2. Harvested Wood Products Accounting Systems
This section will discuss submissions relating to
- Objectives of approaches
- Current IPCC default approach
- Alternative approaches
2.1 Objectives of Approaches
One submission (Canada) states clearly how the objectives for wood products reporting and accounting systems conform to other parts of GHG inventories:
"the primary objective of national inventory guidelines is to improve the accuracy and completeness of GHG inventories and reporting under the Framework Convention on Climate Change and under the Kyoto Protocol. The GHG inventory should provide complete, transparent and accurate accounting of emissions and removals, identifying when and where they occur. The accounting methodologies should be scientifically credible, feasible and consistent with the other sections of the inventory (i.e. provide complete accounting that does not result in double counting.)"
This appears to be a clear indication of the need initially to identify where and when in the forest cycle the emissions and removals occur, by attributing them to appropriate activities. Since the current default assumption is to allocate emissions where and when forest harvesting occurs, this will need to be reviewed if wood products are added as another pool. However, this apparently succinct summary raises a number of issues in itself, and the view is not shared by all Parties. Key issues and other objectives will be discussed in this section, with further issues relating to particular approaches in the following sections.
2.1.1 Stocks and flows
Canada supports "full carbon accounting that includes the accounting for carbon stored in harvested wood products (HWP) and the C-CO2 emissions and removals associated with HWP". The USA agrees, suggesting Parties "report carbon emissions and storage in HWP…". This suggests there may be some confusion between accounting for stocks and/or flows, creating the potential for double-counting.
With this in mind, it is useful to refer to the definitions in the UNFCCC:
- A SINK is any process, activity or mechanism that removes a GHG, an aerosol or a precursor to a GHG from the atmosphere.
- A SOURCE is any process, activity or mechanism that releases a GHG, an aerosol or a precursor to a GHG into the atmosphere.
- A RESERVOIR means a component or components of the climate system where a greenhouse gas is stored.
Under these definitions, forest harvesting is not a source of emissions (from biomass). Similarly, wood products are not sinks since they do not remove a greenhouse gas from the atmosphere; the stand/forest is the only sink. Wood products can be seen as an extension of the time before carbon is returned to the atmosphere. As a pool, wood products represent a reservoir (as identified by Japan and Mexico) and a source of emissions (Argentina, Uruguay), but given the definitions above, an expanding reservoir does not qualify as a sink. Despite this, Denmark considers there is most potential in developing approaches to account for stock changes.
Emissions arise from the decay of unharvested biomass left in the forest, from processing wastes, and from the wood products. Figure 1 provides an overview of major stocks and flows within the forest industry. This type of model can be used to attribute emissions and removals to appropriate activities, and as a basis for allocating responsibility for emissions.
Samoa contends that emissions from fossil fuel use during forest operations, transport and processing should also be included. While this may be appropriate for CDM projects, it would appear to be double counting if these emissions are also reported in the energy sector of national inventories.
Figure 1. Major forest industry stocks and flows. Only the forest qualifies as a sink under UNFCCC definitions (downward arrow). Sources arise from harvesting residues, processing residues and wood products, from disposal/decay or use for energy (upward arrows). Transfers also occur between pools within the terrestrial carbon pool (horizontal arrows).
2.1.2 Timing and location
Samoa supports the view expressed by Canada that the accounting system should be based on scientifically credible attribution of emissions and removals, when and where they occur. It is clear that this view is not held by all Parties.
Argentina states there should only be credit for sinks i.e. the forest whence the products came, and that the producer should account for all carbon sequestered. Uruguay accepts that the wood products pool is a source of carbon, and emissions should be accounted when they occur, like any other forest carbon pool. Both of these submissions propose that removals should be accounted where and when they occur, but emissions only when they occur. The emissions remain the "responsibility" of the producer, even if exported. Hence the impact of a forest would include emissions not at harvest, but over an extended time period.
Any Parties supporting accounting of carbon stocks (e.g. Denmark) are more interested in where and when stocks change than the exchanges with the atmosphere.
2.1.3 Attribution and allocation
Some confusion may arise due to inconsistent use of terminology. Samoa provides the following interpretations:
- "attribution" - the scientific accounting of emissions and removals.
