Carbon Accounting

Carbon Sinks under the Kyoto Protocol

Under the Kyoto Protocol, developed countries agreed to adopt specific targets for the reduction in greenhouse gas emissions from their countries within the first Kyoto commitment period (2008-2012). These targets become binding if the relevant country ratifies the Protocol.

To assist with meeting targets, the Protocol allows countries to use a range of flexibility mechanisms. One such flexibility mechanism is emissions trading. Emissions trading is well recognised as a cost effective means of meeting greenhouse targets, thereby minimising the overall economic impact. Where the cost of meeting emission targets through direct reduction in emissions is high, countries and companies will use emissions trading to purchase lower cost emissions reductions or emissions offsets from other countries or companies, to enable targets to be met at lower total cost.

One form of emissions offset is the capture of carbon in carbon sinks. The term carbon sinks applies to the concept of vegetation using the power of sunlight to join atmospheric carbon dioxide with water to create organic molecules and oxygen, via photosynthesis. The process of capturing carbon from the atmosphere and storing it in vegetation biomass is also referred to as sequestration. While the most effective and long lasting form of sequestration in biomass is capture by forests, the Kyoto Protocol allows for sequestration in other forms of vegetation.

In NSW, the primary focus has been on the establishment of new planted forests on land cleared prior to 1990 (usually decades before for grazing), consistent with Article 3.3 of the Kyoto Protocol.

The Concept of Carbon Accounting

In order for the carbon sequestered in vegetation to be used as part of an emissions trading regime, it is essential that correct and defensible accounting be undertaken of the amount of carbon that is captured in biomass. It is also necessary that correct accounting treatment is applied to situations in which that carbon is no longer sequestered in biomass, such as through fire, disease or destruction of the biomass. Confidence in the carbon accounting system is fundamental to building confidence in use of carbon sequestration in a carbon trading market, thereby underpinning growth and investment in new planted forests to create new carbon credits from sequestration.

The mechanism for calculating the quantum of carbon sequestered in biomass is referred to carbon accounting. The carbon accounting mechanism must be sufficiently robust that the carbon trading market has confidence that the amount of carbon sequestered can be considered to be equivalent in its impact on global warming potential to the carbon released to the atmosphere from activities producing greenhouse gases.

The rate of photosynthesis and thus carbon sequestration is influenced by such factors as climate, soil characteristics, topography, species and age of the biomass. Accumulation of sequestered carbon in forests tends to be slow in the early stages of growth, but accelerates as trees grow towards maturity and then decreases once maturity is reached. If trees grow on to an over mature state, the rate of sequestration tends to be negative because biomass material is breaking down faster than it is accumulating.

Approximately 50% of the dry weight of the biomass in a forest is carbon. All forests are carbon reservoirs and a carbon sink is a carbon reservoir that is increasing in size. Of course, forests can also be carbon sources if they emit more carbon than they sequester, or they may be neutral in terms of carbon when sequestration is balanced by emissions.

When undertaking carbon accounting for forests, the following carbon pools are recognised:

• tree stem
• tree canopy, comprising branches and leaves/needles
• tree roots, both coarse and fine
• soil carbon, comprising carbon stored as organic matter
• other vegetation, primarily understorey, comprising shrubs, grasses and so on
• litter, comprising large and small logs, branches and leaves/needles on the forest floor

A carbon accounting system needs to assess the changes in the amount of carbon stored in each of these pools over the life of the forest. In the case of a planted forest, this would cycle from predominantly soil carbon and grasses prior to tree planting, through any soil carbon losses as trees are planted, to progressively more carbon stored in the above and below ground parts of trees as they grow, to substantial carbon emissions at the time of harvest.

The amount of carbon stored in each of these pools is most commonly estimated by developing relationships between easily measured things like stem diameter or stem volume and harder to measure things like canopy and root biomass. It is also necessary to establish the pattern of changes in pools like soil carbon and understorey over the time frames of forest growth.

There are two key points to note with regard to carbon accounting under the Kyoto Protocol. The first is that the amount of carbon sequestration that can be claimed as a "carbon credit" is limited to the net amount of change in the total forest carbon pool from one period to the next. This referred to as stock change accounting. The second key point is that, even though carbon remains stored in the products produced from harvested logs (paper, reconstituted boards, veneers, sawn timber etc), this on-going "capture" is not recognised under carbon accounting rules as applied to the first Kyoto Protocol commitment period of 2008-2012. Recognition may occur in later periods.

Developing a Carbon Accounting System

The detailed requirements for a carbon accounting system are being developed by the Intergovernmental Panel on Climate Change (IPCC) under the United Nations Framework Convention on Climate Change (UNFCCC). The IPCC is in the process of developing Good Practice Guidance and Uncertainty Management in National Greenhouse Gas Inventories. This document is intended to be submitted for the 9^th Conference of the Parties (COP9) to the UNFCCC, which will occur in 2004. Any carbon accounting standard developed prior to the release of this document will need to be varied to be consistent with the IPCC document before carbon credits generated from carbon sinks can be used in an emissions trading regime under the Kyoto Protocol.

Several organisations have been developing carbon accounting systems in advance of these guidelines (IPCC has already established some principles), with a primary focus to date on carbon accounting in forests as opposed to other forms of vegetation.

1. Standards Australia

A carbon accounting standard has been developed by Standards Australia. State Forests was heavily involved in this.

2. Australian Greenhouse Office

The Australian Greenhouse Office (AGO) initially developed a workbook for the calculation of carbon sequestered in forests, called the AGO Vegetation Sinks Workbook. This has subsequently been updated by a new carbon accounting toolbox called FullCAM, developed as a toolbox to be compatible with the National Carbon Accounting System (NCAS). See Australian Greenhouse Office Tools for Carbon Accounting.

3. Electricity retailers in NSW

In February 2002, the NSW government proposed to make both mandatory and national what are currently voluntary targets in NSW for per capita emission reductions for electricity retailers. The NSW government has proposed that carbon sequestration be a permitted activity in meeting these targets. A workbook prepared by the NSW Ministry of Energy and Utilities (MEU) sets out requirements for entities that seek to use carbon sequestration to meet their obligations under this framework.

4. Verification

As part of the process of carbon accounting, an entity's carbon accounts will need to be independently verified before they are accepted for use in an emissions trading regime. See Verification of Carbon Accounts.