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?

Watching U.S. Climate Bills - Money to Forest Carbon Protection

The American Clean Energy and Security Act of 2009 (The 'Waxman-Markey bill' (summary)) includes provisions to use 13% of money from allowance auction revenues to support additional investments in clean energy and energy efficiency. Although protecting forest carbon isn't included in this list, a parallel piece of legislation attempts to fix this: The Buy American Carbon Incentives Program of 2009. The aim of this bill is "to establish a carbon incentives program to achieve supplemental greenhouse gas emissions reductions on private agricultural and forestland of the United States, and for other purposes."

Funds would be delivered through climate mitigation contracts for activities that:

• "measurably increase carbon sequestration and storage over a designated contract period through management activities on eligible lands; and
• maintain carbon sequestration and storage and avoid future emissions through permanent avoided conversion agreements on eligible lands."

This scheme is complementary to offsets and projects/activities would not be eligible for both.

Any thoughts on this? Has this kind of thing been proposed in any other jurisdictions? I certainly think it would be a great policy option for Canada's federal and provincial governments: finance forest carbon protection through the use of auction revenue set asides from cap-and-trade systems.