- "allocation" - the assignment of responsibility for emissions and removals.
This clear distinction may be equivalent to that between reporting and accounting. Participants at the Rotorua Workshop on HWP (McFarlane, 2001) noted the clear distinction between reporting requirements for HWP under the UNFCCC and the accounting requirements under the Kyoto Protocol. Accurate reporting in national inventories is likely to reflect correct attribution ("scientific accounting") of emissions and removals. National accounting may be different as a result of allocation or accounting "rules" for assigning responsibility for emissions and removals.
Allocation of responsibility may be made on the basis of a range of factors, although Samoa (and possibly Canada) considers that correct attribution is paramount. Other factors could include inter alia, avoiding the need for complex systems or intensive data collection, to be consistent and compatible with the Kyoto Protocol, to encourage the use of wood products, to maintain/enhance environmental integrity, and to avoid adverse impacts on trade. These will be discussed further below.
There are several instances in which these words may have been used inappropriately. Australia asks a question "How should attribution of HWP emissions and removals be dealt with?", the meaning of which is not entirely clear. If "allocation" is used instead, they may be referring to the basis on which allocation decisions would be made. USA states the "production approach… attributes carbon storage in both domestically used products and exported products to the producing country" when "allocates" appears more appropriate.
2.1.4 Data and systems
NZ acknowledges HWP accounting is a complex issue. Submissions from Japan and NZ stress that any system should focus on readily obtainable, verifiable data; it should be simple, feasible, accurate and cost-effective. A complex system with intensive additional data requirements will not be practical, and hence should be avoided.
2.1.5 Consistency
Australia suggests Parties should initially focus on the development of a long-term policy framework for wood products, as part of the review of the IPCC Guidelines. This would include consideration of "the forest industry" as a whole (including forests, products and landfills), seeking guidance from treatment of non-wood products (i.e. non-LULUCF sectors).
Several other submissions include references to consistency, but with different emphasis. Uruguay suggest products be treated like any other forest carbon pool. Denmark focuses on the need for consistency with other LULUCF decisions. Canada urges consistency with other sectors of the inventory. Samoa specifically refers to consideration of emissions from product disposal, bioenergy and forest operations. Australia highlights the need for consistent and comparable inventories. NZ notes current inconsistency and advocates an approach that "encourages outcomes consistent with the UNFCCC and Kyoto Protocol", indicating a focus on outcomes rather than fitting within the current accounting structures.
2.1.6 Compatibility with Kyoto Protocol
Some submissions focus on the need for application of principles enshrined in the Kyoto Protocol such as accuracy, completeness, consistency, transparency and verifiability, impact on developing countries and projects. These will undoubtedly be considered in the development of future policies and approaches.
The rules for accounting vary between different Articles of the Kyoto Protocol (e.g. 3.3, 3.4, 3.7, 6 and 12). It would be valuable to examine each Article, but largely as a means to identify positive and negative aspects in order to develop suitable policies, approaches and methods for subsequent commitment periods. NZ stresses future negotiations and commitments may result in completely different accounting rules. It is therefore more important to understand the complex issues surrounding wood products and develop an appropriate system for including wood products in future periods, if there is a desire to do so.
NZ advocates an approach that leads to changes in behaviour to encourage outcomes consistent with the UNFCCC and Kyoto Protocol. This clearly includes environmental outcomes, but also policies and measures that minimize adverse effects e.g. on international trade in forest products.
2.1.7 Environmental integrity
The environmental outcomes of the Kyoto Protocol include reducing emissions through energy efficiency and renewable energy, and protecting and enhancing sinks and reservoirs through sustainable forest management and a-/re-forestation. The Marrakesh Accords include the conservation of biodiversity as one of the "relevant functions" of a forest.
Denmark submits that inclusion of HWP should not damage the environmental integrity of the Kyoto Protocol. Since the EU has largely favoured reductions in gross emissions rather than an emphasis on sinks, it might prefer to avoid an increase in the availability of "credits", which can offset increased emissions. This, however, is inconsistent with their choice of the Stock Change approach for wood products, which could increase the amount of "sequestration" in Annex I countries by 210 MtC/yr with a further 90 MtC/yr in non-Annex I countries (IPCC, 2000).
