Policies And Incentives For Agricultural Carbon Sequestration

International concern about increased concentrations of carbon dioxide and other GHGs in the Earth's atmosphere led to the establishment of the Intergovernmental Panel on Climate Change in 1988. The panel concluded that human activities were responsible for increased emissions of GHGs and the accompanying climate change. While acknowledging a degree of scientific uncertainty, the UN Framework Convention on Climate Change (UNFCCC) concluded that "where there are threats of serious or irreversible damage, lack of full scientific certainty should not be used as a reason for postponing such measures [to reduce GHG emissions]" (Climate Change Secretariat, 2002). Having been ratified by 175 nations, including the United States, the UN Framework took effect in 1994. The primary objective of the convention is to reduce GHG concentrations in the atmosphere to levels that would prevent dangerous anthropogenic interference with the climate system. All parties to the UNFCCC agreed to prepare and update national climate change mitigation and adaptation programs. These would include measures to reduce emissions and enhance sinks for carbon, promote the development and application of climate-friendly technology, undertake research on climate change and its mitigation, and compile and submit a national inventory of GHG emissions.

In addition, parties to Annex I (41 industrialized countries and economies in transition [EITs]) agreed to the non-legally binding aim of reducing emissions to 1990 levels by the year 2000. Annex II parties (industrialized countries minus the EITs) further agreed to provide financial assistance to other parties for the acquisition of appropriate GHG-reduc-ing technology. Annex I parties are encouraged to undertake projects in other countries to reduce emissions or increase removal of GHGs.

Since the U.N. Framework took effect in 1994, stronger scientific evidence on the existence of climate change, as well as concern that emissions are continuing to increase, prompted negotiation of the Kyoto Protocol, which concluded in December 1997. The key provision of the protocol requires Annex I parties to collectively reduce emissions of GHGs to a level 5% below the 1990 level by the first commitment period of 2008 to 2012. The protocol also calls for establishment of policies to reduce emissions, including the phasing out of subsidies for energy-intensive technologies, the creation of regulatory standards encouraging the adoption of alternative energy sources and the taxing of emissions, the reduction of emissions from transport systems, and the control of methane emissions through innovative waste management.

The issue of establishing credits for forestry and agriculture as carbon sinks was hotly debated during the negotiations. Technical difficulties in verifying the amount of carbon sequestered by agriculture was one contentious issue. Nevertheless, guidelines for carbon sequestration were agreed to in the 2001 Marrakesh accords, which provide rules for land use, land use change, and forestry (UNFCCC, 2002a). The accords recognize revegetation and improved management of cropland and grazing land as carbon sinks, and allow parties to receive credits for carbon sequestered in excess of 1990 levels. Scientific bodies supporting the Kyoto Protocol continue to work on protocols to verify emissions removals achieved by these activities.

The Kyoto Protocol allows Annex I countries to meet their commitments at least cost within some constraints. They can receive credit for implementing projects that reduce emissions or remove carbon from the air in other countries, and they can trade credits with other Annex I parties, subject to conditions. The Clean Development Mechanism allows Annex I parties to implement projects that reduce emissions in non-Annex I countries and to receive credits toward meeting their emissions-reduction targets. However, agricultural sequestration activities cannot be used in the Clean Development Mechanism for the first implementation period of the Kyoto Protocol.

A recent decision limited eligibility for this mechanism to afforestation and reforestation activities. However, the World Bank launched the BioCarbon Fund to sponsor a broad range of carbon sequestration projects in developing countries, including agricultural sequestration projects. The motivation for sponsoring non-Kyoto compliant projects is that agricultural sequestration projects can achieve both emissions reductions and sustainable development goals (World Bank, 2002).

The Kyoto Protocol will enter into force when it has been ratified by 55 Annex I governments representing 55% of the total Annex I 1990 carbon dioxide emissions (UNFCCC, 2002b). Currently, 128 parties accounting for 61.6% of emissions have ratified the protocol, which became effective on February 16, 2005. Prolonged uncertainty over the ratification of the Protocol existed due to indecision by Russia on whether or not to ratify.

Only parties that have ratified the protocol and have met methodological and reporting requirements may engage in emissions trading that gets counted toward meeting Kyoto Protocol requirements. Annex I parties can purchase credits only from other ratifying Annex I parties. Because they have not ratified the Kyoto Protocol, the United States and Australia cannot sell emissions or removal credits to other Annex I parties. This means that the carbon trading market will be fractured into a market for sellers who have ratified the protocol and for sellers who have not. International demand is likely to be severely limited for carbon credits from sellers who have not ratified the Kyoto Protocol, as the only buyers would be countries that have not themselves ratified, and thus are not under any binding commitments to reduce emissions.

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