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Including LULUCF in the EU’s 2030 climate policy target

Today, Thursday 18 June, is the closing date for the Commission’s consultation on addressing greenhouse gas emissions from agriculture and land use, land use change and forestry (LULUCF) in the context of the 2030 EU climate and energy framework. The consultation will be followed by a Commission proposal in the course of next year (2016). This proposal will be a very significant initiative, and will have large implications for land use within the EU, as well as determining the severity of member state mitigation targets under the Effort Sharing Decision (ESD) to 2030.

Background

In 2012, agricultural non-CO2 emissions amounted to 10.3% of total emissions in the EU. Half of the agriculture-related emissions came from agricultural soils (mostly N2O), roughly one third from enteric fermentation in animals, primarily cattle (mostly CH4), and the remainder from manure management (N2O and CH4) and other activities.

Since 1990, the sector’s emissions have declined to 76% of the 1990 base year emissions in 2012. This has been because agricultural output has remained broadly static over this period, while productivity has increased, so both cattle numbers and fertiliser use have fallen and so have emissions.

However, EEA projections show that this fall in agricultural emissions has now halted and no further fall in agricultural emissions is expected over the period 2012-2020 (see figure below). By 2050, agricultural non-CO2 emissions are expected to account for a third of total EU emissions, more than three times their current share.



Since 1990, LULUCF CO2 emissions and removals have acted as a sink and net removals have remained at much the same level, although with considerable inter-annual variability. As a proportion of total EU emissions, LULUCF net removals have increased from around 4.6% in 1990 to over 6.6% on average during the first commitment period (2008-12) of the Kyoto Protocol (KP) to the United Nations Framework Convention on Climate Change (UNFCCC).

Agriculture, forestry and other land use (AFOLU) are regulated in two separate pillars of the overall EU climate policy framework in the 2013-2020 commitment period. Non-CO2 emissions from agriculture are covered under the Effort Sharing Decision. CO2 emissions and removals from land use, land use change and forestry are covered under the Kyoto Protocol, but are not taken into account in reporting net emissions under the Effort Sharing Decision.

Furthermore, CO2 emissions and removals from the land use sector are accounted for differently under the Kyoto Protocol from the way they are reported in the UNFCC greenhouse gas inventories. Kyoto Protocol accounting takes a cautious approach with respect to LULUCF emissions in order to ensure overall environmental integrity. For example, accounting rules under the Kyoto Protocol are designed to ensure that only those actions that are considered ‘additional’ to the status quo can count towards reduction targets.

The accounting rules for emissions and removals in the LULUCF sector were revised for the Kyoto Protocol second commitment period 2013-2020. These new rules were incorporated into and extended in the EU’s Decision on LULUCF accounting rules in 2013 which member states are now beginning to implement.

The most important change is that accounting for forest management using a reference level approach is now made mandatory for the 2013-2020 period.

Member states are also required to put in place systems to measure and account for emissions and removals from cropland and grazing land management. Accounting for the draining and rewetting of wetlands and for harvested wood products will remain voluntary, as in the international context. In addition to producing accounts on their removals and emissions, member states are also expected to submit information on current and future measures in the LULUCF sector.

The European Council decision on the 2030 targets in October 2014 confirmed that LULUCF would be included along with agriculture as part of the EU’s targets but left open how this would be done.

the multiple objectives of the agriculture and land use sector, with their lower mitigation potential, should be acknowledged, as well as the need to ensure coherence between the EU’s food security and climate change objectives. The European Council invites the Commission to examine the best means of encouraging the sustainable intensification of food production, while optimising the sector’s contribution to greenhouse gas mitigation and sequestration, including through afforestation. Policy on how to include Land Use, Land Use Change and Forestry into the 2030 greenhouse gas mitigation framework will be established as soon as technical conditions allow and in any case before 2020.

The consultation invited stakeholders to give their views on how these guidelines set by the European Council might be operationalised.

