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Are Trees Getting Too Much Climate Credit…or Not Enough?

What would the Lorax say about today’s forest offsets?

The race is on. Democratic presidential candidates are jockeying for position. And climate change is emerging as a top priority. Jay Inslee is making climate the focus of his campaign. Bernie Sanders wants a Green New Deal. Beto O’Rourke’s has a $5 trillion plan to achieve net-zero emissions by 2050. Last week, Joe Biden and Elizabeth Warren released their competing proposals.

All of these candidates are charting an ambitious course. All pledge major support for renewable energy, building energy efficiency standards, clean manufacturing, vehicle standards, and infrastructure. But across these proposals, there’s little (Biden, O’Rourke) or no (Warren, Inslee) mention of land use and forests.

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Source

Before you dismiss this remark as tree-hugger-crazy-talk, let’s review some fundamentals. First, it’s estimated that 25% of global emissions come from land use. More importantly, land and trees are among the most cost-effective carbon sequestration options we’ve got. The IPCC estimates that land-related mitigation could contribute as much as 60 percent of abatement through 2030.

So why are efforts to leverage land and forest resources lagging so far behind? One reason is that it’s really hard to measure the GHG emissions released by, or stored in, trees and grass and dirt. Tracking emissions from power plants and factories and automobiles is much easier. What gets measured gets managed.

Measurement challenges notwithstanding, California has been experimenting with a legally enforceable incentive program to reward resource managers for the carbon they keep in their land bank. If we’re going to start charting a course towards more ambitious federal policy, it’s worth taking a clear-eyed look at how California’s offset experiment is working.

California’s Forest Offset Experiment

Under California’s GHG cap-and- trade program, regulated firms can “offset” their GHG emissions with carbon mitigation projects in sectors that are not covered by the cap. Offsets are often characterized as a small part of California’s carbon market because they are capped at 8 percent of permitted emissions. But compared against estimates of emissions reductions, offsets can look pretty significant.

Picture1
GHG emissions reductions projected under the GHG cap-and-trade program between 2021-2030 are on the left. California compliance offset credits issued are on the right

130 million tons of offsets have been credited so far. The majority are forest projects. This could be good news if the program is helping California identify cost-effective mitigation opportunities in the land sector. But there are a number of reasons to be concerned that these projects will not offset GHG emissions one-for-one. Let’s unpack these concerns in three parts.

  1.      Emit now, offset later?

To understand the timing issue, we need to delve into some implementation details. A big thanks UC Berkeley researcher Barbara Haya for helping me to understand how these offset contracts actually work. I am going to play my blogger’s card and over-simplify.

Suppose you want to implement a forest offset project. The first step is a big one: Establish a conservative estimate of the GHGs that would have been captured – and the timber that would have been harvested- absent the offset project. In California, these project-specific “business as usual” carbon stocks and fluxes are modeled over a 100-year time horizon.

For the purpose of crediting carbon offsets, these business-as-usual scenarios are boiled down to a few summary numbers. One is the baseline average amount of carbon stored per acre (measured in tons per acre). In the first year, offset credits are earned for carbon stocks measured above this hundred-year average baseline. After this first year, a land manager has effectively sold her above-baseline carbon stock. In subsequent years, she can only get credit for additional stock increases (and must pay for any reductions below).

There are pragmatic reasons to structure offset contracts in this way. But the crux of the concern is that this can “front-load” the allocation of credits if the BAU trajectory lies above the long-run average in the early years. In other words, a disproportionate number of credits are allocated in Year 1 for many projects:

graph
In Year 1, offsets credit standing forest carbon that exceeds the modeled long-run baseline. 

Some have argued this is a nice feature because it enables projects that would not otherwise be financially feasible. But critics contend that offsetting a ton of GHG emissions today with a reduction (relative to baseline) some years in the future is not a fair trade. 

  1.     Leakage

Issue # 2 concerns shifting emissions in space versus time. Suppose we estimate that an offset project will reduce timber harvesting such that 100 tons/acre less carbon will be removed from the forest (on average) each year (relative to the baseline). There are at least two reasons why this 100-ton number over-estimates the net impact on global GHG emissions.

First, an offset project can increase timber extraction elsewhere if the harvesting that would have happened on the offset project just shifts to other forests. If we don’t account for this “activity-shifting leakage”, we will over-estimate the net emissions impact of reduced harvesting on offset projects.

Second, when we harvest trees, some of that timber ends up in dining room tables, gazebos, and other wood products. So we can’t credit all avoided harvesting as avoided GHG emissions.

cheers
Cheers to carbon sequestering wood products!

California offset protocols make adjustments for both of these concerns. For example, CARB assumes a market shifting rate of 20%. But it’s really hard to know if this is the right number. Partly because the empirical work on US programs is limited (and over ten years old!). And partly because chasing the ripple effects of offsets around the global forest product market is an extremely difficult task.

