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Document 52012SC0040
COMMISSION STAFF WORKING DOCUMENT EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENTThe role of land use, land use change and forestry (LULUCF) in the EU's climate change commitments
COMMISSION STAFF WORKING DOCUMENT EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENTThe role of land use, land use change and forestry (LULUCF) in the EU's climate change commitments
COMMISSION STAFF WORKING DOCUMENT EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENTThe role of land use, land use change and forestry (LULUCF) in the EU's climate change commitments
/* SWD/2012/0040 - COD/2012/0042 */
COMMISSION STAFF WORKING DOCUMENT EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENTThe role of land use, land use change and forestry (LULUCF) in the EU's climate change commitments /* SWD/2012/0040 - COD/2012/0042 */
1.
Executive summary
1.1.
Scope and background
The EU and other world leaders agreed[1] that global warming must not
exceed the temperatures experienced before the industrial revolution by more
than 2˚ C. This long-term goal requires global greenhouse gas (GHG) emissions
to be reduced by at least 50 % below 1990 levels by 2050. In the short term, the EU has committed to
reduce its GHG emissions by 20 % below 1990 levels by 2020, and by 30 %
if conditions are right[2].
The European Parliament and the Council have agreed that all sectors should
contribute to reaching the target[3].
The land use, land use change and forestry (LULUCF) sector does not yet form
part of the target. This impact assessment (IA)'s aim is to assess how the
sector could contribute. GHG emissions in the EU come mainly from
energy production and other man-made sources. Some emissions are countered by
carbon being absorbed (removed) from the atmosphere through photosynthesis and
stored in vegetation, soils and harvested wood products. Various land uses and
management practices in forestry and agriculture and the use of long-life
harvested wood products can limit emissions and enhance removals from the
atmosphere. These practices are covered by LULUCF[4].
1.2.
Problem definition
There are good reasons to account for
emissions and removals in LULUCF, namely: ·
to ensure EU's policy coherence, as accounting would be consistent with the Europe 2020 strategy
and would ensure that all sectors contribute to combating climate change. This
is important for the EU’s role in promoting a level playing field for business
and a fair effort distribution; ·
to improve the environmental integrity of the
EU’s climate change commitments by ensuring that
emissions and removals in all sectors are recorded. Currently, emissions from
biomass used for energy are not included in the accounting rules for the energy
sector or other sectors that produce biomass energy; ·
to enhance the economic efficiency of EU’s
climate policy in the pursuit of more ambitious
targets by allowing all sectors to contribute. Including the LULUCF requires addressing
its specific profile and the different MSs' circumstances. Accounting rules are
needed to distinguish anthropogenic from non-anthropogenic emissions and
removals. The reversibility of emissions and removals can be caused by natural
disturbances such as fires, storms, droughts, pests etc. but also as a result
of management decisions, e.g. to harvest or plant trees. Accounting must
therefore be able to reflect reversals. In addition, monitoring and reporting
of emissions and removals is complex and requires a robust system. Lastly, the emissions
and removals in forests fluctuate sharply between years and can amount to very
significant shares of the total annual emissions in MSs.
1.3.
How would the problem evolve, all things being equal?
The sink (i.e. when removals are greater
than emissions) in the LULUCF is projected to decrease in the EU by 2020 under
a business-as-usual scenario[5].
This sector, as a whole, it is expected to fall by about 10 % in 2020
compared to the period 2005-2009. The decrease is expected to be very
pronounced in forest management. This is partly compensated by planting ‘new’
forests (afforestation). Emissions and removals from agricultural activities
such as cropland management and grazing land management are expected to remain
fairly stable or to improve. Negative trends and emissions risk being ignored
unless LULUCF is part of EU's climate policy. The projected capacity of the sink would
increasingly affect policy coherence and economic efficiency. Not accounting
for the decline in net removals stemming from non-action would risk an
excessive use of resources for mitigation measures that count towards other
objectives, thereby creating an unlevel playing field between different
mitigation options. Moreover, economic efficiency losses may increase over time
given that significant additional action will be required in all sectors to
meet the long-term climate objectives.
1.4.
Objectives
The overall objective is to ensure that
LULUCF contributes to the EU’s climate change commitments. The following
operational objectives address the problem definition: ·
monitoring and reporting by MSs should comply
with Good Practice Guidance (GPG) as issued by the Intergovernmental Panel on
Climate Change (IPCC) to ensure transparency, completeness, consistency, comparability
and accuracy of estimates; ·
accounting rules should: · be extensive so as to include all emissions and removals, and all
main LULUCF activities (afforestation, reforestation, deforestation, forest management,
cropland management and grazing land management); · reflect the non-permanence of emissions and removals; · provide incentives for climate change mitigation; · the policy context for integrating LULUCF should be such that MSs' ability
to comply with GHG reduction targets is not put at risk due to inter-annual
variability of emissions and removals or significant natural disturbances.
