R O P E A N F O R E S T I N S T I T U T E4 .

4 IEA Bioenergy Task 25 Workshop, Joensuu, Finland: LULUCF: The Road to COP6SummaryConclusionsIn the whole EU• the area of the ARD lands 2 to 9 % of all forest area• trees on the ARD lands a sink, a source or neither• the sink or the source on the ARD lands at largest up to a few %of the carbon sink of trees in all forests and a few ‰ of the CO 2emissions• the carbon sink of trees in all forests 7 % of the CO 2 emissionsIn individual countries• where the carbon sink of all trees is small, much of it can be onthe AR lands• where the carbon sink of all trees is large, little of it is on the ARlandsThe carbon balance of trees on the ARD lands• the sink as large as the targeted emission reduction in a fewcountries, considerable source in a few others• Article 3.3 may be relevant in these few countries for themanagement of these lands, probably

D. Bradley – Domestic Options for carbon management 5Domestic options for carbon managementDoug Bradley, Domtar Inc, CanadaKyoto- In vs Not yet inDomestic Options for CarbonManagementTask Force 25Joensuu, FinlandSept 28, 2000Doug BradleyDomtar11IN KYOTONOT YET IN KYOTO_________Fossil Fuel Reduction_ ____Carbon Sequestration_____________Energy Efficiency Fuel Switching Afforest., Reforest Other Forestry, Agricultural(Biomass for fossil fuel) Deforestation ActivitiesReduce fossil fuel Reduces fossil fuel Sequesters carbon Sequesters carbon(defn. - Article 3.3) (negotiated- Article 3.4)Examples:-Fuel efficient motors -Wood waste cogen -Planting on poor agric. land Forestry:-Waste heat capture -Black liquor -Reducing deforestation -Pest and disease control-Prod’n enhancemt integrated gasific.-Fire control-Improved Maint. and combined cycle cogen -Commercial thinning-Juvenile Spacing-Tree Improvment- Reduc. impact loggingAgricultural:-Reduced tillage-Manure management-Shelterbelts22Carbon Impacts of Emission ReductionActivitiesForestry:InitialLong TermJuvenile spacing emission sequestr.Pest spray sequestr. sequestr.Tree Improvement sequestr. sequestr.Commercial thinning emission sequestr.Fertilization emission sequestr.Other:Landfill Incineration emission sequestr.500450400350300250200150100500Natural Jack Pine Forest (Baseline)Forest and Products Carbon PoolsGorcam modelBaseline2000 2020 2040 2060 2080 2100 2120 2140 2160 2180 2200YearLandfillLLPSLPOther Veg.TreesLitterRootsSoil3344 .

6 IEA Bioenergy Task 25 Workshop, Joensuu, Finland: LULUCF: The Road to COP6Juvenile Spaced StandForest and Products Carbon PoolsGorcam ModelProjectNet EmissionsControl vs Spaced Gorcam ModelStand-level Net Biomass60050040030020010002000 2020 2040 2060 2080 2100 2120 2140 2160 2180 2200YearLandfillLLPSLPOther VegTreesLitterRootsSoilNet Biomass(t CO2e/ ha)5004003002001000-1002000 2020 2040 2060 2080 2100 2120 2140 2160 2180 2200-200-300-400YearLandfillLLPSLPOther Veg.TreesLitterRootsSoilTotal (with landfill)Total (no landfill)5566Stand SequestrationAnnual CreditingGorcam ModelStand Net Sequestration- Tonnes CO 2/haForest Level Impact of Spacing50Gorcam ModelForest-level Net BiomassConstant Production Option250200150100500-502000 2010 2020 2030 2040 2050 2060 2070 2080 2090 2100 2110 2120 2130-100-150Net Biomass Net All Pools Amortized SequestrationBiomass(t CO2e / ha controlled & protected)4030201002000 2020 2040 2060 2080 2100 2120 2140 2160 2180 2200-10LandfillLLPSLPOther VegTreesLitterRootsSoilTotal (without Landfill)Total (with Landfill)-2077Year88 .