 

  1.     Additionality

The third complication takes us back to the baseline. Under California law, offsets should credit only those emission reductions that are made “in addition to any greenhouse gas emission reduction that otherwise would occur. But in practice, it’s very difficult to predict how a forest would be managed between now and 2119, which means we can’t definitively establish that an offset project actually changed behavior.

You may have heard horror stories about early Clean Development Mechanism projects that allocated credits for reductions that would have happened anyway. California has made important and substantive protocol improvements in an effort to avoid crediting non-additional offsets. That said, demonstrating true additionality will always be a challenge.

What gets measured gets managed

Between baseline guesswork and leakage potential, creating incentives for climate change mitigation via land conservation is very challenging. So, you may be wondering: What’s the point?

The point is that fixating only on factors that are the easiest to measure can distort our policy priorities and misallocate our efforts. I see parallels in other policy arenas (from health care to education) where there are mounting concerns with “measurement fixation”. Frank Pasquale talks about the “delicate balance between mission and margin”. If U.S. climate ambition escalates (and I hope it does), it will be important to figure out how to conservatively tap the potential in harder-to-measure mitigation options.

Unlocking the carbon mitigation possibilities in fields and forests is a messy business. If we hold ourselves to the gold standard of “real, permanent, quantifiable, verifiable, enforceable, and additional”, offset programs will certainly fall short. But the more pragmatic question is whether these programs can be designed to advance our climate policy objectives with reasonable certainty. There’s a lot we could learn from California’s unfolding experience. We should drill down on this. Lessons learned could have big impact post-2020.

Keep up with Energy Institute blogs, research, and events on Twitter @energyathaas.

Suggested citation for this blog post:

Fowlie, Meredith. “Are Trees Getting Too Much Climate Credit…or Not Enough?” Energy Institute Blog, UC Berkeley, June 10, 2019, https://energyathaas.wordpress.com/2019/06/10/are-trees-getting-too-much-climate-credit-or-not-enough/

 

3 thoughts on “Are Trees Getting Too Much Climate Credit…or Not Enough? Leave a comment

  1. Combining Lewis Carroll and Frank Baum, “It’s always best to begin at the beginning.” For economists, this means starting w/ the first-best solution. In forest economics, we should tax carbon emissions at the shadow price of carbon. If we arbitrarily set the benchmark at zero emissions, this implies a (big) subsidy, since the socially efficient emission level is negative. Consider a fixed forest area. The optimum involves harvesting immediately all trees of Faustmann age and replanting (or relying on natural regeneration). Thereafter, you’re only cutting the trees that reach Faustmann age, and you have sequestration from both growth and “pickling” some fraction into wood products. Second, since there is presently excess deforestation, the optimum involves increasing forest area. Even though the optimum forest area will slowly decline after this recovery, this force is of second-order magnitude (especially in present-value terms).

    In a second-best framework, the benchmark should be less than zero emissions (a positive sequestration requirement) and the optimal subsidy less than in the first-best case.

    I don’t see any reason for subsidizing the stock. (Of course, you can always translate the emission tax into a change in stock, but why would you want to do that?)

    Van Kooten has made some useful contributions, e.g. his 2016, “The Economics of Forest-Carbon Offsets” w/ Johnston.

  2. Meredith, being sternly (and appropriately) corrected on this issue by a geophysicist, it’s become a pet peeve of mine. Whether planting trees or any other form of biological sequestration gets too much credit in the fight against climate change depends on your priorities – whether you place more value on reducing its effects over the next few hundred years, or the next 100,000 years.

    The obvious choice would be for “the next 100,000 years.” But the most beneficial techniques for diminishing climate effects in the long term can actually make things worse for our kids, and theirs. It can render species extinct now – and with extinction (barring development of an eternal DNA bank), now is forever.

    Trees and other plants withdraw CO2 from the atmosphere and fix it, temporarily, as biomass – cellulose, sugars, and other organic matter (“organic” here used in its biological context – molecules containing elemental carbon). Every plant soon dies and decays, however, in a process which returns all of its carbon to the atmosphere. What about the plants consumed by humans and animals? Same thing – when humans and animals die their carbon returns to the air. This organic bio-cycle has continued for hundreds of millions of years, with only slow, gradual changes in atmospheric carbon and temperature attributable to the inclination of the axis of the Earth, volcanism, and other geological/astrophysical phenomena.

    A century and a half ago suddenly, in an eyeblink of geological time, everything changed. Humans began extracting fossil hydrocarbons and burning them for fuel, freeing trillions of tonnes of carbon which had been trapped underground over the course of eons. Atmospheric carbon concentration rocketed upwards quicker than ever in Earth’s history. Now, we’re in the process of effectively returning our planet’s climate to a time when average global temperature was 18°C hotter than it is now, the poles were ice-free, and prehistoric oceans covered much of the land mass of what is now the United States.

    Thus biological sequestration, including land conservation, minimizing animal husbandry, even rainforest protection, amounts to only a temporary fix. If we care about climate maintaining any semblance to that of the Holocene epoch to which plants and animals alive today adapted, we must end fossil fuel extraction ASAP. In my opinion, that consideration should eclipse all others.

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