1.5.
Options
Action to account for LULUCF should be
taken at two levels. Firstly, it is necessary to define options
for the policy context in which the sector should be accounted as there
is already EU legislation on the commitment to reduce GHG emissions by 20 %
in 2020. A non-regulatory/‘no EU action’ option (Option 1) is not realistic as
the EU is a Party to the Kyoto Protocol (KP) and any commitment there would
have to be shared between MSs and would necessitate taking a common approach. Therefore,
‘do nothing’ would translate only into delaying all action until an
international agreement has been reached. Option 2 involves creating a legal
framework for LULUCF that is separate from the frameworks laid down in the EU's
Effort Sharing Decision (ESD) and Emission Trading System (ETS). This option
was subdivided into one without targets (Option 2.I) and one with targets (Option
2.II). Option 3 involves including LULUCF in the ESD legal. The option of using
the ETS was discarded at an early stage. Secondly, options were developed to assess
how to achieve robust accounting, monitoring and reporting. For accounting,
the following options were considered: (a)
the same accounting rules as under the KP's first
commitment period (CP), including voluntary accounting for agricultural
activities, but with mandatory accounting for all forestry activities. (b)
accounting rules corresponding to the expected
outcome of the UNFCCC negotiations of a second CP under the KP, including
mandatory accounting for all forestry activities and voluntary accounting for
agricultural activities. (c)
accounting rules corresponding to the expected
outcome of UNFCCC negotiations, but with further improvements achieved by
bringing in mandatory accounting for both forestry and agricultural activities. A three-step approach to achieve robust monitoring
and reporting was also outlined. The first step would involve achieving
complete reporting of emissions and removals from the various activities using
at least simple methodologies. The second step would mean increasing reported
data's accuracy by using more sophisticated methods. Lastly, the MSs' data comparability
would be honed to harmonise monitoring, reporting and related nomenclature. The
sub-options on accounting, and monitoring and reporting are the same for the
overall Options 2 and 3, but their impacts differ depending on the policy
context.
1.6.
Impact
The analysis shows that two of the broad
policy options would meet the objective of having all sectors contributing
to the EU’s overall GHG reduction commitment; namely they would include
LULUCF in the EU’s GHG reduction commitment under a separate framework (Option
2) or under the ESD (Option 3). The environmental, economic and
social impacts of the options differ widely depending on the accounting rules
applied, as shown in Table 1. Table 1. Summary of main impact for the EU Type of impact || Option 1 || Option 2.I || Option 2.II || Option 3 || No EU action || Include LULUCF under a separate framework (No target) || Include LULUCF under a separate framework (Target) || Include LULUCF in the Effort Sharing Decision Accounting option || n/a || (a) || (b) || (c) || (a) || (b) || (c) || (a) || (b) || (c) Environmental || || || || || || || || || || Net effect on economy-wide mitigation in addition to the reference scenario (MtCO2 per year) || Zero (delayed) || 0 || 0 || 0 || -7 || -5 || -5 || 80 || 13 || 39 Potential contribution to the EU’s emission reduction target, including reference scenario (MtCO2 per year) || Zero (delayed) || -79 || -10 to -86 || -36 to -106 || -86 || -15 to -91 || -41 to-111 || 0 || 0 || 0 Potential contribution to the EU’s emission reduction target (in % of total GHG emissions in 1990) || Zero (delayed) || -1.4 || -0.2 to -1.5 || -0.6 to -1.9 || -1.6 || -0.3 to -1.6 || -0.7 t-2/0 || 0 || 0 || 0 Economic || || || || || || || || || || Cost of mitigation || Zero (delayed) || 0 || 0 || 0 || 40 || 27 || 27 || -166 || -55 || -156 Cost of improved monitoring and reporting (€ million) || Zero (delayed) || 0.35 || 0.65 || 1.35 || 0.35 || 0.65 || 1.35 || 0.35 || 0.65 || 1.35 Social || || || || || || || || || || Effects on employment || Zero (delayed) || 0 || 0 || 0 || Small (neutral or positive) || Small (neutral or positive) Note: Option 2.II
is based on a target of -5.4 MtCO2 accounted credits. This equals a carbon
price of € 5 per tCO2 for accounting options (b) and (c), as
assumed for Option 3, but a carbon price of € 12 per tCO2 for
accounting option (a) due to the discounting of forest management. Negative
values denote net removals (and positive values for net emissions). Source:
calculations are based on Böttcher et al. (2011) and update of JRC (2011b),
reflecting the UNFCCC review. For option 2.I (b) two estimates for the
contribution to EU's emission reduction target are given: one is based on model
projections and the other relies on model plus national projections. In terms of environmental impact, action
to increase removals and reduce emissions in forestry and agriculture should
ideally be considered over a long time horizon because it can take decades
before measures such as afforestation have a significant effect. However, the
EU’s existing climate change commitments stretch only to 2020 and are an
important milestone. The extent to which the contribution could go beyond what
is expected from current efforts (i.e. the reference scenario) depends on the
policy context in which LULUCF is accounted for. Additional action is expected
to be limited in Options 2.I and 3 and greater in Option 2.II. However, the
estimate does not fully capture the mitigation potential in agriculture, and
neither does it include the benefits obtained from material substitution. As