D. Bradley – Domestic Options for carbon management 7Bud Worm Spray ProgramGorcam ModelEarly CreditingNet Biomass(t CO2e/ ha)Stand-level Net Biomass40030020010002000 2020 2040 2060 2080 2100 2120 2140 2160 2180-100-200LandfillLLPSLPOther Veg.TreesLitterRootsSoilTotal (with landfill)Total (no landfill)Can governments become “carbonmanagers” using an early creditingsystem, for the long term good of theatmosphere?How would the system work?-300-400YearWhat incentive would it provide?991010Early Credit to a Juvenile Spacing Program(tonnes CO 2e)Example of Early Crediting System2000-102010-202020-301990 2000 2010 2020 2030Emissions 604 700 764 764 764ActualSequestrationCredits(5)525154040Forestry OffsetsSpacing 0 2 (25) (40)Thinning 0 3 (8) (14)Tree Improve 0 (2) (24) (44)Pest Control 0 (6) (6) (6)0 (3) (63) (104)Net(10)100Net Emissions 604 700 761 701 66011111212 .

8 IEA Bioenergy Task 25 Workshop, Joensuu, Finland: LULUCF: The Road to COP6Carbon Management via Incentives(amortization)Risks of Early Crediting2000-05 2005-10 2010-15 2015-20 totalBase Emissions 700 720 690 640 2750With Amortization:Credits given -10 -10 -10 -30 -60Book Emissions 690 710 680 610 2690• Issuing credits if forests don’t count in Kyoto II• Issuing credits where benefits are over-estimated• Issuing credits where benefits never happen• Excess credit liabilityActual reductions 0 -10 -20 -30 -60Actual Emissions 700 710 670 610 269013131414Benefits to Early CreditingCountries Net Enissions• Implement many more projects thanwould otherwise happen• Wider range of options to reach Kyototargets• Allows least cost solutions• Doesn’t cost government money, justpaper credits• Government becomes manager of carbon8007507006506005505001990 2000 2010 2020 2030With Early CreditingEmissionsNet EmissionsTarget15151616

S.Subak – Addressing COP6 Decisions on Agricultural Soil Carbon 9Addressing COP6 Decisions on Agricultural Soil CarbonAccumulationSusan SubakAmerican Association for the Advancement of Science FellowOffice of Atmospheric Programs, U.S. Environmental Protection AgencyABSTRACTThe Kyoto Protocol introduces the possibility that changes in carbon stock on agricultural and forest landand soils may be counted against countries’ commitments to reduce their greenhouse gas emissions.Including activities related to land use change and forestry in the international climate change agreementmay stimulate new incentives for soil-conservation practices domestically. However, a primary criteria fortheir inclusion relates to the level of accuracy and transparency with which carbon stock changes can beassessed. Parties will also be concerned with the wider environmental impact of different sequestrationpractices, and the impact of offsets on overall emissions targets. This paper examines these issues foragricultural soils, considering recent research in temperate regions. It is argued that incentives for carbonsequestration practices may need to be implemented independently of actual stock changes because farmlevelsoil monitoring would be very costly. Priority should be given to establishing incentives for covercrops and to expanding conservation tillage programs. These activities provide a range of ancillaryenvironmental benefits. In contrast, improvements in biomass yield tend to rely on higher fertilizer inputswith their related environmental costs. Carbon accumulated through any of these activities is easily lost if thepractices are discontinued, and so assessment procedures are needed that would avoid overestimatingsequestration. Annual accumulation in agricultural soils could be equivalent to about 10% of Annex I carbondioxide emissions, and therefore options for limiting sink credits from soils should be considered.

10 IEA Bioenergy Task 25 Workshop, Joensuu, Finland: LULUCF: The Road to COP6ADDRESSING COP6 DECISIONS ON AGRICULTURAL SOIL CARBON ACCUMULATIONDr. Susan SubakFellow, American Association for the Advancement of ScienceBased at: Office of Atmospheric ProgramsU.S. Environmental Protection AgencyWashington DCsubak.susan@epa.govIn the United States, a strong constituency for including agriculture soils in the Kyoto ProtocolA. Support among U.S. “Conservatives”Midwestern farmers and Republican Members of Congress have been supporting the idea of rewardingcarbon sequestration on American farmland, although potential is small (~ 0.1 t C/ha/year forconservation tillage; ~ 0.3 t C/ha/year for cover crops)B. Some support among U.S. environmental organizationsViewed as environmentally beneficial because practices that sequester carbon in soil tend to prevent soilerosion and reduce requirements for fertilizer. Viewed to be less of a loophole than forests becausepotential sequestration is relatively small for Annex I.Considerations for COP6 and Beyond: Additionality Verifiability Reversibility Indirect Effects