Implications of ALOFU for member state ESD targets

Two main issues are raised in the consultation document. The first is how to ensure a fair and equitable distribution among member states of action for mitigation in agriculture, forestry and other land use while reflecting biophysical, geographical, and socio-economic variability and differences among member states?

This issue is relevant to agricultural non-CO2 emissions because the importance of agricultural emissions in each country’s non-ETS total (that is, the sectors not covered by the Emissions Trading System and which fall under the Effort Sharing Decision) differs widely. For countries like Germany, the UK, the Netherlands and Austria, it is less than 15% of their total, so limiting agricultural emissions will play only a minor role in their strategy to meet their ESD ceilings. However, for Denmark and particularly Ireland, where the shares are 30% and 45% respectively, meeting their ESD ceilings will not be possible without a significant effort to reduce emissions from agriculture.

The question of fairness is further complicated because there are differences in the marginal abatement opportunities in each country’s agriculture (for example, there may be more low-cost opportunities in arable than in livestock farming, while anaerobic digesters to produce biogas from animal slurry may be more economic in countries with larger holdings). In a previous post, I ranked EU member states according to a ‘pain index’ to illustrate the wide differences in the challenge to agriculture posed by national ceilings on non-ETS emissions.

These differences will be further exacerbated by the inclusion of LULUCF in the activities covered by the EU’s climate target. There are significant variations in the relative importance of LULUCF credits and debits accounted for by member states for the purpose of showing compliance with the Kyoto Protocol target for the first commitment period, as shown in the figure below.

In this period, accounting for net credits and debits from KP Article 3.3 activities (afforestation, reforestation and deforestation) was mandatory. Member states could choose whether to account for Article 3.4 activities (forest management, cropland management, grazing land management and revegetation) but only 18 chose to do so, and most of these chose only to account for forest management.



We can make a few observations about this chart. First, the accounted net removals from LULUCF activities for the EU-28 only offset 1.5% of total EU emissions during the KP first commitment period. This is much less than the LULUCF net removals reported under the UNFCCC inventory accounting (quoted above), because of the KP rules limiting the removals which can actually be credited. As a share of non-ETS emissions, the share of LULUCF net removals is a little higher, at 2.5%.

It is also clear that both the direction and scale of the effects for Article 3.3.and Article 3.4 activities are quite different for individual member states. Estonia, Finland, Latvia and Sweden all show net emissions from afforestation and deforestation: these are all countries with substantial forest areas which are now mature and being logged for timber. However, these countries were all able to more than compensate with credits from forest management (with the exception of Estonia which did not elect to account for forest management during the 2008-2012 period).

On the other hand, Ireland, Portugal and, to a lesser extent, Austria and Bulgaria could offset a significant proportion of their non-ETS emissions by Article 3.3 credits from afforestation.
Whether the same pattern of net credits and debits will be maintained under the new LULUCF reporting rules which start to apply from 2013 and which possibly will be further amended for the period after 2020 is not yet known. Particularly the change in rules for reporting net emissions and removals from forest management (with the use of a reference level) may change the picture.

However, the basic point that member states will have different potentials to avail of LULUCF net credits to offset their other non-ETS emissions in the period after 2020 remains a valid one. How this should be reflected in individual member states’ ESD targets is the question posed in the consultation.

Another important question is whether a cap should be placed on the use of net credits from LULUCF to offset emissions in the non-ETS sector for the purpose of complying with national ESD targets. In turn, the answer to this question will be determined partly by how the ALOFU sector is incorporated into the EU’s climate policy framework.