regards the economic impact, accounting option (a) would generate higher
costs in Option 2.II if there are targets because only a fraction of mitigation
efforts actually count. On the contrary, it also generates high credits in the
reference scenario and this leads to cost savings under Option 3 where no
additional mitigation is required from LULUCF, but credits can be used to
replace emission reductions under ESD. The costs for all accounting options are
zero in Option 2.I where no targets are set and in Option 1 where no accounting
is carried out. The social impacts are limited and employment effects
are estimated to be low and either neutral or positive. There are, however,
some distributional effects amongst MSs in Options 2.II and 3.
1.7.
Comparison of options
1.7.1.
Choosing the right policy context
The objective to limit the impact of
high inter-annual variability of emissions and removals and their inherent reversibility
on compliance poses a major challenge in including LULUCF in the current EU's reduction
targets legal frameworks. The ESD (Option 3) is based on annual
compliance and requires MSs to decrease (or limit increases in) emissions following
a linear trajectory. However, annual compliance with a linear trajectory would
be difficult to apply due to variations in net emissions between MSs, and the
frequent and significant recalculations of reported data. In many cases it
would greatly exceed the ESD’s scope for flexibility. In addition, the long
lead-time of many measures in LULUCF means that annual accounting is not as
meaningful as in other sectors, and a linear trajectory with required emission
reductions each year will generally not be relevant. Option 2 would
address these issues by averaging emissions and removals over the CP and
therefore meet the objective on inter-annual variability. A risk related to Option
3 is that including LULUCF would reduce the agreed efforts for the sectors
that are already part of existing commitments and so effectively reduce the EU’s
commitment. Option 2 would avoid this risk.
1.7.2.
Ensuring robust accounting
Table 2 provides a summary assessment of how
the various accounting options meet the objectives. As regards providing a
level playing field between different mitigation options, the most
important activity is forest management. Table 1 shows that accounting
option (a) generates substantial credits, which are largely ‘windfall’
(free) as they include removals that would have occurred without any change in
management decisions. Any mitigation efforts will be discounted by 85 %. This
will make mitigation more expensive and so limit incentives to take additional action.
It would also allow for substantial decreases in net removals and increases in
net emissions without any real economic impacts. Lastly, it would not ensure
that non-permanence is reflected in accounting because it would not cover
emissions and removals related to agricultural activities, and only a fraction
of those related to forest management. Table 2.
Performance of the various accounting options Objectives || Extent to which the objectives are met by the various accounting options Accounting option (a) Small changes || Accounting option (b) Likely outcome in the UNFCCC negotiations || Accounting option (c) UNFCCC+ Provide a level playing field between different mitigation options || X || ● || ●● Ensure extensive coverage of emissions and removals || ● || ● || ●● Ensure that non-permanence is reflected in accounting || X || ● || ●● Prevent large natural disturbances from negatively affecting the compliance risk of MSs || ● || ●● || ●● Notation key: x
Objective not or insufficiently addressed by option, ● Objective
partially addressed by option, ●● Objective sufficiently addressed
by option Accounting options (b) and (c) allow for a change in the sink due to natural saturation and
existing policies without generating debits or credits. They do so to factor
out changes in emissions and removals that are not human-induced. However, they
require full accounting for any deviations from the ‘reference level’. This
means that in the reference scenario, all abatement options and uses, whether
sequestration or additional use of biomass for energy production (e.g. for
reaching the RES-D targets) or material substitution, will face the same
opportunity cost. This will ensure a level playing field between the various
mitigation options. In terms of ensuring extensive coverage
of emissions and removals and that non-permanence is reflected in
accounting, only accounting option (c) requires MSs to mandatory account
for emissions and removals in both agriculture and forestry. Accounting options
(a) and (b) make accounting for agriculture voluntary, which may put the
credibility of the EU’s commitment at risk. Extending the scope of accounting
would increase consistency between MSs. It is important that all sectors in all
MSs contribute to reaching the ‘Europe 2020’ strategy targets, to secure a
level playing field for business and MSs and a fair effort distribution,, and
to ensure a consistent treatment of agriculture, forestry and industry within
the EU’s internal market. In the longer term, a more inclusive accounting system
would also be conducive to increasing the cost efficiency in reaching
any given overall target. As regards reducing the impact of
natural disturbances on compliance risk, accounting options (b) and (c)
would include accounting rules for large natural disturbances and so limit the
risk of non-compliance with GHG reduction targets if emissions occur as a
result of such disturbances which are beyond the control of MSs. The impact on
the EU’s overall accounting would be negligible, but it would provide the
necessary safeguards for those MSs most affected.
