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Harvesting Durban: The Opportunities and Challenges for Central and Eastern Europe

2012.04.19. 14:27 Világgazdasági Intézet

 
Unnoticed amid disappointment over the failure to conclude a more decisive agreement at the COP17 meetings in Durban, negotiations in the AWG-KP over future LULUCF carbon accounting rules has witnessed some important changes. For Hungary at least, as well as for many of the Annex I countries and European Union (EU) Member states, this may represent a genuine opportunity. Most importantly, the officially determined “caps” which regulate the total amount of carbon removal credits individual countries can claim under the forest management sector (Art. 3.4 Kyoto Protocol) for reductions in annual harvesting or forest-based carbon sequestration efforts (“net removals”, or net annual increases in the forest sink) have been raised significantly for all countries.
 
The new cap, which takes effect during the second Kyoto framework commitment period (2013-2017 or 2020), has been calculated on the basis of a uniform method for all countries—3.5% of 1990 emissions—and will be added to a country specific baseline. The baseline either represents a business as usual projection, historical data or is set to zero (this is the forest management reference level, or FMRL). Forest based carbon sequestration in all carbon pools (net removals) above the reference line and below the new cap can be credited to an individual country’s Kyoto account (or sold as RMU’s on the international carbon credit market). Forest-based carbon sequestration between 0 and the reference line does not yield credits, but increasing harvest such that net removals fall below the reference line leads to debits. Forest-based carbon sequestration above the new cap is not eligible for carbon credits and thus is not mobilized in the UNFCCC and Kyoto Protocol II policy framework.
 
The relative change in the magnitude of the new cap is likely to be important for many countries. This comment focuses on the potential benefits and concerns for Hungary and other Central and East European countries. Croatia has also been included in this analysis because it has concluded EU membership negotiations and is scheduled to become a new member in July 2013.
 
For Hungary, the “new cap” represents a 276% increase over the previous cap (Figure 1). Though this is far from the largest increase (the Netherlands cap was increased by a factor of 200), it nonetheless represents a substantial change. On average, the cap in the Central and East European countries was increased by 185% (207% on the basis the weighted measure). Though this increase does not compare well to the average increase in the cap across all Annex I countries (this amounts to over 1000%, but only 75% on a weighted basis). Two New Member states, however, have seen their cap reduced (Latvia by -25% and Slovenia by -46%).
 
In order to take advantage of this opportunity, Hungary will have to get planting. Additional carbon sequestration (net removals) under Forest Management in Hungary in 2008 and 2009 (after subtracting the official reference line submissions, FMRL) were well below the level of the new cap (Figure 1, green bar). This was likewise true for the Czech Republic, Estonia, Bulgaria, Romania and Lithuania.
 

For many other Central and East European countries (those in which average 2008-2009 FM net removals above the reference line were larger than the new cap), however, the new cap may not be large enough to encourage significant additional growth in the net forest sink. This is true for Poland, Slovakia, Croatia, Latvia and Slovenia. Thus, under the appropriate demand conditions, countries with no additional cap can harvest any additional growth above the cap without influencing the accounting.

 
However, since the FMRL represents individual country projections regarding net removals for the 2nd Commitment Period (CP2 2013-2020, when the new cap rules will take effect), this suggests countries either plan to harvest and use considerably more forest resources, or will be obliged to increase harvests due to the changing age structure of existing forests (on average, larger shares of European forests will be ready for harvest in the coming years). To the extent harvesting increases—without considerable measures to increase future forest growth—all New Member states will have a difficult time taking advantage of the new cap.
 
At the same time, individual countries may have difficulty predicting future behavior and may thus be prone to either over-estimating future forest resource use, or under-estimating future net change in the forest sink. In this regard, since the new rules adopted in Durban also mean that failure to maintain forest growth above the reference line incurs carbon accounting debits, all Parties including the NMS must also be concerned about inadequate forest growth and/or over-harvesting.
 
There are strong indications that demand for biomass resources will significantly increase in coming years. Among the EU Member states, the Central and East European New Member states have witnessed the highest rate of growth of renewable energy technologies over the period 1990-2009. Moreover, in the NMS a relatively large share of this gross inland consumption is from biomass resources: 95% for Estonia, 86% for Lithuania, 80% for Latvia, 77% for Hungary and 71% for Romania (Ellison 2011).
 
Thus the use of biomass resources in Central and Eastern Europe has experienced quite rapid growth. As demonstrated in Ellison (2011), as a share of primary energy production, between 1990 and 2009 the use of biomass grew some 174% in the ten New Member states compared to only 68% in the EU15. Though these numbers disguise some important outliers—e.g. biomass use in the UK grew 447%, in Italy 376% and in Germany 281%—over the same period biomass use has grown most significantly in Romania (522%), Bulgaria (329%), Slovakia (272%), Estonia (270%), Poland (258%), Lithuania (167%) and Hungary (128%). While Slovenia, Latvia, Estonia and to a lesser extent Slovakia and Lithuania have relatively extensive forest cover, other countries in the region (e.g. Hungary, Romania and Poland) have significantly fewer forest biomass resources (MCPFE 2007: p.6, 8).
 
