Project-Based Approaches vs. Comprehensive Policy Design Jeff Fiedler Natural Resources Defense Council November 1, 2003 Katoomba Group, Locarno

What Are We Trying To Do? Design policy that can realize the potential: –for forestry to contribute to climate solutions –for carbon incentives to change land use Criteria: –Scale –Accurate assessment of benefits –Administrative feasibility –Political feasibility

Policy Design Options Project-based offsets Extension of project-boundary: –Entity-wide –Landscape –National Opt-in vs. Mandatory Non-trading policies: –Tax policy –Direct regulation/standards –Incentives/subsidies

Can Projects Achieve Potential? Cherry Picking: only credits, no debits Transaction costs reduce economies of scale Capacity limits for project participants, administrators, verifiers Do project methodologies still apply once projects become widespread, large-scale? Double-counting Structural policies difficult to handle Will we find credible rules, methodologies?

Benefits of Comprehensiveness Greater coverage Reduce or eliminate cherry-picking Economies of scale for monitoring Reduce many transaction costs –Avoid difficult project methodologies –Reduce administrative costs Account for structural policies Capture multiple revenue streams

Technical Issues Still need policies to translate national target into incentive for landowners Monitoring technical, cost limits Variability in land use sector could cause problems for meeting targets Public vs. private land treatment Permanence/Reversibility Timing of monitoring

Practical and Political Issues Mandatory regulation of forest/ag sector Less suitable for some countries, regions Acceptability of greater role for sinks Cost for lands with no C changes Target setting and allocation: –Potential glut of allowances –Handling both +ve, -ve C projections Registry mechanics for debits Can it provide community benefits

Final Questions Comprehensive accounting and project- based policies are fundamentally different –Is comprehensive accounting better? If comprehensive policy is the end-goal, how much time and effort do we want to invest in project-based approach? Are we doing enough research on comprehensive accounting?