Options to include ALOFU in the EU’s climate policy framework

The second main issue raised in the consultation document was how best to include the agriculture, forestry and other land use sectors into the climate policy framework. The 2030 Communication on the policy framework for climate and energy and its impact assessment identified three principal options for future policy design:

  • Option 1 — LULUCF pillar: Maintain non-CO2 agriculture sector emissions in a potential future Effort Sharing Decision, and further develop a LULUCF sector policy approach separately;
  • Option 2 — Land use sector pillar: Merging the LULUCF and agriculture sector non-CO2 emissions into one new and independent pillar of the EU’s climate policy;
  • Option 3 — Effort Sharing: Include the LULUCF sector in a potential future Effort Sharing Decision.

The Commission’s consultation document describes the pros and cons of the three options as follows:

Option 1, the LULUCF pillar, would continue the status quo, i.e. separate treatment of LULUCF. Accounting rules, targets and appropriate measures could be further developed. Flexibilities with regard to other sectors could be considered. The major disadvantage of this option is that agricultural and LULUCF emissions (including those of agricultural soils) would continue to be addressed by different policy tools, reducing policy coherence and rendering the design of incentives for action more complex.

Option 2 (“Land use sector pillar”): Under this option a separate pillar in the EU’s climate policy, the Land Use Sector, would be created by merging LULUCF and non-CO2 emissions from the agriculture sector into one new and independent pillar of the EU’s climate policy. Such a sector would include all emissions and removals related to agriculture and LULUCF. It could lack the advantage of flexibility between sectors within the overall Effort Sharing Decision, but give an opportunity for a policy approach that reflects the sector’s specific particularities (e.g. permanence, long time-cycles, high natural inter-annual variability).

Option 3 (“Effort sharing”) would increase the number of sectors in the ESD and thus increase flexibility for Member States to achieve a given overall target. It would also enable an integrated approach. However, it would increase complexity and raise methodological issues, including concerns related to environmental integrity and technical compliance issues, which would have to be specifically addressed (e.g. potentially large annual fluctuations in removals and emissions).

Whichever option is chosen, the consultation document notes that three cross-cutting issues also need to be addressed.

These are further updating and modifications of the reporting rules for LULUCF emissions in the light of ongoing discussions within the UNFCCC, the treatment of LULUCF credits and debits in meeting national targets, and possible flexibility mechanisms to allow the exchange of LULUCF credits with different pillars of the climate policy framework.

Conclusions

The consultation document notes that the range of policy options will be further analysed in the context of the impact assessment which will accompany the Commission’s proposal next year. The impact assessment will also build upon the information received from the stakeholder consultation which closes today. According to the Commission:

The impact assessment will assess mitigation options for each member state, taking into account the geographic distribution of biophysical potential. It will also assess environmental impacts (contribution to the 40% target, bioenergy, biodiversity, resilience and other co-benefits) and economic and social impacts, and compare the options in view of all relevant parameters.

The choice will not be an easy one, with each option having advantages and disadvantages. Option 3 (adding LULUCF as one of the ESD sectors) gives the maximum flexibility to member states and avoids the creation of inevitably somewhat arbitrary additional targets for the LULUCF or AFOLU sectors alone which would be likely to increase the overall cost of meeting the 2030 climate target.

However, the differing importance of agricultural emissions in the non-ETS sectors (which could in future include LULUCF) would mean that agricultural producers in different member states would likely be affected very differently by national strategies to meet the new ESD limits.

I have argued that the most efficient national strategy will be to price emissions from all agricultural emissions as well as removals from all approved forms of carbon sequestration at the opportunity cost for each country of selling or acquiring non-ETS allowances.

But, politically, it will be very difficult to unilaterally introduce such a charge in one member state only. It would clearly disadvantage it relative to agricultural production in other member states where emissions reduction is only pursued through voluntary measures supported, for example, by rural development funding.

From this perspective, a common ALOFU pillar would be a way to maintain a level playing field within the EU single market. The objection that an additional pillar would increase the economic cost of meeting the EU’s overall reduction commitment could be addressed by allowing flexibility to exchange allowances between the different pillars.

This post was written by Alan Matthews.

Photo credit: acclimatise.uk.com

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