3. A New Approach: The Simple Decay Approach

3.1 Overview

The Simple Decay approach has been developed in response to many of the issues raised above. The approach addresses the commonly raised issue that carbon in harvested biomass is not emitted instantly. At the same time, there is an acknowledged need for simplicity, so no complex product tracking is required and there are no issues of Parties being responsible for things over which they have no control. Emissions liabilities remain with the producer to avoid trade issues, but are accounted for more appropriately in terms of when the emissions occur.

Rather than assuming all carbon in harvested biomass is emitted instantly, the emissions are assumed to decay over time. All the carbon in the harvested logs is still emitted, creating no additional credits (offsets) and hence retaining atmospheric integrity, but the more accurate time profile means some emissions are delayed until future commitment periods. The delay also means that some of the inter-annual fluctuations in harvest (and hence assumed emissions) can be minimised. Scientific accuracy would suggest that the emissions liabilities are allocated to the consumer country if trade occurs, but in order to keep the approach relatively simple and due to concern over trade impacts, this approach suggests the emissions remain the responsibility of the producer.

The Dakar approaches all use assumptions about lifetimes for various product categories, and allocate responsibility for emissions. The Simple Decay approach focuses on the total harvest volume, with Tiers indicating increasing capability and data available to derive greater accuracy in terms of atmospheric impact. The suggested Tiers would be:

Tier 1: no verifiable national data – use current IPCC default i.e. decay at harvest.
Tier 2: limited national data – use conservative on and off-site decay rates.
Tier 3: national lifetimes determined by log types, product categories or other verifiable data.

3.2 Methods

The basic data requirements for the Simple Decay approach are:

Annual stock change (forest or stand level).
Annual harvest volume.
Lifetime of products.

Stock change can be derived from the difference between stocks at two points in time. The stock change in the forest (or stand) integrates all the flows to and from it. The simple equation for this is:

Forest stock change = net exchange with atmosphere - harvest

therefore

Net exchange with atmosphere = forest stock change + harvest

The annual harvest is currently assumed to be emitted instantly, whereas the residues left in the forest decay over time. This approach assumes a similar decay over time for the products as it does for the residues left in the forest.

In order to represent the atmospheric flows more accurately, the lifetime of products and the decay profile must be determined. Lifetimes can be estimated for product categories, as in the Dakar approaches, but the creation of categories might be challenging for some Parties, particularly when logs are exported (unknown processing/products). Furthermore, some concern has been expressed over the categories proposed to date. For example, paper is derived from a variety of different types of pulp and additives leading to different product characteristics and decay profiles.

An alternative might be to allocate lifetimes on the basis of log types, but again this could cause problems for some Parties. There is still no guarantee that a sawlog will end up in sawn timber, nor that a small log will not end up in a durable engineered product. However, a Party may be able to change species or regime/rotation length to maximise the production of quality sawlogs. This might increase carbon stocks in the forest as well as increasing the anticipated lifetime of the products.

As an example, a Party might estimate for its total domestic harvest:

20% ends up in products with an estimated life (linear decay) of 50 years;
30% in products lasting 20 years; and
50% in short life products lasting only 1 year before being emitted.

Combining these data produces a weighted average of 16.5 years. Each product category could be tracked/modelled individually, but this merely increases complexity. For simplicity and transparency the "average" lifetime can be rounded down (to be conservative) and applied to the entire harvest. The application of an average lifetime means that the emissions profile will change, but the total impact will be the same. This can be confirmed by looking at the total carbon stock over time i.e. calculating the total area under the graph of stocks against time. This produces what has been referred to as the tonne.year impact. Tracking stocks for each category identified above produces the same tonne.year impact as using the average. Using a rounded down average means the tonne.year impact is reduced i.e. it is a conservative estimate.

Closely related to the lifetime is the product decay profile. Three approaches are considered here to estimate products stocks remaining, using the data above to determine lifetime for each:

linear decay over the lifetime, so there is nothing left at the end of that period. For the data above, the lifetime would be 16 years.
exponential decay with a given half-life. In order to generate an equivalent "tonne-year" impact, the half life is 8 years i.e. equivalent to half of the lifetime used for linear decay.
instant decay of all emissions at the end of the product life. As with the exponential decay, the life used is 8 years i.e. half of that used for linear decay.

In each approach, emissions are reported when stocks from each year’s harvest decline. Figure 2 provides an example of the impact of each of these approaches on products stocks remaining, applying each of these to the harvest volume in 1980 (9.9 MtC). The suitability of these approaches may depend more on personal preference than other factors, although the ease of application to inventories may be a deciding factor.