S.Subak – Addressing COP6 Decisions on Agricultural Soil Carbon 11Sources and Sinks of Carbon from Agricultural SoilsSourcesTransformations • Croplands from wetlands• Croplands fromgrasslandsSinks• Set-aside (to grasslandor woodland)ProductionSoilconservation• Croplands from naturalecosystems• Lower residue yield (maybe due to fertilizer inputsor genetic improvements)• Change to crop typeswith lower biomass levels• Lower lignin contentcrops• Longer fallow• Intensive till• Residue (straw) sales• Stubble burning• Higher residue yields• Change to crops withhigher biomass levels(agroforestry or certaincrop switching to e.g.from soybeans to corn)• Higher lignin contentcrops• Shorter fallow• No-till or minimum till• Residue incorporationinto soils• Cover crops (inter-rowwith perennials; orwinter cover forannuals)• Control of soil waterOther • liming • Animal manure orsewage sludge storage

12 IEA Bioenergy Task 25 Workshop, Joensuu, Finland: LULUCF: The Road to COP6Other Environmental Impacts of Agricultural ManagementPositiveNegativeCrop andresidue yieldincreasethrough fertilizerinputs• Nitrous oxide emissions fromnitrogen fertilizers (Mosier etal., 1995)• Fossil fuel energy inputs toproduce nitrogen fertilizer• Reduced soil uptake ofmethane after nitrogenfertilizer use (Stendler, 1989;Bronson and Mosier, 1993cited in Paustian 1995)• Methane emissions related toorganic fertilizer applicationSoil conservationpractices• water pollutionCover Crops• Nitrogen-fixing cropsespecially reducerequirements for fertilizerNo-till• Some species can reducerequirements for pesticides(Pan, 1999)• Reduce emissions ofparticulates by reducingwind erosion• Reduces soil erosion• Reduces fertilizerconsumption• Reduces fossil fuelemissions from tractors• May reduce nitrous oxideemissions (Li, et al., 1996)• May reduce the rate ofmethane consumption (Coleet al., 1993)• Increased herbicide use• May increase nitrous oxideemissions (Cole et al., 1993)

S.Subak – Addressing COP6 Decisions on Agricultural Soil Carbon 131. Additionality: Can Business-as-Usual tons be identified?A. In excess of 1990 sequestrationB. In excess of 1990-2008 trendC. Best practices applied to any activityD. Best practices defined as certain activities (e.g. cover crops)US additionality test in the CDM (September 2000):“the project activity achieve a level of performance…that is significantly better than average compared withrecently undertaken activities or facilities”Lands under no-till in the USA increased by more than four-fold between 1989 and 1997Carbon Uptake in Agricultural Soils: Recent EstimatesUSA 9 MT (net) 1998 US Inventory (Eve et al., 2000)9 - 24 MT C/yr (net) 2008-2012 Business as Usual: August 1, 2000 submission~ 50 MT C/yr potential Donigian et al., 1994~ 30 MT C/yr recent extr. Buyanovsky and Wagner, 1998Europe --------- 2008-2012 August 1, 2000 submission43 MT C/yr potential Smith et al., 1998FSU 340 MT C/yr potential Kolchugina et al., 1995

14 IEA Bioenergy Task 25 Workshop, Joensuu, Finland: LULUCF: The Road to COP62. Verifiability: Will the uncertainties be manageable?MonitoringA. Site (farm) specific sampling and verification?B. Model-based analysis with some samplingFarms in USATotal CroplandSampling frequency in 1990sRecommended frequency for basic soil tests~ 2 million~100 millionhectares1 in 60 hectares1 in 2-8 hectaresEstimated % of farms survey in the 1990s < 10%% of farmers now taking own samples 1-2%Estimated cost per sample $50-$75Cost for sampling every 10 hectares in 2008, 2012Cost per tonne sequestered assuming 30 MT Caccumulation>$1 billion$33/tonne

