Accounting for climate change

Forests play vital role in climate change mitigation by offsetting greenhouse gas emissions through the sequestration and storing of carbon. Whilst this may seem like a simple equation, the reality of how forest management fits into the accounting rules for climate policy development is far more complex. A review published earlier this year in Carbon Balance and Management  looks at the development of these accounting rules and discusses pros and cons of different approaches.

One of the aims of the Paris Agreement is “to achieve a balance between anthropogenic emissions by sources and removals by sinks of greenhouse gases in the second half of this century”. This puts pressure on the entire land sector to contribute to overall greenhouse gas (GHG) emission reductions. Because of this, the agreement is interpreted as a “game changer” for the role of forests in climate change mitigation since many countries rely on forests in their Nationally Determined Contributions (NDCs) to achieve their self-set targets.

It’s widely understood that forest management serves climate change mitigation since forests sequester and store carbon. However, the meaning of forest management and its potential contribution to reduce GHG from the atmosphere is far more complicated and can result in different conclusions, depending on the spectator’s perspective.

The complexity of forest management accounting and various approaches to link the sector to further sectors in climate change negotiations resulted in opportunities and procedures that were often unclear for stakeholders not deeply involved. On top of this, the direct contribution of forest management to climate change mitigation can be overruled by the accounting procedure: this could results in “debits” or “credits” despite an actual GHG mitigation. For Example, a larger base year’s sink than a current sink results in debits under net-net accounting, but in credits under gross-net accounting. This again has direct consequences for climate-investments in forestry.

The direct contribution of forest management to climate change mitigation can be overruled by the accounting procedure: this could results in “debits” or “credits” despite an actual GHG mitigation.

This complexity has thrown up some fundamental questions:

  • To what extend is forest growth (and carbon sequestration) a consequence of forest management?
  • Which past management impacts shall be included in the calculation of a baseline?
  • Which baseline is an unbiased one, allowing to determine “real” (direct human-induced) improvements?
  • Could the development of accounting rules consider and solve such challenges and provide a capable approach?
  • Can forest management accounting stipulate incentives for management changes?

This review recalls the development of forest management accounting rules and current agreements under the Paris Agreement. It discusses pros and cons of different approaches with specific focus on the challenge to maintain integrity of the accounting approach. Form here, it reflects resulting incentives for additional human induced investments to increase growth for future substitution and increased carbon storage by forest management.

It is concluded that core requirements like factoring out direct human-induced from indirect human-induced and natural impacts on managed lands; a facilitation of incentives for management changes; and providing safeguards for the integrity of the accounting system are not sufficiently secured by currently discussed accounting rules.

However, the current accounting rules and their improvements can be perceived as a sufficient compromise between political requirements and a technically feasible implementation. Increased incentives for additional human induced investments for improvements of sequestration rates by forest management are not perceived.

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