Denmark, Japan and Uruguay highlight the value of fossil fuel substitution both directly (bioenergy) and indirectly (wood products replacing more energy intensive materials, extending wood product life), and favour an accounting approach that encourages this. Encouragement could be interpreted, for example, either as not penalizing emissions from biofuels, or providing "credit" for emissions avoided. In the latter case there would be potential for double counting: providing both a stick to penalize emissions and a carrot to avoid them.
Denmark focus on the long-lived products, rather than all products that Uruguay submits have equal importance. Japan and Samoa are more concerned about the source of products to be included e.g. products from pre- or post 1990 forests, Article 3.3 or 3.4 activities, and/or Article 6 and 12 projects. Canada and the USA appear to favour including all products, with the latter also keen on including stocks of wood products in solid waste disposal sites (e.g. landfills). The environmental integrity of encouraging biomass disposal in landfills might be questioned, particularly by the EU since they have introduced legislation to phase out such behaviour.
NZ notes that decisions on which products to include and how to deal with activities such as recycling, will affect the complexity of the accounting system and the ease of its implementation. Japan would like the system to acknowledge efforts such as recycling to extend product life. The USA agrees, noting that "increasing product life can increase sequestration without increasing overall consumption of wood and paper products". This comment highlights several issues. Firstly, increasing product life does not increase sequestration, it delays emissions. It appears to increase sequestration if the Stock Change or Production approaches are used, by demonstrating an enlarged reservoir. Secondly, consumption rate is not the most important factor affecting stocks, but the balance between consumption and disposal. Increased consumption could reflect either higher product retention or more rapid flows through a constant stock.
Acknowledging activities to extend useful life appears straightforward. Recycling and perhaps even re-use could qualify, although there may be issues regarding how to track activities and quantify their impacts. Other activities such as the increased use of chemical additives to extend product life might be more questionable. It undoubtedly increases the potential life of wood in some applications, but not necessarily the actual life. Furthermore, toxic components may also cause problems for disposal or combustion, leading to questions over environmental integrity. If the drive to extend useful life revolved around growing durable species under appropriate regimes, the opportunity for manufacturing long-lived products is increased and the potential for use as "clean" bioenergy remains.
Denmark suggests the accounting system should provide incentives for sustainable forest management, including conservation of biological diversity. Japan and Mexico also urge promotion of sustainable forest management. NZ adopts a slightly different position, encouraging the use of wood from sustainably managed forests. The difference may be irrelevant considering there is currently little "promotion" of sustainable forest management within the Kyoto Protocol. A sustained yield forest assumes full responsibility for emissions at harvest and therefore receives no credit (no stock change). This means that a production forest is worse off than a protection forest. Harvesting emissions are treated the same way as deforestation emissions, yet the production forest has a sustained yield of wood products and energy that can enable fossil fuel substitution.
2.1.8 Trade
Several Parties refer to the importance of not affecting trade in wood products. Denmark suggests the system should not be "overly sensitive to annual variations e.g. in the balance of imported and exported wood products". NZ wishes to avoid a system that results in consumers favouring non-wood alternatives that are more energy intensive to produce. Others are keen to ensure trade in biofuels is not affected.
It is worth noting that international agreements are not the only way to affect trade. Domestic policies introduced to implement the Kyoto Protocol can also be influential due to the support given to different industries. For example, an international agreement may be designed to penalise fossil fuel emissions. If domestic policy provides exemptions from penalties to some users, the impact of the international agreement will be reduced.
Table 1 provides a summary of the positions of different Parties on what they feel should be accounted for, and their currently favoured approach. The key issues identified from this and the following sections are summarised and discussed in Section 3.4.9.