S.Subak – Addressing COP6 Decisions on Agricultural Soil Carbon 153. Reversibility: Approaches for addressing reversal of soil sequestrationA. Expiring TonsB. Stock Change - Liability, with insuranceC. Ton-Year AccountingProbably the same considerations exist as for forests: Liability, availability and rates of insurance,uncertainties for future CER prices.4. Indirect Effects: Can human induced effects be separated from natural effects?A. Control plots to sitesB. Adjustments based on model factors, i.e. crop type, regional climatePossible that adjustments for indirect effects exclude agricultural crops because of minor implicationsfor total uptake termRecommendations for Further Research1. Better research on residue yields needed2. Research on the non-carbon impacts of agricultural soil activities3. Continued research on indirect effects (temperature, CO 2 fertilization etc.)Components of an Incentive Program1. Include farms that are not considered “highly erodible”2. Provide incentives for increasing residue, rather than crop yields3. Encourage long-term, rather than short-term, activities4. Provide incentives for establishing and maintaining cover crops5. Continue programs to encourage conservation tillage

A.Cowie and K.Lamb – Measuring and marketing carbon sequestration in planted forests 17Measuring and marketing carbon sequestration in plantedforests in New South Wales, AustraliaAnnette Cowie and Keith LambState Forests of New South Wales, Australia.ABSTRACTThe Kyoto Protocol to the Framework Convention on Climate Change has established carbon as a tradeablecommodity, offering financial returns from “carbon credits” to increase management flexibility andprofitability of forestry. Australia has large areas of agricultural land suitable for developing Kyotocompliant plantations, where reforestation can provide multiple environmental and social benefits includingamelioration of dryland salinity, biodiversity enhancement and diversification of rural incomes.Consequently, the NSW State Government has taken action to facilitate the expansion of planted forests,including legislative reforms to support bilateral contractual carbon trades and a proposed derivatives marketfor trading carbon credits.State Forests of NSW, a government-owned trading enterprise, has attracted new investment in Kyotocompliant forests from companies wishing to take early action in anticipation of enforcement of emissionscontrols. Investors retain the rights to the wood and carbon arising from the new forests and hedge thespeculative carbon right against the conventional wood-based returns from existing industry.To support carbon trading, State Forests has developed a draft Carbon Accounting Standard that allowscarbon credits to be quantified in a transparent and verifiable manner. The draft Standard takes a qualitativesystems approach to limit the exposure of growers to the risk of overselling, specifying three levels ofcertification to reflect different levels of sophistication and investment in carbon accounting. Furtherdevelopments will see the standardisation of procedures for quantitatively appraising uncertainty inforecasts.Verification and certification of tradeable carbon will then be appraised on growers’ managementcompetence and risk handling procedures.State Forests’ carbon accounting system for hardwood (eucalypt) plantations is based on conventionalinventory and modelling systems for wood production, and tracks the carbon stocks in above and belowgroundtree biomass, understorey, litter and soil pools. Current research is focussed on efficient derivation ofbiomass allometrics, soil carbon dynamics under afforestation and management of forests for joint carbonwoodproduction.Financial modelling reveals that incorporating a market price for carbon into the joint carbon-woodproduction possibility frontier increases NPV. Forward selling will alleviate early negative cash flow,although the buy price is likely to include a discount for the cost of long term capital investment (up to2012), and the risk of non-ratification by Annexe B countries. Profits will be higher for those who candistribute the growing costs between wood and carbon, however growers will face the risk of adversemovements in the carbon-wood price ratio.A key issue is the handling of risk and uncertainty as the greenhouse policy agenda evolves. Forestry is lowriskfinancially efficient option for directing greenhouse-related investment until the accounting rules areagreed and the Kyoto Protocol enters into force. Success of the carbon trading market will depend onconfidence in the product that is underpinned by a sound knowledge of forest carbon dynamics, defendablecarbon accounting procedures and competent forest management.

Measuring and marketingcarbon sequestration in plantedforestsNew South Wales, AustraliaAnnette CowieKeith LambState Forests of NSW, CRC Greenhouse AccountingContent• Carbon trading in NSW• Carbon accounting - project scale– monitoring carbon sequestration in NSWplantations• Creating a carbon credit product– Carbon accounting standard• Marketing sequestered carbon• Managing for carbon and woodproductionAustralia's Greenhouse GasEmissions 1996Fugitive7%Transport16%Agriculture19%Waste4%Total 419 Mt CO 2 - 23t per capitaIndustrialprocesses2%1Stationaryenergy52%(Australian Greenhouse Office)3Opportunities for Forestry• Carbon trading from conventionalplanted forests• Environmental, rehabilitation planting• Timber as a greenhouse-friendlybuilding product• Biomass for bioenergy,substituting for fossil fuels24 .

