If passed by the Senate, cap and trade will be in place in Australia in 2011. Australia's target is to reduce emissions by 60 percent below 2000 levels by 2050, and its interim target is a reduction of between 5 and 25 percent below 2000 levels by 2020. The willingness of the rest of the world to adopt targets, following the Copenhagen climate change conference in December 2009, will influence Australia's targets post-2013 (Australian Government, 2009).

A considerable amount of independent research has been done to inform the Australian people and the Australian government of the need to reduce and to target global and Australian carbon emissions. Garnaut (2008) emphasizes the imperatives of climate change policy, the methods that can be used to achieve greenhouse gas reduction targets and the consequences of proposals for households and industry. The Australian government also conducted modeling of forestry's role in the cap and trade scheme (Lawson et al., 2008) prior to issuing a white paper that signals its preferred policy options (Australian Government, 2008).

The importance of including forestry in Australia's cap and trade scheme is emphasized by the results of modeling with and without forestry. Excluding forestry consistently drives the carbon price 30 percent higher for the same level of mitigation. GNP is half a percentage lower in 2100 when forestry is excluded (Lawson et al., 2008). The role of forestry is very sensitive to the price per tonne of CO2e and the deeper the cuts in emissions, the higher the price.

In dealing with the crediting of removals of CO2e by reforestation in its scheme, the Australian government is innovative. It tackles the permanence issue by making a small deduction for a buffer each time credits are issued. In the case where forests are continually harvested and replanted, credits are issued in the initial growing phase with a limit determined by the average removals (less an allowance for the buffer). This system avoids the necessity to debit and credit annually. Where the harvested forest is

□ Permits issued Buffered permit limit Cumulative removals

Note: Annual permits are issued ex-post during the growing phase, removals being verified every five years. The limit to permits issued is less than the total of net CO2e removals, creating a buffer against losses.

Source: Author's own design.

Figure 7.2a Stylized representation of the generation ofpermits for CO2e removals by unharvested reforestation under Australia's Carbon Pollution Reduction Scheme not replanted, permits need to be surrendered. Figures 7.2a. 7.2b and 7.2c illustrate how the scheme credits reforestation in unharvested and harvested reforestation.26 The crediting for reforestation projects is based on output from the National Carbon Accounting Toolbox (CAMFor) that provides a high degree of certainty in estimating the profile of CO2e removals in any reforestation situation; a fuller description of Australia's NCAS is in Chapter 5.

While Australia's Carbon Pollution Reduction Scheme (CPRS) will allow the import of unlimited certified emission reductions (CERs) from its commencement in July 2011, forestry CERs under the CDM will not be able to be used.27 The avoidance of contingent liabilities is the main reason given for this exclusion (Australian Government, 2008). The contingent liability is created by the need to replace both temporary CERs (tCERs) and long-term CERs (lCERs) at the end of their lives, which is two commitment periods for tCERs and between 20 and 60 years for lCERs.

Australia's scheme does not include deforestation even though land-use change contributes about 7 percent to Australia's total emissions and will emit 44M tonnes of CO2e per year during 2008-12 (Australian Government, 2008: 6-3). The reasons given for this exclusion are that deforestation is much lower than in 1990, there are now restrictions in



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»q place on clearing land, and what forest is cleared tends to be in very small pockets or classified as regrowth. Administrative costs of including deforestation would thus be high. Moreover, if deforestation coverage were in prospect, preemptive clearing would be given a powerful incentive (Australian Government, 2008).

It is likely that interest in the Australian voluntary market will fall off now the CPRS has been announced. The forestry sector will instead be able to create government certified permits under the emission trading scheme.

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