Figure 2. Carbon stocks remaining in wood products using different decay profiles. The area under each line can be referred to as the tonne.year impact. In this example, the linear and exponential approaches both have an impact of 84 t.yrs, and the instant approach an impact of 79 t.yrs.

3.3 Simple Decay Application

The Simple Decay approach has been applied to fictitious sample data. All three decay profiles outlined above have been applied to the harvest volume, using the average lifetimes derived above for this evaluation. Emissions are reported when the stocks of carbon harvested each year decline. Total emissions in a given year are equal to the "inherited" emissions from previous years’ harvests minus additions from the current year harvest.

It is instructive to examine the implications of each approach in terms of stocks as well as emissions. Figure 3 shows the impact of each approach on the product stocks that would be generated. It is clear that all the approaches are approximately equal in magnitude, and that the magnitude of the impact is indeed substantial. If a stock change approach was adopted, these stocks could be liable for credit, since these represent the balance between inputs (harvested logs) and outputs (emissions to atmosphere).

Figure 3. Impact of approaches on product stocks.

The stocks increase during the initial years is a result of no "inherited emissions" from products prior to 1990. In this example, harvest levels stay relatively stable after 2005 (see Figures 4 and 5) and product stocks equilibrate after a period (related to product lifetime).

Each approach has similar impacts on the emissions profile (Figure 4), which can be compared with the profile generated by assuming emissions at harvest. The linear and exponential approaches have similar impacts: they both delay emissions and smooth some of the fluctuations in emissions caused by annual variations in harvest volume. The instant decay approach produces a replica of the harvest emissions profile, delayed by 8 years.

Figure 4. Emissions from harvested wood. All approaches have a similar impact on emissions (top left), and each can be compared with emissions at harvest.

If the total plantation estate is used in this way, the impact on the emissions reported in particular periods varies. Table 2 summarises the impact of each approach over three periods, compared with the current IPCC default. It is clear that emissions would generally be lower, although there are instances where this may not be the case. If the emissions are lower than currently reported, there will appear to be a bigger sink in forests.

Table 2. Impact of decay patterns on emissions reported (MtC) relative to emissions at harvest

	2008-12	2013-17	2018-22
Harvest	100	95	95
Linear	71	85	94
Exponential	75	85	89
Instant at end	67	96	98

The results in Table 2 can be compared with the Dakar approaches. The emission at harvest is the IPCC Default approach, allocating all emissions to the producer country. The Atmospheric Flow approach would report emissions similar to those of the linear or exponential decay methods, allocating "responsibility" to the consumer. The Stock Change and Production approaches would report a removal of around 30MtC in the first period, allocating the credit to the consumer or producer respectively. All the Dakar approaches would require considerably more data and analysis than the Simple Decay approach. It is not easy to see how to verify which approach is more accurate, but perhaps easier to assess which is more atmospherically benign.

The results can be compared with the current IPCC Default approach. Figures 5 and 6 demonstrate the emissions and removals reported under the Simple Decay approach in comparison to the current IPCC Default approach for determining change in forest stocks under which all harvested carbon is released at the time of harvest. Under the Simple Decay approach the harvested carbon is not released in the harvest year but emitted more evenly over time and hence the impact of changing harvest levels is not as sudden. As the forest stocks and harvest levels equilibrate, the emissions reported by different approaches also stabilise and the differences in magnitude reduce.

Figure 5. Emissions and removals in the forest under the IPCC Default and Simple Decay approaches. The UNFCCC sink is defined as the net atmospheric exchange between the atmosphere and the forests. Harvest represents the total harvested carbon. The Simple Decay approach (linear decay) apportions the emissions from harvested carbon over time (16 years in this example).

Figure 6. Emissions and removals reported in the forest under the IPCC Default and Simple Decay approaches. The stock change in the forest reported under the IPCC Default approach equals the UNFCCC sink minus emissions at harvest of all harvested carbon. The Simple Decay approach would report the sink minus delayed emissions, and result in higher annual atmospheric removals being reported initially.

3.4 Discussion

3.4.1 Stocks and flows

Both the Simple Decay and Atmospheric Flow approaches will improve the accuracy of the inventory of emissions and removals when they occur, relative to the current IPCC Default. Neither the Stock Change nor the Production approaches reflect emissions and removals accurately, since they focus on stocks. The impression that the stock change of a forest or products pool represents atmospheric exchanges is false. The stock change of a forest assumes the removal of logs is an exchange with the atmosphere. Similarly the stock change of products assumes the flow of wood into it is an atmospheric exchange.