Table 1. Positions of Parties on what to account for and how
|
Account for |
Location/timing |
Favoured approach |
||||||
|
Country |
emissions/removals |
stocks |
where |
when |
IPCC |
SC |
Prod |
AF |
|
Argentina |
Yes |
Yes |
Yes |
|||||
|
Australia |
Yes |
|||||||
|
Canada |
Yes |
Yes |
Yes |
Yes |
||||
|
Denmark |
Yes |
Yes |
||||||
|
Japan |
Yes |
|||||||
|
Mexico |
Yes |
|||||||
|
NZ |
||||||||
|
Samoa |
Yes |
Yes |
Yes |
|||||
|
USA |
Yes |
Yes |
Yes |
|||||
|
Uruguay |
Yes |
Yes |
||||||
Note: Approaches include: IPCC default, Stock Change (SC), Production approach (Prod) and Atmospheric Flow approach (AF)
2.2 IPCC default approach
The Revised 1996 IPCC Guidelines for National Greenhouse Gas Inventories (Reference Manual, p5.17) provide the following advice on wood products:
"For the purposes of the basic calculations, the recommended default assumption is that all carbon removed in wood and other biomass from forests is oxidized in the year of removal. This is clearly not strictly accurate in the case of some forest products, but is considered a legitimate, conservative assumption for initial calculations…
The proposed method recommends that storage of carbon in forest products be included in a national inventory only in the case where a country can document that existing stocks of long-term forest products are in fact increasing… This information would, of course, require careful documentation, including accounting for imports and exports of forest products during the inventory period."
2.2.1 Appropriateness
This approach is generally assumed (e.g. Denmark, NZ) to apply to the first commitment period, so most Parties will report instant emissions of carbon in biomass removed from the forest. Japan insists this approach is retained for the first commitment period to avoid "eventual great uncertainties and impacts of the application of new approaches in question and the likes upon the achievement of the commitments".
The US would like Parties to begin to report on wood products in the first commitment period, in order to provide a basis for discussion of accounting systems in a future period. Australia suggest Parties could start to produce inventories now, applying the IPCC default and other approaches (e.g. Dakar approaches discussed below), so that there can be more immediate (and informed) discussion of accounting approaches.
Australia considers the IPCC Guidelines" text (above) "provides Parties with no clear guidance, nor does it provide a consistent logical policy basis, on options for inventorying emissions or removals from HWP, thus preventing the preparation of consistent, comparable, transparent and verifiable inventories". This observation may refer to the meaning of the text itself, or that it has been interpreted in very different ways to date.
In terms of the IPCC Guidelines text, there is little logic in Parties reporting emissions or removals from wood products only where stocks are increasing. Firstly, wood products do not remove GHGs from the atmosphere. The default assumption refers only to the timing of emissions. With this in mind, it might be appropriate to consider the default as a Tier 1 approach, which could be supplemented by higher Tiers increasing the accuracy of the timing of emissions. Secondly if there is to be an accurate and complete inventory, the instances where wood product stocks are decreasing should also be reported. Furthermore, stocks may increase in a variety of products, so the focus on long lived stocks may be inappropriate. If wood products are added as another pool, it would appear logical to consider the same advice from the Marrakesh Accords "A Party may choose not to account for a given pool in a commitment period, if transparent and verifiable information is provided that the pool is not a source."
The Australian submission therefore argues for the need for further development of methodological guidance, within a set policy framework. Australia suggests the choice of an accounting approach should be delayed until there is better understanding of options and implications, and hence the IPCC default approach should remain in force until the policy framework has been developed.
2.2.2 Timing and location
The IPCC default does not always identify "where and when" emissions occur since all emissions are allocated to the producer country (i.e. forest grower). Emissions frequently do not occur in the producer country since products are traded internationally (products and packaging in use). The carbon in all biomass components (removed or left on site) is frequently reported as an emission at the time of harvest, although some Parties apply decay factors to residues left in the forests. The decay period reflects more accurately when the emissions occur, and could have the effect of delaying emissions to future commitment periods.
Assuming emissions at harvest is simple and means the atmosphere is "in balance". Since all future emissions from the harvested biomass are accounted for at once, it would be double counting to account for further emissions (unless they are non-CO2). This enables bioenergy to enjoy its "emission free" status. Responsibility for the emissions is allocated to the producer country regardless of whether it is also the consumer, so trade is unaffected.
This is the worst outcome for a wood producing and exporting country in terms of carbon. There is no other reasonable approach that could cause a forest grower to account for emissions sooner, or to account for higher emissions. This might be considered as a Tier 1 approach. Those Parties responsible for "protecting and enhancing sinks and reservoirs" are also held responsible for the emissions before they occur. As noted by NZ, this is equivalent to emissions from oil being allocated to countries where such resources are extracted.