20 IEA Bioenergy Task 25 Workshop, Joensuu, Finland: LULUCF: The Road to COP6Bioenergy options forforest biomass• stand-alone• co-firing with coal• supplementing bagasse• ethanol• charcoal for metallurgicalprocessesNational• National Greenhouse Strategy• Australian Greenhouse Office– National Carbon Accounting System– Determining 1990 baseline emissions• Renewables legislation56NSW - State ForestsCarbon Trading Activities• Carbon Rights Legislation Amendment Act 1998– legal recognition of ownership and trade ofcarbon rights• First Australian carbon trades– Pacific Power, Delta Electricity• Carbon trade with Tokyo Electric Power Co• Sydney Futures Exchange– Carbon Accounting StandardLitterSoilorganicmatterAtmosphereAbovegroundbiomassBelow -groundbiomassCarbon Accounting SystemsWood products7Measuring Carbon Sequestration in Forests8 .

Measuring CarbonSequestration in Forests• measuring and modelling procedureslinked to existing wood productionmanagement systems• expansion factors for other majorcarbon pools• new approaches using process-basedmodelsKey features of a carbonaccounting system:• robust and cost effective• transparent• compatibleCarbon accounting systems will bescrutinised.910Components of a Carbon Accounting SystemData InputsReviewSimulationAssumptionsOutput DataMonitoring& Reporting11Biomass measurement in E. dunnii plantationAim: To develop allometric equation relating biomass tostandard inventory measurements. 12 .

22 IEA Bioenergy Task 25 Workshop, Joensuu, Finland: LULUCF: The Road to COP6Biomass kg/treeMeasuring Carbon Sequestration in Forests504030201002 year old Eucalyptus dunniiy = 0.0023x 2.06R 2 = 0.960 20 40 60 80 100 120dbhob (mm)Carbon sequestration over 2 years ofplantation growth:Net increase of 6 t/ha (3 t carbon/ha)Biomass(t DM / ha)302520151050Baseline 1 year 2 yearsTreeUnderstorey +litterFine rootsWeighing E. pilularis, using 2.5 t load cell, Ourimbah State Forest.1314Blackbutt biomass (above- and below-ground) forsampled trees at Ourimbah (native forest) and Heaton(plantation)10.09.08.0OurimbahHeaton15ln Biomass7.0 Linear6.05.04.03.02.01.00.04.0 4.5 5.0 5.5 6.0 6.5 7.0ln DBH16

Remote-sensing tools to estimate carbon1. Coarse sievesurface soil(23%)• species recognition• area estimation(planted - harvested)• direct biomassestimation• height measurementsEfficient techniques:Ground penetrating radar?173. Soil cores to fine sieve- backfill soil (13%)- deep soil (22%)2. Extract stump(42%)Mean proportion ofroot biomass bysampling method,P.pinaster, WAP. Ritson, CRCGreenhouseAccounting 18Ground Penetrating Radar1920 .

24 IEA Bioenergy Task 25 Workshop, Joensuu, Finland: LULUCF: The Road to COP6Ground Penetrating RadarTree Root Volume ComputationCarbon pools: 2 year old E. dunnii plantation3.2 2.2 2.6103tonnes carbon per haTreeUnderstoreyFine rootSoil2122Plant C Soil C Net CState Forests NSW Carbon Bank Annual Balance Sheet.Carbon sequestration PERIOD: Sequestered AvalailableBalanceCarbon (t/ha)12080400-40-800 10 20 30 40 50 60 70 80Time (years)Management Verification Location Crop Crop Modelling DetailsStanding C02(t) Sequestered CO2 (t)Planted Forests Carbon TableStanding C02(t) Liabilities30 year rotation, thinned twice23softwoodshardwoodstotal24 .

Creating a Carbon CreditProductRequirements:• a standardised tradeable carbon mass• a rigorous carbon trading systemRequirements of Carbon Accounting Standard• open to all on a merit basis• ensure market confidence• practical and acceptable to forestmanagersCarbon Accounting Standard• appraisal of carbon accounting systemsby independent verifier• certification of tradeable carbon mass2526Creating a Carbon Credit ProductCertificationSystemFrameworkSTANDARDComplianceRequirementsAccountingSystemSystemImprovementVERIFICATIONAppraisalIndependentVerifierCreation ofCertificateCertificationCarbonSequestrationCredit• By independent verifier• Three levels available:• 1. Easily achieved at low cost, usingdefault accounting assumptions: 40%tradeable• 2. Some site specific data and models:60% tradeable• 3. Best practice carbon accounting:80% tradeable2728 .