The difference between stocks and flows can be examined in terms of a simple example. Table 3 shows the harvested carbon in each year, an increasing product stock, and emissions from the products. The harvested carbon is added to the "product stocks" each year, and each year a portion of the product stock is "emitted" due to product disposal or decay (using an arbitrary 10% for this example). The harvested carbon is assumed to be emitted in the year of harvest under the default IPCC approach. The Simple Decay and Atmospheric Flow approaches also account for the emissions from the products, but over a longer period of time. The Stock Change and Production approaches account for the accumulation of carbon in the product stocks, and hence focus on the stock changes.

Table 3. Example of analysis showing carbon stocks and emissions from wood products

Harvested		Stocks (end of year)						Emissions (during the year)
Year	tC	1990	91	92	93	94		1990	91	92	93	94
1990	50	50	45	40	35	30			5	5	5	5
1991	50		50	45	40	35				5	5	5
1992	100			100	90	80					10	10
1993	100				100	90						10
etc	100					100
Total stock		50	95	185	265	335	Emit/year	0	5	10	20	30
Stock change		50	45	90	80	70

3.4.2 Timing and location

Although the Simple Decay and Atmospheric Flow approaches will better reflect when emissions and removals occur, only the Atmospheric Flow approach attempts to identify where they occur. The IPCC default assumption refers only to the timing of emissions rather than the location, since the atmosphere does not recognise national boundaries. The Stock Change and Production approaches are not interested in when or where emissions and removals occur, but when and/or where changes in product stocks occur.

3.4.3 Attribution and allocation

The Simple Decay approach as outlined here retains responsibility for emissions with the producer and hence does not always reflect correct attribution. The Atmospheric Flow is the only approach that attributes emissions correctly. The Stock Change and Production approaches neither attribute nor allocate emissions. They attribute and allocate stock changes.

Changing the allocation of responsibility for emissions to the consumer would require some form of transfer from producer to consumer countries, most likely 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. Perspectives may be affected by the Party’s position as an exporter or importer of wood products since both options could have major implications for national GHG inventories and trade.

One could argue that the producer has been paid to capture carbon, and hence the benefit to the consumer should be in terms of reduced cost of the product, or a transfer of the "credited" carbon. However, the grower does not in fact gain any net credit under the IPCC Default approach since the harvest is considered a loss of carbon, so the grower does not retain any credit. Under the IPCC Default approach, all harvested carbon is counted as an emission in the grower country, so if anything is to be transferred it has to be an emission liability. This can be considered as a "trade rebate" i.e. the producer’s inventory of emissions is reduced by a transfer of assigned amount from the importer.

If liability for emissions is associated with trade in wood products, it raises issues relating to the source of products, relativity with non-wood products, and impacts on bioenergy. For example, consumers may favour wood from non-Annex I countries if emissions from these are excluded from accounting, or they may favour non-wood products that do not have associated emissions liabilities. The arguments surrounding "emission-free" bioenergy are about equity, since producer countries already report and account for all emissions from harvested biomass.

3.4.4 D ata and systems

The data requirements for the Simple Decay approach are less intensive than for the Dakar approaches, and are little more intensive than the current IPCC default. Only one average lifetime may have to be estimated. This lifetime could be estimated and/or validated in several ways such as based on expert judgement, "natural" decay rates (left in forest or in use), log types harvested, primary product categories produced or a combination of these.

The "virtual carbon" emissions would be simple to incorporate in national inventories, probably favouring those decay patterns with the more immediate impact. Instant decay emissions will be incorporated in inventories soonest, while the emissions from exponential decay may be delayed considerably longer and hence incorporated in more distant inventories (with potentially different calculation or allocation rules).

The products "pool" is not conveniently rooted to the ground in one place in one country, nor does it photosynthesise. The emissions from it are the hardest to locate. All the approaches include little more than best estimates of lifetimes, and broad categories of products with associated characteristics and other assumptions. The estimates are based on sound science, but the verifiability of results could be questioned.

3.4.5 Consistency and compatibility

The commitments of the UNFCCC include promoting the protection and enhancement of sinks and reservoirs, and this is highlighted as a potential component of policies and measures to be encouraged under the Kyoto Protocol. However, the Marrakesh Accords state "the mere presence of carbon stocks be excluded from accounting" which suggests reservoirs are excluded. A sustained yield forest is a reservoir.