2.2.3 Which products
The IPCC Guidelines do not provide guidance on which products to include and there are concerns raised by Parties over the impact of such decisions on trade and environmental integrity, as well as the impact on developing countries. The choices may be addressed on the basis of the desirable outcomes. For completeness, accuracy and verifiability there might be a need to account for all atmospheric exchanges where and when they occur, tracking all disposal and decay. For simplicity, assumptions might be made on lifetimes for aggregated primary product categories or total harvest volume. To achieve equity might require correct attribution of emissions, but trade concerns or good environmental citizenship might encourage exporters to assume responsibility for eventual emissions from their products.
2.3 Alternative approaches
There are many alternative accounting approaches that could be applied to the products pool, depending on the objectives. Those most commonly discussed are often referred to as the Dakar approaches, as discussed at an IPCC Expert workshop in Dakar, Senegal (Brown et al., 1999). These are known as the Stock Change approach, the Production approach and the Atmospheric Flow approach. The submissions did not identify any consensus between countries on which approach to HWP accounting should be adopted. Therefore it may be useful to look at alternative to the current options of the IPCC default and the three Dakar approaches. It may also be useful to develop a matrix of principles within which to consider and assess the options for HWP accounting. Some principles to consider could be around issues of: stocks and flows; timing and location; attribution and allocation; data systems; consistency and compatibility; environmental integrity; sustainable forest management; trade and economic outcomes; etc (refer Appendix 1).
Issues have been raised over the level of complexity over the Dakar approaches to HWP accounting. NZ notes that there are better data on flows into the products pool than those out of the products pool. There are questions over the verifiability (and hence validity) of assumptions (e.g. wood consumption is directly related to product stocks) and estimates (e.g. lifetimes) required.
Australia and Canada both note there is some confusion and inconsistency in interpretation of these Dakar approaches. Australia and Samoa suggest that Parties’ support for these approaches might be (inappropriately) affected by their status as either an importer or exporter of wood. In other words wood product exporters are likely to support one approach whereas importers might favour a different one, depending on how each approach affects their carbon balance. Australia and Japan recommend accounting options should not be restricted to the Dakar approaches alone.
The Dakar approaches can be compared with the existing default approach. Currently all emissions are accounted for at harvest. The Stock Change and Production approaches will not affect these emissions, but could potentially add (or remove) assigned amount if there are stock changes in products. The Atmospheric Flow approach would reduce emissions from producers, and increase emissions for consumers, but the total assigned amount available would remain the same.
2.3.1 Stock Change approach
The Stock Change approach is focussed on accounting for the stocks of products within national boundaries i.e. including imports and excluding exports. It accounts for the stock changes where and when they occur, but not for the emissions and removals when and where they occur. It assumes that an increasing stock of products implies there is a sink, which is inconsistent with the UNFCCC definition.
The Stock Change approach is considered by Denmark to be the most suitable for further development, but the rationale for this conclusion is not clear. This could be because Denmark considers that there should be "credit" to the consumer for delaying the emission of carbon in products. It is possible that despite limited scope for expanding the forest stocks in Europe, there could be considerable capacity for increasing product stocks.
The Stock Change approach works for forests because the stand/forest integrates all the flows, as identified by Uruguay. It is easy to implement through conventional forest inventory techniques and the difference between stocks at two points in time is equivalent to "net" emission/removals, including assuming the harvested material removed from the forest is emitted instantly.
The Stock Change approach is not easy to implement for products since there are no simple verifiable methods of conducting an inventory of products, particularly if it is only a subset of the total products pool. The determination of stock changes through evaluating flows is restricted by the availability of data, particularly regarding flows out of the products pool. Wood products do not have a readily defined lifetime, since this can be affected by a range of factors including (relative) cost, economic situation of the country, fashion, and suitability for purpose.
