OWNERSHIP/TENURE ISSUES IN FOREST CARBON MANAGEMENT

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OWNERSHIP/TENURE ISSUES IN FOREST CARBON
MANAGEMENT

• Paul Griss
• CBI/Ivey Forests and Climate Forum
• Kananaskis
• October 16, 2007

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FOREST TENURE AND CARBON

• International
• Kyoto rules re forests are clear but Canada has
  opted to exclude forests from its accounting
• A long, complex process lies ahead to develop
  rules for post-2012 with uncertain implications
  for Canada and for forests
• Domestic
• May be possible for forest offsets to be included
  in a domestic trading system for 2008-2012 and
  beyond
• Unlikely to be a significant amount of projects
  or sufficient forest carbon credits in the near
  future to warrant changes in tenure
• There are many arguments for tenure reform in
  Canada but a focus on tenure reform for carbon at
  this stage of the game may divert attention from,
  or undermine, other conservation objectives

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FOCUS ON CONSERVATION

• Creating forest carbon credits to support
  biodiversity conservation in Canada is going to
  take a lot of effort
• Carbon may help lever changes in the forest but
  will not likely drive change unless prices are
  extremely high (and that could compromise other
  conservation objectives)
• Advocate conservation efforts that have a carbon
  component and that make sense to do anyway, with
  potential revenue from carbon as a sweetener
• Carbon credits will follow and tenure / ownership
  issues will resolve themselves once the benefits
  and the rules of the game are clear

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MY TIMELINE

• Global Change and the Forests of Western Canada,
  Royal Society of Canada, 1991
• The Carbon Bomb, Greenpeace International (CSCE
  Boreal Experts Seminar), 1993
• Design and Implementation Options for a National
  Afforestation Program, NCCP, 1999
• Forest Carbon Management Workshop Series
  (2000-2002)
• Forest Carbon Management Pilots Series
  (2003-2004)
• International Plantation Experts Forum, 2005

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How Have Forests Fared in the Past Decade of
Climate Negotiations?
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FORESTS AND KYOTO (1)

• Canada fought hard to include forest offsets in
  the Kyoto Protocol (not widely supported) in 1997
• Opportunities for afforestation/reforestation
  (AR), avoided deforestation (D) and forest
  management (FM) activities
• Best opportunity for new investment in forest
  conservation this country has ever seen, dwarfing
  FRDA and other funding mechanisms
• Forests and Sinks Issue Tables under the National
  Climate Change Process laid out options in
  1998/1999
• No real domestic action has been taken post-1997
  to capitalize on the opportunity Canada worked so
  hard to secure

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FORESTS AND KYOTO (2)

• Currently no major afforestation/reforestation
  programs in place and no programs to avoid
  deforestation
• Canada chose to not include forest management in
  its Kyoto accounting in 2007 due to
• projected insect, disease and fire losses
  (2008-2012)
• uneven distribution of forest sources and sinks
  across Canada
• short-term negative impacts of FM actions (e.g.,
  PCT) and
• federal/provincial in-fighting over
  responsibilities and costs
• Virtually no pressure from conservation /
  environmental NGOs supporting the biodiversity
  and other benefits of FCM over the past ten years

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FORESTS AND KYOTO (3)

• Although Canada has not included forest
  management in its Kyoto accounting, it MAY be
  possible for forest management projects to be
  eligible for any domestic emission trading
  programs
• No decision made yet, and not clear what the
  national process would be
• Albertas climate change legislation effectively
  sets a maximum price of 15/tonne but only
  offsets in Alberta are eligible
• Any forest offsets would have to compete against
  all other offset options, most of which are far
  more cost-effective

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FORESTS AND KYOTO (4)

• Continued behind-the-scenes work on offsets has
  taken place
• National Offset Working Group, coordinated
  through Climate Change Central, has developed
  numerous protocols including one for
  afforestation
• No accepted protocols for avoided deforestation
  and forest management
• Too late to secure any serious forest carbon
  benefits in 2008-2012 (although there may be some
  limited role for avoided deforestation)
• Need to chalk 1997-2007 up to experience and
  start now to prepare for post-2012 building on
  the lessons learned

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POLLUTION PROBES WORK

• Tried to catalyze action following the National
  Climate Change Process
• Forest Carbon Management Workshop Series
• five progressive national workshops
• over 200 participants
• produced a primer on opportunities provided
  through the Kyoto Protocol
• Forest Carbon Managements Pilots Series
• brought together practitioners exploring forest
  carbon management opportunities with policy
  makers and technical experts
• produced a protocol template and a guidance
  document for creating projects

