A Critical Comparison and Virtual "Field Test" of Forest Management Carbon Offset Protocols

A paper by the Climate Change Policy Partnership comparing seven existing forest management offset protocols

Author(s): Christopher S. Galik, Daniel deB. Richter, Megan L. Mobley, Lydia P. Olander, Brian C. Murray

Published: October 2008

download: working paper (.pdf) >

Executive Summary:
The term offset describes a reduction in emissions or increase in sequestration of greenhouse gases (GHG) produced by one entity that is used to compensate for emissions produced by another entity. Offsets are a key component of numerous climate policy initiatives currently under discussion or consideration. Including offsets in a GHG cap-and-trade policy framework can lower the overall cost of compliance because offsets can often be achieved at lower costs than comparably sized reductions in emissions from regulated facilities.

Regardless of how offsets are achieved, accounting for the net GHG mitigation benefit produced by an activity is absolutely critical. Numerous approaches have been developed under voluntary, regional, and international markets to account for the mitigation achieved by various offset activities. This diversity in approach has made the early carbon market a valuable source of innovation and test bed for carbon accounting concepts and methodologies, but has created a great deal of uncertainty in practice. This is especially true for forest management offsets, where accounting methodology development and implementation remain relatively nascent.

To provide the confidence necessary for the political acceptance of offsets in new mandatory policies and the continued acceptance of offsets by the buyers, a standardization of carbon accounting methodology is needed. An analysis of the lessons offered by existing forest management protocols is a key first step in this standardization process. The analysis that follows addresses this critical research gap by conducting side-by-side trials of seven existing forest management offset protocols:

• U.S. Department of Energy (DOE) 1605(b) Technical Guidelines for Voluntary Reporting of Greenhouse Gases;
• Georgia Forestry Commission (GFC) Carbon Sequestration Registry Protocol;
• Chicago Climate Exchange (CCX) Sustainably Managed Forests/Long-Lived Wood Products Protocols;
• California Climate Action Registry (CCAR) Forest Project Protocol;
• Voluntary Carbon Standard (VCS) Improved Forest Management Protocol;
• a forest management protocol derived from recommended concepts and provisions in Duke University’s Harnessing Farms and Forests in the Low-Carbon Economy (HFF);and
• a draft recommendation for active forest management offset projects proposed by the

State of Maine for inclusion under the Regional Greenhouse Gas Initiative (RGGI).

Because several years of in-field measurement and monitoring would be needed to generate enough data to allow for the critical comparisons contained herein, we use carbon sequestration data from the Calhoun Experimental Forest in South Carolina. The Calhoun Experimental Forest is one of the world’s longest running forest-ecosystem studies including aboveground and belowground observations. Through it, we can draw upon five decades of in-field measurement and monitoring of whole-ecosystem carbon sequestration in our comparison of protocols. Our virtual “field test” and subsequent analysis reveals significant differences among the seven protocols examined here. In particular, we note that two general categories emerge: 1) protocols designed to provide guidance on carbon accounting and a system for registering on-site carbon sequestration, and 2) those developed for the express purpose of marketing stored carbon. We suggest that GFC and 1605(b) are more appropriately classified as the former (termed “registries”), while CCX, CCAR, VCS, HFF, and RGGI are best described as the latter (“full protocols”). Depending on the approach used and the pools included, total creditable carbon after 100 years of project implementation ranges from a low of 68.7 metric tons of CO2e ha-1 under VCS to a high of 586.0 metric tons of CO2e ha-1 under 1605(b). We also explore the carbon prices needed to match or exceed the NPV of timber-only management, but suggest that a comparison of the relative performances between protocols is potentially more informative than absolute findings of profitability due to assumptions made herein.

The significant variations in the amount of creditable carbon generated under each methodology stem from differences in the scope and stringency of carbon accounting techniques. In particular, the choice of baseline methodology and the choice of which pools to include strongly influence the amount of creditable carbon generated by the project. A cohort group performance standard is the most conservative baseline approach evaluated, but it is also the most reliant on outside data. At the other end of the spectrum, we find that a “base-year” baseline approach will allow non-additional carbon to be credited under situations similar to the one modeled here. With regard to carbon pools, the Wood Products pool comprises a substantial portion of gross carbon sequestration when included. Fully accounting for the wood products that would have been produced in a business-as-usual (BAU) scenario, however, causes the Wood Products pool to become a strong, net drain on total project creditable carbon.

We find that each protocol has its own set of strengths and weaknesses. Two (1605(b), GFC) fail to address issues such as leakage and catastrophic reversal risk, but provide extensive technical information and tools that may be leveraged to assist landowners in carbon accounting. The other five protocols evaluated here provide more robust carbon accounting schemes, with most directly considering issues of leakage, reversal, and uncertainty. Mandatory buffer set-asides to address reversal risk are included or contemplated under several protocols (CCX, VCS, RGGI), as are deductions for leakage (VCS, HFF, RGGI) and uncertainty (CCX, CCAR).

Collectively, these findings can be used to highlight potential “best practice” approaches for forest management offset accounting. These approaches are selected solely on a carbon accounting perspective as informed by this report, and incorporate aspects of CCX, CCAR, VCS, HFF, and RGGI protocols. Their inclusion here provides an example of how lessons learned in state, regional, and voluntary markets can be drawn upon in the creation of a singular standard.