To the extent that the Simple Decay approach acknowledges the extended impact of forests in wood products, the emissions are delayed and hence forest sinks will become more attractive propositions. The same approach could also be applied to other materials, which may or may not contribute to the desired outcomes. Cotton, leather and wool could all be considered as durable organic materials, and plastics may also be subject to a "future emission" penalty at the factory gate. The difference between the two would be that a credit for growing the fibres would also be included. Other materials such as concrete or steel might be penalised since they are more energy intensive to produce than wood products, but if such industries are given exemptions from emission charges, the advantages intended to be bestowed upon wood products will be minimised or lost.

Compatibility with the Kyoto Protocol appears unnecessary, and perhaps even undesirable. It may be impossible for the treatment of wood products to be compatible with all related articles and sectors. However, Table 4 demonstrates the outcome if only the products from "Kyoto Forests" planted since 1990 are included. In this example, there is no harvesting in these forests until 2012. In the second and third periods there is a marked difference in emissions reported using different approaches.

Table 4. Emissions reported under the Simple Decay methods.

	2008-12	2013-17	2018-22
Harvest	1	19	79
Linear	0	2	14
Exponential	0	3	22
Instant at end	0	0	5

These results are also shown in Figure 7 in comparison with current IPCC Default approach for the plantations established since 1990. Since the Simple Decay approach is simply a more accurate depiction of emissions timing, it is also a more accurate representation of the "emissions by sources and removals by sinks resulting from… afforestation, reforestation and deforestation since 1990" required in the Kyoto Protocol. It is estimated by a transparent change in stocks approach, but the changes may not be verifiable.

Figure 7. Emissions and removals in post 1990 forests. In some years the total carbon harvested may exceed the sink in the forest and hence the forest stock change reported under the IPCC Default approach could give the impression that the entire forest is a source. Under the Simple Decay approach the emissions would be spread over a longer time period and hence the forest stock change reported (sink minus delayed emissions) would not fluctuate as markedly.

3.4.6 Environmental integrity

The first consideration with respect to the environment is whether or not the approach achieves atmospheric objectives. The Simple Decay approach does not alter the quantity of emissions reported. It generates a more realistic emissions profile, and hence there may be periods in which sinks appear to be enhanced, but this phenomenon will not continue unless new planting (afforestation) is maintained. The Atmospheric Flow approach produces similar results, accounting for all emissions. The Stock Change and Production approaches both generate additional "credits" to be used as offsets, meaning emissions can increase.

A second consideration is bioenergy. The Simple Decay approach makes no changes to the current allocation of emissions, and hence emissions from bioenergy remain unaffected. If emissions from bioenergy are not "penalised" but emissions from fossil fuels are, this should improve the relative viability of bioenergy and hence create an incentive. The Atmospheric Flow approach would allocate emissions from bioenergy to the consumer and hence may discourage bioenergy, but the extent also depends on the treatment of fossil fuel emissions. The Stock Change and Production approaches do not penalise emissions and hence do not discourage bioenergy.

Product substitution will also depend on the relative treatment of wood versus other materials. The stock-based approaches favour longer life products to create additional credit to the consumer. The Simple Decay approach provides a longer delay in reporting emissions than the current approach, and hence encourages a focus on longer rotations and appropriate species to produce sawlogs rather than pulp logs, and to produce more longer-life products. The Atmospheric Flow approach also encourages longer retention of products before emissions are accounted. The difference between the two is that the former creates incentive for the producer country, and the latter for the consumer.

The type of forest is highly influential on the products that can be manufactured, and hence their potential life. However there may be options for the consumer country to extend product life. Encouraging recycling may be valuable, since it transforms a "waste" back into a useful product and thus delays emissions. However, this raises a number of questions such as:

Is extending product life as good as or better than avoiding or reducing emissions by using waste biomass for energy?
If recycling is encouraged, are wood preservatives also encouraged, even if these additives are toxic in situ or if combusted?
Does recycling cover processing and packaging waste as well as post-consumer waste?
Does re-use, e.g. via second hand or antique shops need to be accommodated in a consistent way?

Differentiating between sources of the products (e.g. Annex I or not, pre- or post-1990) can create an accounting nightmare under the Dakar approaches. The Simple Decay approach can be applied at any level to the harvested wood, and the lifetime could incorporate time in landfills. It could also be applicable at the project level.