1.7.3.
Improving monitoring and reporting
This IA outlines a three-step approach
to meet the objective of ensuring that monitoring and reporting comply with
IPCC's GPG. A first step would involve achieving complete reporting using
at least simple methodologies. A second step would mean increasing the accuracy
of the reported data by using more sophisticated methods. Progress is expected
during the first CP of the KP, but efforts will have to continue during the
period 2013-20. Lastly, the comparability of data between MSs can be improved
by harmonising monitoring, reporting and related nomenclature. The above steps would form part of the
Commission’s proposal for a revised Monitoring Mechanism Decision.
1.8.
Concluding comments
An international agreement on revised
accounting rules for LULUCF for the second CP under the KP was only achieved
during the 17th Conference of the Parties (COP17) in Durban in December 2011[6] There are good
reasons now to include LULUCF in the EU’s GHG emission reduction commitments,
namely to improve the policy coherence, environmental integrity and economic
efficiency. But it requires addressing the special features of LULUCF and the
varying circumstances in the MSs. It is therefore important to ensure that
robust accounting rules and monitoring and reporting are in place. Accounting
option (c) involves mandatory accounting of
emissions and removals from both forestry and agricultural activities and gives
equal weight to mitigation action, whether taken in the forestry, agriculture,
industry or energy sectors. This is conducive to cost efficiency and will
ensure a level playing field for both MSs and the various sectors of the EU’s
internal market. It will also provide a framework to give incentives for mitigation
action by farmers, foresters and industry, ensuring they are visible and
correctly reflected. A wide coverage of emissions and removals will also ensure
that potential reversals are reflected in the accounting system. Monitoring
and reporting needs to be improved to underpin the
accounting framework and the indicators tracking progress in agriculture and
forestry. The Commission proposes to achieve this through separate framework,
i.e. by revising the Monitoring Mechanism Decision. For reasons of
comparability and cost-efficiency, better use should be made of EU-wide
monitoring instruments such as LUCAS and CORINE. To provide strong
incentives, the results of action taken by sectors must count towards the EU’s
GHG emission reduction commitments. This will only be possible if the right policy
context for LULUCF is put in place. The high variability of emissions and
removals in forests means that annual emissions reduction targets that apply to
other sectors are unsuitable. The long lead times needed for mitigation
measures to take effect also set LULUCF apart from most other sectors. This
IA's results suggest that a separate legal framework for LULUCF would be the best
option. The EU has
already committed to reducing GHG emissions by 20 % by 2020 compared to
1990 through efforts in other sectors. Before the ambition level is increased
beyond 20 %, the conditions need to be right. LULUCF should therefore be
formally included in commitments only once the EU decides to increase this ambition
level (Option 2.I). This does not mean that mitigation actions should be
put on hold. National action plans could be prepared to provide a strategy and forecast
for LULUCF. This would be an intermediate step towards the sector's full inclusion
with current policies. [1] Decision 1/CP.16 of the Conference of Parties to the
UNFCCC (the "Cancún Agreements"). [2] Brussels European Council 8-9.3.2007 Presidency
Conclusions, implemented through Decision No 406/2009/EC and Directive
2009/29/EC. [3] Decision No 406/2009/EC and Directive 2009/29/EC. [4] Other GHG from agricultural activities, e.g. methane
and nitrous oxide from ruminants and fertilisers, do not count under LULUCF,
which deals primarily with carbon emissions and removals in vegetation and
soils. Non-CO2 emissions are covered by the ‘agriculture’ inventory
sector. [5] In this context, ‘business as usual’ assumes that MSs
will reach their 20 % reduction targets, including the ones for renewable
energy. [6] Decision -/CMP.7 of the Conference of the Parties
serving as the meeting of the Parties to the Kyoto Protocol.