The view that future pressures on available biomass resources will be significant is strongly supported by the recent EUwood report. The authors argue that, if rapid changes are not introduced in individual EU Member state forestry sectors, significant demand constraints are likely to emerge across the EU, outpacing EU domestic supply, by as early as 2016 (Mantau et al., 2010, p.22-24). Though some argue significant room for additional biomass production remains, obstacles to increased biomass production include the failure to adopt improved forestry management techniques (Verkerk et al., 2011).
 
However these estimates are based primarily upon official statistics and do not consider discrepancies between officially reported forest inventory data and unofficial studies. Given the rapid adoption of biomass-based renewable energy sources, some reservations are in order concerning future resource availability. Tremendous pressures are likely to remain in place as countries attempt to meet the EU Renewable Energy Directive targets for the year 2020. For one, this pressure has already contributed to heated debate over the level of biomass extraction in Hungary and its accurate accounting (see: “Brutális mennyiségű fa tűnt el hazánkban - Megdöbbentő adatok”, An excessive amount of wood is disappearing in Hungary – Shocking Statistics, Portfolio.hu, Oct. 27th, 2009; and in particular Szajkó et al. 2009), as well as to the pressure additional biomass installations place on available resources and concerns about possible impacts on illegal logging (Ellison 2006: 328-330).
 
In Hungary, researchers suggest significant amounts of forest biomass remain unaccounted for, claiming discrepancies in officially reported statistics of anywhere between 1 to 4 million cubic meters per year (Szajkó et al. 2009). This problem has become increasingly apparent since 1995 when many of the larger biomass power plants first started coming on line. Though pressures on and the reliability of National Forest Inventory data, may well be a problem in other EU and New Member states, thus far the authors have not found adequate data to support these claims. The WWF, however, has recently carried out an evaluation of individual EU Member state forestry practices with particular attention to the implementation of the EU FLEGT program (which attempts to counter illegal logging both domestically and abroad, in part by promoting “private and public sector procurement policies that give preference to legally harvested timber and timber products”). Though no EU Member state receives an excellent rating, 8 out of 10 of the Central and East European countries (along with several Old Member states) are poor performers (country scores).
 
These observations form the groundwork for maintaining the following: 1) for many or most Central and East European countries, the new and greatly increased cap for CP2 under the Forest Management sector represents an important opportunity, not to be wasted. 2) At the same time, evidence suggests the presence of any cap at all represents a barrier to incentivizing either additional growth or the promotion of an increasing forest carbon sink (we elsewhere refer to this as the “Incentive Gap”, Ellison et al. 2011 and Ellison et al. forthcoming).
 
Failing to adequately mobilize the forest sink by means of sound LULUCF carbon accounting practices has many potential consequences. For one, countries without adequate incentives—and even some countries with only marginal incentives—may not be motivated to promote greater forest-based carbon sequestration and a steady increase in the forest sink. This would have the unfortunate consequence that opportunities for additional climate change mitigation (and adaptation) would go unutilized. Nonetheless, there are at least increased incentives not to fall below the projected reference levels, since this will incur carbon debits.
 
However a second negative consequence is also likely. High pressures for additional biomass use may dissuade countries from increasing the available forest sink. While some might argue this may be a good thing: bioenergy use—in particular for combined heat and power generation (which produces the greatest rate of energy use efficiency)—represents an important alternative to fossil fuel combustion. Fossil fuel substitution has important climate change mitigation impacts. However, the failure to mobilize growth in the forest sink ultimately means the future potential share of biomass available for bioenergy purposes will be limited. This in turn will place significant pressures on existing forests and further increase strains on the management of national inventories.
 
David Ellison, Hans Petersson, Mattias Lundblad and Per-Erik Wikberg*
 
Acknowledgements: this Short Notice is based on a forthcoming article (Ellison et al. forthcoming: “The Incentive Gap: LULUCF and the Kyoto Mechanism Before and After Durban”) and two initial analyses of the Durban agreement (Ellison, Lundblad and Petersson 2011, Ellison, Lundblad and Petersson 2012). This research is funded through Future Forests, a multi-disciplinary research program supported by the Foundation for Strategic Environmental Research (MISTRA), the Swedish Forestry Industry, the Swedish University of Agricultural Sciences (SLU) and the Forestry Research Institute of Sweden.
David Ellison works at the Institute of World Economics (Budapest, Hungary). Hans Petersson, Mattias Lundblad and Per-Erik Wikberg work at the Swedish University of Agricultural Sciences, Sweden.
*Corresponding Author’s Email Address: EllisonDL@Gmail.Com
For a pdf of this blog, click here
 

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