It would be possible to retain the Stock Change approach in forests and adopt it for the entire products pool. This would in effect sever the link between the two stocks, since the carbon in harvested wood would still be assumed to be emitted to the atmosphere. The products would be a separate pool, assuming the inflows are a removal from the atmosphere, and accounting for increases/decreases where and when they occur. Given the methods proposed to date, particularly with exponential decay rates, there are likely to be few (if any) Parties that would report a decrease in stocks of products in use, and none that would report a decrease in stocks in waste disposal sites. It is unclear how any Party could verify the assumptions used or the results obtained from these methods.
It is also possible to adopt the Stock Change approach for the entire "terrestrial carbon pool" associated with the forest industry. Rather than treat harvested wood as an exchange with the atmosphere, this would require some form of transfer from producer to consumer countries, based on trade data. The transfer could be a credit, to represent the carbon reservoir in the wood, or a transfer of an emission liability to recognise that the carbon will be emitted at some future point in time. Either option could have major implications for national inventories and trade, as well as enduring issues surrounding methods for monitoring stocks or tracking emissions from product decay or disposal.
Perhaps most important is the treatment of wood relative to other materials that could be used. Denmark suggests there should be incentives to encourage replacing fossil fuels with sustainably-produced wood as well as storing carbon in wood products. This infers that the issue of incentives (or penalties) related to wood products should be consistent with the treatment of non-wood products, including the emissions during product manufacture. This point, highlighted by NZ, may be considered in the policy framework proposed by Australia.
Japan is concerned that this approach might not be compatible with Kyoto rules, if an Annex I Party gains credit by importing wood products from a non-Annex I country. Japan states that Annex I Parties can only receive credits from non-Annex I Parties through CDM. This may not be an immediate concern given previous discussions about future negotiations, but is a factor worth considering in future negotiations. The issue is important as increasing stocks (and therefore issuing credits) with wood harvested outside the Kyoto Protocol system (from non-Annex 1 countries) would severely undermine the integrity of the system since the increase in carbon from which the credit resulted was not also accounted for at the time of harvest.
2.3.2 Production approach
This is also a stock change approach, but differs in terms of allocation. The Producer is required to report changes in stocks of products derived from their forests, regardless of the products’ location.
Argentina submit that this approach is the only one that reflects their view that credits should only apply where carbon is removed from the atmosphere i.e. to the producing (forest growing) countries. They acknowledge the difficulties in tracking products, but are confident these can be resolved with a reasonable degree of certainty.
Denmark state an aim of the accounting system is "not to make a Party’s inventory subject to policies over which it has no control". Clearly if a Party has to determine and apply decay rates overseas, a change in the importer’s processes and behaviour will have an influence on the exporter’s inventory.
One option to address both of the above concerns is to assume the same decay/emission profiles for all products regardless of their destination, as is done in the USA. While this may not be strictly accurate, it could be considered to be more representative of when the exchanges with the atmosphere take place than the current default assumption. Conservative decay periods i.e. shorter lifetimes than might be expected, could be used to avoid any suggestion of creating a "false" sink.
2.3.3 Atmospheric Flow approach
In their previous (2001) submission Canada noted: "If an atmospheric flow approach were to be selected to account for the fate of harvested material, a question would arise as to whether the estimates obtained with the atmospheric flow approach can be reconciled with those obtained under Article 3.3 which states that net changes in emissions and removals from ARD since 1990 are to be measured as verifiable changes in stock in each commitment period." While this could be relevant for accounting in the first commitment period, the rules for subsequent periods may not remain the same. As with many of the examples provided by Japan on compatibility with Kyoto Protocol articles, this issue is certainly worth keeping in mind during negotiations for future periods.
This would seem to be the only approach under consideration that meets the stated objectives of many Parties to account for emissions when and where they occur, but this message does not come through from the submissions.
It would be possible to retain the Stock Change approach in forests and adopt a flow approach for products. Since the forest stock change represents complete balance with the atmosphere due to the assumption of harvest removals being emitted to the atmosphere, care would be required to ensure any credits for "removals" are appropriately balanced by emissions. In other words, the flow into the wood products pool would have to be considered as the "sink". This would balance the actual emissions from product decay/disposal over time. This would still require the development of data collection systems to capture emissions when and where they occur. There would also be concern that this might penalise bioenergy, since all emissions from biomass would be accounted.
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Policy Analyst - Forestry
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