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The use of market mechanisms to bolster forest carbon:

The use of market mechanisms to bolster forest carbon:. A critical analysis. Faculty of Law, University of Sydney, Australia. Celeste M Black, Senior Lecturer. Forest Carbon. Introduction. Role of forestry in reducing levels of atmospheric carbon The bathtub analogy

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The use of market mechanisms to bolster forest carbon:

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  1. The use of market mechanisms to bolster forest carbon: A critical analysis Faculty of Law, University of Sydney, Australia Celeste M Black, Senior Lecturer

  2. Forest Carbon Introduction • Role of forestry in reducing levels of atmospheric carbon The bathtub analogy • Emissions: deforestation and forest degradation • Removals: forest carbon – afforestation and reforestation • Sustainability Institute and Schlumberger Ltd • Climate Bathtub

  3. Forest Carbon Role of Market Incentives Reducing deforestation • REDD • Domestic measures: emissions liability upon deforestation Establishing new forests • CDM • Domestic forest offsets • Voluntary/regulatory markets

  4. Forest Carbon Forests as a Carbon Sink • Natural sequestration of carbon • Soil Carbon • Forest Carbon • Ocean uptake • Growth of forest: net carbon sink • Carbon saturation point at forest maturity? • Monitoring and measurement • Permanence – natural risks • Small scale harvesting

  5. Forest Carbon Creating positive incentives for forestry • Creating a commercially viable alternative to other land use options • Direct incentives • Grants programs • Concessional tax treatment of expenses • Indirect incentives • Issuing carbon offsets • Including both large and small land-holders

  6. Forest Carbon: Australia Forest incentives in Australia • Several regimes to encourage forestry at state and federal levels • Federal level • Tax concessions • Generation of units under deferred ETS (the Carbon Pollution Reduction Scheme) • NSW State level: Generation of units under emissions trading scheme – the NSW Greenhouse Gas Abatement Scheme (GGAS) • New initiatives: Victorian Carbon Exchange for carbon offsets

  7. Forest Carbon: Australia Federal tax incentives for carbon sink forests • Establishment costs deductible • Until June 2012, fully deductible in year incurred • After June 2012, deductible at 7% pa (over 14 yrs, 105 days) • Must notify relevant authority and satisfy criteria • Commissioner of Taxation may deny deduction for non-compliance • Suggestion of annual monitoring? • Compare favourable tax treatment of forestry managed investment schemes (plantation forestry)

  8. Forest Carbon: Australia Federal incentive: Generation of units under CPRS • Indefinite deferral of CPRS • For reforestation • Qualification requirements similar to regime for carbon sink forests • Approach to crediting units • 5 year reporting cycle • Treatment of harvested forest stands • Risk of reversal buffer • Projects to be revoked and units relinquished if non-compliant • Liability capped

  9. Forest Carbon: Australia CPRS Discussion Paper: short rotation harvest – unit limit in red

  10. Forest Carbon: Australia Generating NGACs under NSW GGAS • GGAS covers NSW electricity sector • For project-based increase in carbon stocks in an eligible forest, generate NSW Greenhouse Abatement Certificates (“NGACs”) • Accreditation and project registration • Approach to issuing abatement certificates • Sequestration pools • Permanent carbon storage plus rotational harvesting • 100 year requirement • Non-compliance produces emissions liability

  11. NSW GGAS sequestration pool management

  12. Forest Carbon: New Zealand Forestry incentives in New Zealand • 3 main regimes to encourage forestry • National level: generation of units under 2 regimes: • Permanent Forest Sink Initiative (PFSI) • NZ Emissions Trading Scheme (NZ ETS) • Local/Federal level • Cash grants under Afforestation Grant Scheme (AGS)

  13. Forest Carbon: New Zealand National Incentives: Permanent Forest Sink Initiative • Provides for generation of Assigned Amount Units • For carbon sequestered in a permanent forest on previously unforested land (1989/90 rule) • 99 year covenant with NZ Government • Limited harvesting allowed • Landowners required to return AAUs and pay penalty in the event of non-compliance

  14. Forest Carbon: New Zealand National Incentives: NZ ETS • NZ units issues for increases in carbon stock from afforestation and reforestation • Delineation between pre-1990 and post-1989 • Pre-1990 forests must participate upon deforestation • Post-1989 forests: voluntary participation • One-off allocation for pre-1990 forests & limited exemptions • Approach to issuing NZUs • Units must be surrendered if carbon stocks decrease • Measurement • Look-up tables: forest age and type • New measurement-based approach (proposed) based on field data

  15. Forest Carbon: New Zealand Afforestation Grants Scheme • Competitive cash grant scheme jointly funded by NZ Govt and regional councils • Complements PFSI and NZ ETS • Simpler option to obtain benefits from establishing a new Kyoto-compliant forest • Grant agreement with Minister for Agriculture • Term of 10 years • Crown owns any units generated

  16. Forest Carbon: A comparison Comparison of approaches in Australia and NZ • Shortcomings of Australian approach • Lack of coherence between current measures • Issues around design of tax concession and monitoring • NSW GGAS a useful model - pooling • NZ approach • More thorough/detailed • Inclusive of both holders of small parcels of land and larger scale forestry operators • Inclusion of deforestation

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