3.4.7 Sustainable forest management

Sustainable forest management is not encouraged under the current default approach, despite generating a stream of biomass for products or energy. The Simple Decay approach acknowledges the delay in emissions created by products, with more benefit from the production of sawlogs since they are assumed to have the greatest potential to be used for long lived products. The Stock Change and Production approaches are more affected by the lifetime of products, just as in forests they favour longer rotation lengths (for a given species). Each stock is a balance of inflows and outflows, but the flow into the product stock is considered as a flow from the atmosphere, thereby creating an artificial disconnect with the forest. There may therefore be only a tenuous link between the stock approaches and sustainable forest management. The Atmospheric Flow approach is perhaps the easiest to examine in this respect. Since there are no emissions at harvest, sustained yield forests become "permanent sinks", with the product consumer taking responsibility for all emissions.

An issue related to sustainable forest management is how to deal with products from deforestation. The Simple Decay approach could be adapted to apply only to sustained harvest, i.e. reduce the total harvest by the amount sourced from deforestation. This would add to the complexity of the approach and increase data requirements. If more accurate data is unavailable, an estimate of the harvest removals per hectare could be derived from total area harvested and total harvest volume. The reduction in harvest volume used would be equal to the area deforested multiplied by the average harvest volume per hectare.

3.4.8 Trade

The biggest factor in assessing impacts on trade will be the relative treatment of other products, but this is beyond the scope of this report. However, impacts can be assessed relative to the current IPCC default approach regarding wood products.

The Simple Decay approach does not affect the allocation of responsibility for emissions, therefore there are no new trade implications for products or biofuels. There are no issues relating to reporting emissions over which a Party has no control, and it can reduce the fluctuations in emissions caused by inter-annual variations in harvesting.

The Atmospheric Flow approach may discourage Parties from importing products which are in effect an emission liability. The Stock Change approach might encourage Parties to import wood in order to gain benefits from increased domestic product stocks, but it could also encourage producers to increase their domestic consumption and hence reduce exports. The Production approach makes Parties liable for emissions in export destinations over which they have no control.

3.4.9 Summary

Table 5 summarises the information provided above in terms of whether the approaches satisfy various objectives. No attempt is made to prioritise or assign value to each criterion in the table, since perspectives on these may vary. The Production approach is omitted from the table since it is similar to the Stock Change approach, differing only in terms of allocation of responsibility for changes in product stocks. The comments in the table are based on the assumption that the methods/estimates used in each approach are valid.

As can be seen in Table 5, there are positive and negative aspects for each approach. The choice of an approach depends on national objectives and perspectives as well as the existing system of complementary policies and measures. These must be taken into account when developing an appropriate approach.

Table 5. Summary evaluation of approaches

Criterion	Forest stock change (IPCC default)	Atmospheric Flow	SC forest + SC HWP	SC forest + Simple Decay
Where emissions occur	No	Yes	No	No
When emissions occur	No	Yes	No	Yes
Equitable (other than inherent A1 vs nonA1, or pre- or post-1990)	Growers liable for consumers’ emissions.	Emissions/removals accounted where and when they occur.	Growers still liable for emissions. Consumers get credit.	Growers still liable for consumers’ emissions, but delayed
Readily obtainable, verifiable data	Yes Forest inventories well established	No Intensive data and estimates required. Unverifiable results.	No Intensive data and estimates required. Unverifiable results.	No Less intensive data and estimates required than for Dakar approaches. Unverifiable results.
Promote a reduction in carbon dioxide emissions to the atmosphere	Yes Emissions at harvest means least offset potential and hence more gross emissions reductions. Valid approaches to decrease CO2 are not incentivised to the optimal extent.	Maybe Same emissions, different time and place. Impact on trade and use of biofuels is key.	No Additional credits available for products meaning more emissions can be offset	Yes Same total credits available for offsets - only different timing (delayed emissions)
Provide an incentive for using long-lived wood products	Maybe May encourage higher forest stocks (sawlogs?), but these may not be harvested to avoid stock loss (hence no products)	Yes Longer retention delays emissions	Maybe Longer retention provides more credits only if consumption and retirement rates remain stable.	Yes Longer retention delays emissions
Encourage sustainable forest management	No No credit for sustained yield forest. Emissions from both harvesting and deforestation count.	Yes Sustained yield forests become "permanent sinks".	No No credit for sustained yield forest. Disconnect between stocks in forest and products.	Maybe Particularly if deforestation products can be omitted.
Disincentive to the trade in forest products	No	Yes Importer responsibility for emissions from forest products	No	No
Disincentive to the use of bioenergy.	No	Yes Consumer responsibility for emissions from bioenergy	No	No

Contact for Enquiries

Policy Analyst - Forestry
Innovation and Research
MAF Policy
Ministry of Agriculture and Forestry
PO Box 2526
Wellington
NEW ZEALAND

Tel: +64 4 894 0100
Fax: +64 4 894 0741
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