1. Introduction
2. Carbon Transactions – A Primer
3. Forestry and the Kyoto Protocol - The International Context
4. The United States Context
5. Global Carbon Markets
6. Trading and Marketing U.S. Forest Carbon Offset Projects
7. Forestry Project Accounting Issues for U.S. Registries
8. Conclusion and Synthesis

Carbon Primer

Forest Carbon Trading and Marketing in the United States

3. Forestry and the Kyoto Protocol - The International Context

The world’s attention has been focused on human-induced changes in the earth’s climate since the signing of the United National Framework Convention on Climate Change (UNFCCC) at the 1992 Earth Summit. Since then, the Convention has been ratified by 189 countries, including the United States (U.S.). As provided in Article 2 of the Convention, the overall objective was to stabilize greenhouse gas emissions, "at a level that would prevent dangerous anthropogenic (human induced) interference with the climate system”. It states that, "such a level should be achieved within a time-frame sufficient to allow ecosystems to adapt naturally to climate change, to ensure that food production is not threatened, and to enable economic development to proceed in a sustainable manner”.¹²

The UNFCCC required parties (countries) to meet periodically in “Conference of the Parties” (COP) meetings. To date there have been 11 COP meetings. From the December 1997 COP 3 session came the Kyoto Protocol which required the Annex I parties¹³ (39 industrialized countries) to implement policies and measures for achieving legally binding assigned emission limitations and reduction commitments.

The global carbon market has emerged as a result of the Kyoto Protocol that set GHG emission limitations on its signatory countries, and established mechanisms for reducing overall GHG by at least 5 percent below 1990 levels by the end of 2012¹⁴. The Kyoto Protocol went into affect in February 2005 after being ratified by all industrialized countries except Australia and the United States.

The Intergovernmental Panel on Climate Change (IPCC) reported in its third assessment that 10-30% of human-induced global GHG emissions are due to Land Use, Land Use Change, and Forestry (LULUCF), (Intergovernmental Panel on Climate Change, 2001). The IPCC concluded that globally, changes in forest management could induce future carbon sequestration adequate to offset an additional 15-20% of CO₂ emissions. Within the U.S., LULUCF activities in 2004 resulted in a net carbon sequestration of 780.1 million tons CO₂ equivalent. This represents an offset of approximately 13 percent of total U.S. CO₂ emissions, or 11 percent of total GHG emissions in 2004 (Environmental Protection Agency, 2006).

Of most interest regarding emission reduction credits for forestry, Article 3 of the UNFCCC introduced GHG emissions by sources and removals by sinks resulting from direct human-induced LULUCF activities, limited to afforestation, reforestation, and deforestation since 1990. In November 2001, COP 7¹⁵, also known as the Marrakesh Accord, provided definitions for these forestry activities and introduced forest management, effectively linking all forestry practices to a change in land use.

COP 7 provided for a set of principles to govern LULUCF¹⁶ from which the UNFCCC directed the development of Good Practices Guidance for Land Use, Land Use Change and Forestry. These guidelines provide for supplementary methods and good practices for estimating, measuring, monitoring and reporting on carbon stock changes and green house gas emissions from forestry activities under Article 3 paragraphs 3 and 4 of the Kyoto Protocol (Intergovernmental Panel on Climate Change, 2003).

Recognizing the important role that forest management plays in the continual sequestration of carbon dioxide, in May 2006, the UNFCCC began addressing carbon pools associated with the harvesting of wood products¹⁷. Further discussions of how harvested wood products can be counted should be forthcoming at COP 12 in November 2006.

It is important to note that to date the Kyoto Protocol authorizes only afforestation and reforestation activities, excluding soil carbon storage, sustainable forest management, and avoided deforestation. It appears that forestry emission reduction projects will continue to be restricted from participating in offsetting GHG emissions associated with Kyoto Protocol compliance targets through 2012 - the first commitment period, within member countries. This is reflected in the World Bank’s 2006 Report with LULUCF projects accounting for only 1 percent of the 2005 traded volumes (Capoor and Amborsi, 2006).

4. The United States Context

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¹²http://unfccc.int/essential_background/feeling_the_heat/items/2914.php
¹³http://unfccc.int/parties_and_observers/items/2704.php
¹⁴http://unfccc.int/essential_background/kyoto_protocol/items/1678.php
¹⁵http://unfccc.int/methods_and_science/lulucf/items/3063.php
¹⁶http://unfccc.int/resource/docs/cop7/13a01.pdf#page=54
¹⁷http://unfccc.int/resource/docs/2006/sbsta/eng/l10.pdf
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