Accounting for sequestered carbon: the question of permanence
Introduction
The Kyoto protocol to the United Nations Framework Convention on Climate Change (1998) has proposed a process for establishing quantitative, enforceable limits on the emission of greenhouse gases to the Earth's atmosphere. The protocol contains negotiated commitments on greenhouse gas emissions for the period 2008 through 2012 for the 38 developed countries and countries with economies in transition (plus the European Community) listed in its Annex B.
The protocol provides further that, within prescribed rules, countries can remove the greenhouse gas carbon dioxide from the atmosphere into living plants, sequester the carbon in the terrestrial biosphere, and use the sequestered carbon to offset some of their greenhouse gas emissions from other sources. Fig. 1 illustrates the concept that if we refrain from emitting a unit of CO2 to the atmosphere, if CO2 emissions are collected in a bottle at the point of discharge, or if emitted CO2 is moved a short distance through the atmosphere and then taken up in vegetation; there should be no substantial difference for the atmosphere.
The concept of emissions trading has also been included in the Kyoto protocol. An Annex B country can carry out an emissions-reduction activity in another Annex B country and use the reductions as credits against its own commitments (joint implementation, described in Article 6 of the protocol), an Annex B country can carry out an emissions-reduction activity in a non-Annex B country and use the reductions against its own commitments (the clean development mechanism (CDM), described in Article 12), or an Annex B country can simply trade emissions permits with another Annex B country (described in Article 17). The protocol allows emissions offsets for carbon sequestration in the biosphere as part of joint implementation, but is silent on whether or not carbon sequestration can be used as part of the CDM, i.e. whether carbon sequestration in non-Annex B (developing) countries can be used to offset emissions in Annex B (developed) countries.
The Kyoto protocol is incomplete or ambiguous in several ways that need to be resolved before it, or some subsequent international accord, could be brought into force as a functioning international agreement. Notable among the issues yet to be resolved is that the protocol prescribes emissions commitments without fully laying out either the accounting rules for measuring emissions and emissions offsets or the penalties for failure to meet commitments.
The possibility of using carbon sinks in the terrestrial biosphere to offset emissions from other sources has been criticized on several grounds that need to be considered in establishing the rules for accounting (Schlamadinger and Marland, 2000). In particular, it has been suggested that sequestering carbon in the biosphere might be different from reducing greenhouse gas emissions from fossil fuels in three fundamental ways: “If activities succeed in increasing the carbon in the biosphere, will it stay there (the permanence issue)? If activities succeed in increasing the rate of carbon accumulation in the biosphere, how long will it be possible to continue at the increased rate (the saturation issue)? If activities succeed in increasing carbon stocks in the biosphere, is it possible to accurately and precisely measure and affirm that it has been done (the verifiability issue)?” (Schlamadinger and Marland, 2000). On close examination, saturation and verification raise interesting questions, but do not seem to raise compelling questions unique to land-use change and forestry activities. The fundamental issue that is unique to sequestration projects is the one of permanence, and this is the subject of the current paper. In the simple illustration of Fig. 1, we ask what has been gained if the bottle breaks or the tree burns.
Is it appropriate to treat carbon sequestration in the biosphere as the negative of emissions to the atmosphere if we cannot guarantee that carbon once sequestered will remain sequestered? In an ideal accounting system it would be possible to treat carbon flows in and out of the biosphere similarly to flows from fossil fuels: flows toward the atmosphere would be emissions and represented with a positive sign while flows from the atmosphere would be treated symmetrically and have negative sign.
We consider possible accounting rules for carbon that is sequestered in the biosphere when the permanence of that sequestration is in doubt. In fact, we argue here that permanence of sequestration is unnecessary, that there is value in delaying emissions regardless of the long-term fate of the sequestered carbon. We propose that if emissions reductions are clearly permanent (e.g. fossil fuel is not burned), then emissions credits might be bought and sold. If emissions reductions are not clearly permanent (e.g. carbon is sequestered in a forest), then emissions credits might be rented instead. What is needed is to establish who is responsible if and when the CO2 is released to the atmosphere. In this paper, we develop an approach for renting emissions credits and contrast this approach with the now widely discussed ton-year approach for dealing with sequestration that cannot be considered permanent. The government of Colombia Ministry of the Environment (2000) has proposed a system of expiring credits which is very similar to our approach but we broaden the ideas somewhat and cast them in more familiar economic concepts.
The Kyoto protocol has not yet been ratified by enough countries to enter into force and there is some probability that it will never enter into force in its original form. Nonetheless the protocol includes many elements that have been widely agreed to and could come into force as part of this, or some subsequent, international accord. Among these elements is trading of emissions permits where the trading partners have unequal responsibility or where one partner is unwilling or unable to accept long-term liability for managing a stored pollutant. This trading would take place in an environment where at least some parties have either a tax on emissions or a ration on emissions permits, i.e. where there is an established penalty for emissions. Rental of emissions permits provides an opportunity for reducing total emissions in this environment.
Section snippets
The Kyoto context
Our basic question is whether it is appropriate to treat carbon sequestration as the negative of emissions or whether other accounting rules are necessary. Can carbon sequestration be included as a part of national commitments without compromising the objectives of the Kyoto protocol (or some successor accord)? The Kyoto protocol prescribes that net flows into or out the biosphere will be represented by the change in carbon stocks, and this simplifies the measurement and accounting somewhat
Approaches that have been proposed for addressing permanence
Chomitz (2000) has suggested a useful taxonomy for approaches to deal with the issue of the permanence of carbon sequestration. He suggests that there are two primary approaches: (1) acknowledge that the sequestration is likely not permanent, assess the environmental and economic benefits of limited-term sequestration, and allot credits in proportion to the time period over which carbon is sequestered, and (2) provide reasonable assurance of indefinite sequestration. The first alternative has
The fundamental issue-liability
The essential issue for permanence is liability. The Kyoto protocol envisions a system whereby credits against emissions commitments can be achieved by sequestering carbon in the terrestrial biosphere. Carbon sequestration is a reversible process, however, and the Kyoto protocol does not fully prescribe who is responsible if the sequestered carbon is subsequently released and the basis for the credits thereby lost.
The system of credits and debits created by the protocol does suggest that carbon
Renting credits
A traditional system for limited-term use of a capital asset involves a rental contract, and rental contracts seem ideally suited to transfer of emissions credits for carbon sequestration where permanence is either not guaranteed and/or not desired. A rental contract can allow the ‘buyer/renter’ to enjoy the limited term benefits of the asset while the ‘seller/host’ retains long-term discretion. We consider how an accounting system might work if credits for carbon sequestration in non-Annex B
Summation
The initial premise of the Kyoto protocol is based on a real-time accounting of greenhouse gas emissions to the atmosphere, with corresponding offset credits if carbon is removed from the atmosphere and sequestered. The protocol specifies integration over a 5-year commitment period and we assume that integration over some significant spatial scale might also be used to even out small-scale variability and to minimize the burden of monitoring and verification. Real time accounting of credits and
Acknowledgements
This paper has profited from comments from Bernhard Schlamadinger, Mark Jackson, Philip Fearnside, Naomi Pena, and Jayant Sathaye. A number of people have made available to us their yet unpublished manuscripts on similar or closely related topics. These include Susan Subak, Christo Artusio, Javier Blanco, Mark Jackson, Malte Meinshausen, Michael Dutschke, Pedro Moura Costa, and Bruce McCarl.
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