Discussion: Data and Methods for Offset Policy Implementation and Evaluation Forestry and Agriculture Greenhouse Gas Modelling Forum Shepherdstown, West Virginia April 7, 2009 Erich Livengood KEA 3 Limited New Zealand erich@kea3.com Lydia Olander Tim Pearson Gordon Smith Linda Heath Ian Campbell Booz Allen Hamilton Standard Colors Colors should be used in the color pairs whenever possible. Do not mix and match colors, use pairs together as shown. Black, White and Gray can be used with any of the other colors. Purple Pantone 2765 R 12 G 4 B 79 Green Pantone 357 R 15 G 67 B 24 Blue Pantone 2 88 R 11 G 31 B 101 Pantone Cool Gray 6 R 158 G 158 B 158 Black Red Pantone 485 R 252 G 5 B 14 Yellow Pantone 3965 R 232 G 244 B 4 Aqua Pantone 319 R 126 G 204 B 189 White

Where does land use offset policy fit? Largely restricted to the voluntary market under Kyoto Weak rules Unknown impact Domestic rules (in development … currently Waxman bill) Key tool to support effort to avoid harmful effects of climate change Growing recognition that 450 ppm-e scenario is only achievable if developed country mitigation is reduced below baseline Integration of offsets into markets  cost reduction  enhanced commitments At the same time, credits must be measurable, reportable, and verifiable 2

Climate policies/efforts are interlinked at many levels International International action is critical to achieving the climate outcome (2°C) Can’t get there without China, tropical forests Negotiations drive reductions in many countries, drive demand for offsets, and influence rules at all levels National National “responsibility” devolved Carbon market Policies and measures for non-included sectors International linkages (offsets, carbon markets, trade policy) All taxpayers (or their children more likely) to cover shortfall Sub-national Sector/firm obligations and opportunities Standards/Market rules Impact of policies and measures Significant policy mismatches are possible and are not necessarily a problem 3

Good estimates are critical to…. So project and policy accounting information is important for all levels Level Good estimates are critical to…. International Understanding the cost of treaty obligations Understanding positions and evaluating burden sharing arrangements National Devolution plan Choice of accounting for international compliance (Kyoto 3.3, 3.4) Choice of accounting for domestic compliance Regulatory impact assessments Effective market/standards design Establish policies and measures Understanding costs and opportunities Sub-national Effective project design Land use decisions Investment (UNFCCC process) (US Plan) 4

Good estimates are critical to…. Data needs Level Good estimates are critical to…. Information needs International Understanding the cost of treaty obligations Evaluating burden sharing arrangements Baseline (aggregated) Ecosystem response Implications of mitigation supply disruptions Technology Impact of aggregation on incentives Uncertainty – leakage - discounting Political outcomes Marginal abatement costs (including supply) Baseline (bottom-up) National Devolution plan Regulatory impact assessments Effective market/standards design Establish policies and measures Understanding costs and opportunities Sub-national Effective project design Land use decisions Investment 5

Other thoughts on the presentations we just heard…. Tim Pearson Interplay of international, national, and other policy - GPG, VCS, EU ETS – will have impacts on design of programs and standards Movement between voluntary space and compliance space may see enhancements in additionality requirements Forest definition – momentum to continue existing international forest definitions into the next agreement can lead to…..degradation and perverse incentives As discussed by Tim, incorporation of both performance standards and project specific criteria will lead to adverse selection - must be addressed Baseline may be fixed, dynamic (reset each period), or linked to drivers Uncertainties and the degree to which markets will leak and exploit differences is important become very important when leaving the voluntary space Spatially disaggregated information to support credible projects is required

Other thoughts…. Gordon Smith There is much greater awareness of leakage this time around – afforestation, REDD, forest management, fuels standards, etc.– and a greater willingness to develop a system to address leakage in order to access these credits and mitigation (as evidenced by the 4 for 5 provision of the Waxman bill) Forestry baseline very problematic – if everyone opts in (as in New Zealand) some of these problems become simpler Requirements for baseline establishment are non-trivial –they can be highly political and can have large impacts on outcomes Responsibility for fire, etc. New Zealand approach if to allow owners to retain responsibility for good and bad or to leave leave carbon credits/responsibility with government Program evaluation – what works? – very big issue for less capable nations and smaller scale projects Ian Campbell Ian, along with Karen earlier, covered policy specifics – need to see some work around what standards and characteristics are critical to align, and which can be allowed to diverge to best meet sector and local conditions 7

Discussion: Data and Methods for Offset Policy Implementation and Evaluation Forestry and Agriculture Greenhouse Gas Modelling Forum Shepherdstown, West Virginia April 7, 2009 Erich Livengood KEA 3 Limited New Zealand erich@kea3.com Lydia Olander Tim Pearson Gordon Smith Linda Heath Ian Campbell Booz Allen Hamilton Standard Colors Colors should be used in the color pairs whenever possible. Do not mix and match colors, use pairs together as shown. Black, White and Gray can be used with any of the other colors. Purple Pantone 2765 R 12 G 4 B 79 Green Pantone 357 R 15 G 67 B 24 Blue Pantone 2 88 R 11 G 31 B 101 Pantone Cool Gray 6 R 158 G 158 B 158 Black Red Pantone 485 R 252 G 5 B 14 Yellow Pantone 3965 R 232 G 244 B 4 Aqua Pantone 319 R 126 G 204 B 189 White 8