26 IEA Bioenergy Task 25 Workshop, Joensuu, Finland: LULUCF: The Road to COP6Emissions Trading• model developed with Sydney FuturesExchange, market based on Article 3.3 KyotoProtocol• trading model linking growers to market viapool structure• tradeable carbon certified under the CarbonAccounting StandardEmissions TradingLinkages with National Reporting Requirements (NCAS)National ReportingForestry Carbon LedgerNational AgencyEmissions TradingTrading HousesCarbon Pool ManagersR & D AgenciesCertified carbonInvestorsAccredited AgentAccreditationForest Growers2930GrowersState ForestsothergrowersothergrowersothergrowersEmissions Trading - Proposed ModelAppraisalof system viastandardPoolManagersStateForestscarbon poolothercarbon poolsSFE ContractualrequirementsEmissionsMarketSydneyFuturesExchangeother marketsCarbon pool• Access to market at minimum cost• Efficient risk management, carbonaccounting and certification• Harvest losses balanced across thepoolCertification of carbonby independent verifierOther Marketsrequirements3132

Annual increment and cumulative CO2 . Moderate Site Quality Eucalyptus pilularis500Annual Increment CO2Net Cumulative CO2 - stock change approach45,000Net carbon dioxide sequestered by 32 age classes of 100 ha.Moderate productivity Eucalyptus pilularis plantationSpatialsequestration40040,00030035,00030,000Carbon Dioxide (t/ha)20010001 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49Carbon dioxide (t)25,00020,00015,00010,000-1005,0000-200First rotationSecond rotation1999 2003 2007 2011 2015 2019 2023 2027 2031 2035 2039 2043 2047 2051 2055 2059 2063 2067YearTemporal sequestration-300Age (yrs)3334Total pool carbon sequestration from32 age classes of 100 ha eachCumulative net cash flowunder a range of carbon prices700,000Pool Increment600,000500,000Pooled Net CumulativeCarbon dioxideSteadyStateCarbon dioxide (t)400,000300,000200,000IncrementZoneCash Flow $/haWood Revenue R2100,000Wood Revenue R101 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 491 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 55 58 61 64 67 70 73 76 79 82 85 88 91First Rotation Second Rotation Third Rotation-100,000Year35Year36

28 IEA Bioenergy Task 25 Workshop, Joensuu, Finland: LULUCF: The Road to COP6$25,000$20,000$15,000Comparison of cumulative cash flow under four trading strategiesfor forests planted in 1999wood onlyannual carbon with woodcarbon futures with woodcarbon futures no woodCP1120,000100,00080,000Investment Profile for property on north coast of NSWEstate-level carbon dioxide sequestrationEarly thinningprior to KP1Thinnings and harvest afterKP1 dependent on relativeprice of carbon and wood$/ha$10,000$5,000carbon dioxide (t)60,00040,000KP1 First Kyotocomittment period$02000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 203020,000-$5,000years01999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 2027year3738Carbon (t/ha)12080400-40-80Plant C Soil C Net C0 10 20 30 40 50 60 70 80Time (years)30 year rotation, thinnedtwiceAverage sequestration inplant biomass over60years is 44 t/haAverage net sequestrationis 36 t/haState Forests’ Carbon Management Strategies• conventional objectives to optimise return fromwood production• judicial timing of thinning and harvest tooptimise return from carbon and woodCarbon (t/ha)12080400-40-800 10 20 30 40 50 60 70 8015 year rotation,unthinned.Average sequestration inplant biomass over60years is 32 t/haAverage netsequestration is 3 t/ha• carbon losses at thinning and harvest offsetacross pool• large corporate buffer to offset unexpectedlosses, poor growth performance, uncertainty inmodelsTime (years)Plant C Soil C Net C3940

Carbon trading:• New business opportunity for forestry:carbon sequestration services• Carbon Accounting Standard creates astandard carbon sequestration productfor trading• Grower chooses level of investment incarbon accounting• Carbon pool allows participation ofsmall and large growersChallenge: integratedmanagement for carbon andtimber productionMore information:• www.forest.nsw.gov.au4142