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FOREST CARBON MANAGEMENT WORKSHOP SERIES
(2000-2002)

• Pollution Probe
• Government of Ontario / Forest Ecosystem Science
  Cooperative
• Canadian Forest Service
• BIOCAP
• Climate Change Secretariat
• Environment Canada
• Climate Change Central
• Alberta-Pacific Forest Products

• BC Ministry of Water, Land and Air Protection
• Industry Canada
• Abitibi-Consolidated
• Canfor
• Weyerhaeuser
• Domtar
• Quebec Ministry of Environment
• Saskatchewan Environment and Resource Management

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FCM PILOTS SERIES (2003-2004)

• Abitibi-Consolidated
• Alberta Environment
• Al-Pac
• BIOCAP
• BC Ministry of Water, Land and Air Protection
• Canadian Forest Service
• Carbon Forest
• Climate Change Central
• Climate Change Secretariat
• Environment Canada
• Forest Products Association of Canada

• ICF Consulting
• J.D. Irving
• Lignum
• Métis Settlements of Alberta
• Natsource
• Nova Scotia Power
• OMNR
• Pollution Probe
• Saskatchewan Research Council
• City of Sudbury / Tree Canada Foundation

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Rationale for Action
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SELLING FCM (1)

• FCM provides a bridging mechanism until new
  technologies that can substantially reduce
  greenhouse gas emissions can be developed and/or
  applied
• Most eligible FCM activities make sense to do
  anyway as they can
• enhance timber supply
• contribute to soil and water conservation
• conserve biodiversity and protect wildlife
  habitat
• provide social and economic opportunities
• Even though forest offsets are rarely
  cost-competitive, the co-benefits are thus
  substantial and are a major selling point
  compared to other offsets

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SELLING FCM (2)

• Federal and provincial governments have provided
  significant policy and financial support in the
  past for
• reducing deforestation
• reforestation
• afforesting marginal lands and
• improving forest management practices
• The new value of carbon provides a further
  policy lever and another revenue stream to
  support these long-held objectives
• FCM credits in Canada could be worth over a
  billion dollars per year depending on our ability
  to move forward and the future price of carbon

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Carbon and the Boreal Forest
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REDUCING DEFORESTATION (D)

• Deforestation is the permanent direct
  human-induced conversion of forested land to
  nonforested land.
• The spatial assessment unit for deforestation
  must be no more than 1 ha and all deforestation
  is considered to be an immediate emission of
  carbon into the atmosphere.
• Deforestation thus has a major impact on Canadas
  accounting for FCM Canada has to report it
• Very little deforestation is due to forest
  management activities (most due to agriculture,
  transportation and urban development) but oil and
  gas, mining and hydro impacts in the boreal could
  be significant

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AFFORESTATION / REFORESTATION (AR)

• Afforestation is the direct human-induced
  conversion of land that has not been forested for
  a period of at least 50 years to forested land
  through planting, seeding and/or the
  human-induced promotion of natural seed sources
• Reforestation is the direct human-induced
  conversion of non-forested land to forested land
  through planting, seeding and/or the
  human-induced promotion of natural seed sources,
  on land that was forested but that has been
  converted to non-forested land. For the first
  commitment period, reforestation activities will
  be limited to reforestation occurring on those
  lands that did not contain forest on 31 December
  1989
• There is no limit on the amount of carbon that
  can be sequestered through AR under the Kyoto
  Protocol, but it is not very relevant to the
  boreal region

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FOREST MANAGEMENT (FM)

• Canada could have chosen to claim increases in
  carbon stocks on a declared area of managed
  forest in its national accounting for the first
  reporting period (2008-2012) but did not
• An FM sink could have been used to offset net ARD
  emissions (i.e. when deforestation emissions
  exceed reforestation / afforestation removals) up
  to a maximum of 33 Mt CO2/yr (9 Mt C/yr). Any
  remaining FM sink could have been counted up to
  Canadas country specific cap of 44Mt CO2/yr (12
  Mt C/yr)
• At one point, business as usual was expected to
  produce 20Mt CO2/yr, so if fully realized
  (24Mt/yr) and at 15/tonne the potential existed
  for about 100 million/yr worth of FM projects
• Potential is there, but getting FM legitimized is
  going to be more difficult than it was five years
  ago

