Tuesday, June 23, 2009

Using cap-and-trade auction revenue to finance forest and peatland protection

I posted a few days ago about a piece of legislation in the U.S. that aims to use government funds (from cap-and-trade auction revenues?) to finance the protection of forest carbon stocks.

What are other jurisdictions thinking about this? I'm reminded that the Western Climate Initiative Partners actually made a very concrete recommendation about using auction revenue set asides for 'forestry':

8.2. The WCI Partner jurisdictions agree that a portion of the value represented by each WCI Partner jurisdiction’s allowance budget (for example, through set-asides of allowances, a distribution of revenues from the auctioning of allowances, or other means) will be dedicated to one or more of the following public purposes which are expected to provide benefits region wide:
  • Energy efficiency and renewable energy incentives and achievement;
  • Research, development, demonstrations, and deployment (RDD&D) with particular reference to carbon capture & sequestration (CCS); renewable energy generation, transmission and storage; and energy efficiency;
  • Promoting emission reductions and sequestration in agriculture, forestry and other uncapped sources; and
  • Human and natural community adaptation to climate change impacts.
A couple of other examples...

  1. The Province of Ontario's discussion paper on cap-and-trade references WCI's recommendation to use set asides to reduce emissions in uncapped sectors.
  2. The EU Emission Trading Directive very strongly supports the use of at least 50% of auction revenues (and they intend auctioning to be the rule for distribution of allowances) for various uses aimed at reducing the impacts of climate change and funding adaptation. It also specifically mentions reducing emissions from deforestation and degradation in developing countries, but does not specifically mention domestic forest programs.
It strikes me that the forest sector, especially forest protection, is an especially good fit for the use of set-asides:
  • The sector is not covered by the cap;
  • There are adaptation benefits as well as mitigation benefits (helping communities and biodiversity adapt to climate change through ecosystem protection);
  • Forest offsets present problems, like permanence, that other sectors don't present - so it should be a priority to get at this mitigation in another way.
What do others think? Does anyone have examples from other jurisdictions?


Anonymous said...


In a foreward to a new book on carbon markets, Sir. Nicholas Sterns says, "We can identify the key areas for action: energy efficiency, low-carbon technologies and halting deforestation. And we know the types of economic instrument necessary; crucially this requires a price for greenhouse gases to correct the market failure of the damage caused by emissions. Of great importance too will be appropriate regulation and support for new technologies. And a major global programme combining development with halting deforestation, shaped by the countries where the trees stand, will be crucial". (Emphasis added)


Aran O'Carroll

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