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A NOTE ON FOREST CONVERSION

• Need to be very careful on avoiding forest
  conversion if government sanctions this
  approach then there will be no additionality and
  thus no tradable credits
• The baseline must compare apples with apples
• The landowner will not be able to secure credits
  for conserving carbon on part of the landbase
  without taking the hit for forest conversion on
  the balance you cant cherry-pick your
  project
• If carbon prices arent high or do not stay high,
  economic pressures will undermine the land use
  plan over the long term

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Ownership and Tenure Issues
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OWNERSHIP OF TRADABLE CREDITS (1)

• Carbon sequestered through FCM activities can be
  used to
• meet an emissions reduction target imposed on the
  landowner or the land manager by government or
• create credits that can be sold into an
  emissions trading program if they are surplus
  to regulatory requirements and to the emissions
  reduction needs of the owner or manager.
• Where a tradable credit is to be created through
  investment in FCM activities, ownership of that
  credit must be clearly established and that is a
  matter of negotiation between the investor and
  the landowner
• The major obstacle to clarifying ownership is
  that no entity (government or private sector)
  knows what is expected of them (i.e., targets).
  No-one knows who needs the credits! Thus, no-one
  is primed to invest and no-one is prepared to
  take the back end risks

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OWNERSHIP OF TRADABLE CREDITS (2)

• If there is to be a carbon credit then the entity
  incurring costs to take management action to
  increase carbon sequestered beyond business as
  usual must be compensated so it doesnt really
  matter who owns the credit. Who are the
  investors?
• On Crown lands, the government could transfer the
  future credit to a forest company or it could
  provide another incentive of commensurate value
• The policy application of FCM credits (reporting)
  and the trading of FCM credits (owning) in an
  emissions trading mechanism are frequently
  confused. They are complementary and not
  mutually exclusive.
• As long as the credit is traded domestically, it
  is possible for a forest company and the federal
  and provincial governments to all own the
  credit provided it is not accounted for twice in
  the same process

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TENURE AND TRADABLE CREDITS (1)

• Uncertainty of future ownership of carbon is
  overblown
• Too much attention is paid to the short-term
  costs vs. long-term payoff of carbon it is no
  different than timber in that respect. Many
  companies are already investing in intensive
  silviculture to increase fibre yields beyond
  their license periods
• Inertia is the best form of security how many
  companies have lost their operating license or
  have had significant lands removed from their
  license area?
• From a business perspective, area-based tenure
  and appurtenances are most conducive to the
  security of forest carbon credits and thus the
  willingness to invest

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TENURE AND TRADABLE CREDITS (2)

• Volume based tenure presents a huge challenge
  (similar to certification) as no single entity
  can take responsibility for a forest carbon
  project
• From a carbon perspective, it doesnt really
  matter whether a forest company is the dominant
  player on the landscape or whether management is
  turned over to a forest management corporation.
  He who manages the trees effectively manages the
  carbon.
• As with tenure reform writ large, there are many
  arguments for forest management corporations (see
  Albertas oil and gas royalty review) but carbon
  is highly unlikely to drive this change in
  approach
• Regardless of the form of tenure, the key
  questions are where is the capital investment to
  support FCM going to come from and what is the
  motivation of the investors?

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Getting it Right Next Time
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PREPARING FOR POST-2012 (1)

• Play to your strengths - put the conservation
  benefits of Forest Carbon Management front and
  centre and use carbon as a lever
• Understand but dont get bogged down in the
  details of how to create and trade credits
  without top-down direction on what is to be
  accomplished, everything else is quicksand
• Argue that effective conservation measures are
  often the best ways of adapting to or mitigating
  the impacts of climate change this has been the
  poor cousin in the debate to date and it needs
  stronger advocates
• Recognize that it may be very difficult to add
  Forest Management back in to Canadas accounting
  as it will be seen to be self-serving so the
  domestic benefits are paramount

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PREPARING FOR POST-2012 (2)

• Realize that ownership / tenure issues will be
  responsive to the agreed upon domestic and
  international rules and must follow rather than
  lead this discussion
• Trust that once a value is attached to carbon a
  whole array of market mechanisms will emerge to
  address issues such as permanence, liability,
  etc. It doesnt all have to be figured out in
  advance.
• Understand that forest offsets are not
  competitive with other options on costs,
  especially in the short term, so showcasing the
  co-benefits is critical
• Be prepared to commit a lot of resources and
  fight an uphill battle for at least ten years

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FURTHER INFORMATION

• Paul Griss
• pgriss_at_boldon.org
• 403-678-9956