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The results from the first commitment period of the Kyoto Protocol (KP) show that developed countries fulfilled their commitments through varied strategies. However, the Kyoto protocol did not manage to stabilize global GHG concentrations; furthermore its direct impact on domestic emissions reductions is unclear. Nevertheless, the KP has likely paved the way for a low-carbon transition by establishing international standards on emissions monitoring and on emission reductions projects. Yet, domestic policies – especially the EU ETS – are the main driver of emissions reductions and the principal catalyzers of private finance flows. A new, more effective, agreement would therefore need to expand its coverage, and take down the specter of “internationally binding” emission reductions commitments in order to focus on MRV requirements. Similar to Kyoto, a Paris outcome could take the form of a framework agreement setting up requirements and mechanisms with subsequent implementing agreements expected by 2020.

Beyond the important role that forests play in the fight against climate change through the sequestration of carbon in their biomass, wood products also contribute to climate change through three channels: Material substitution : the manufacturing of wood products being less energy intensive allows to avoid carbon emissions from the processing of other alternative materials (eg. concrete, steel, etc); Energy substitution: achieved by the generation of energy from wood combustion replacing other fossil fuels. Carbon sequestration in the wood products: wood products sequester carbon during their whole life span until their decomposition. This Climate Report identifies French policies that have an impact on climate change mitigation by wood products through these three mitigation channels. Our analysis asserts that similarl to the context at the EU level, the current national policy framework incentives are mostly directed to the "energy wood" sector. These incentives include fiscal and financial instruments such as: The heat fund (fonds chaleur), which subsidizes the production of renewable heat particularly from biomass; The zero interest rate eco-loans (éco-prêt à taux zéro) and the Sustainable development tax credit (crédit d’impôt développement durable (CIDD)) which partly subsidize wood heating; Reduced VAT on renewable heat purchases. The use of wood as a material is currently less encouraged, at least on the financial side: the few devices that support it are rarely binding and mobilize limited resources. Future measures planned under the National Action Plan for the forest-based sector and the upcoming law for the future of agriculture and forestry (Loi d’avenir pour l’agriculture et la forêt) could slightly rebalance this situation.

The Clean Development Mechanism (CDM) facilitated the emergence and deployment of low-cost greenhouse gas (GHG) abatement technologies such as destruction of industrial gases and capturing methane from landfills and coal mines. Some of these technologies are now ripe to “graduate” from the CDM into other, more mainstream, economic tools. The first such step was taken in September 2013 when the G20 leaders agreed to phase out HFCs – highly potent greenhouse gases – including HFC-23 that was the focus of 19 CDM projects. A potential HFC-23 abatement fund under the Montreal Protocol could reduce up to 1.8 Gt CO2e by 2020 at a cost of under US$0.2 per ton of CO2e, i.e. much cheaper than the price paid to CDM projects through carbon crediting. The next potential candidate technology to “graduate” from the CDM is the abatement of nitrous oxide (N2O) emissions in the chemical industry, which have already been placed on the agenda of the Montreal Protocol.

In a framework where no common forestry policy exists at the EU level (such as the Common Agriculture Policy for agriculture), this report lists EU policies that have an impact on climate change mitigation that can be achieved by the forestry sector. With the objective of analyzing the coherence of these policies, we have established a typology and a hierarchy firstly by laying out the legal status and the financial and institutional resources associated with each policy, and secondly by reviewing the objectives of each policy in regards to climate change mitigation in the forestry sector. We finally analyze potentials synergies and conflicts between them. The consequences of each policy on climate change mitigation is assessed through three principal mitigation pathways in the forestry sector: carbon sequestration in forests, energy substitution (biomass, etc.), and what we refer to as the “harvested wood product use effect” (the sequestration of carbon in wood products and the substitution of more carbon-intensive materials with wood). The forest-related EU policies analyzed in this report are found to be globally coherent in terms of shared objectives, defining an EU forestry mitigation strategy focused on energy substitution through: • the Climate and Energy Package that does not address exclusively the forestry sector but has significant influence on energy substitution; • the European Agriculture Fund for Rural Development (EAFRD), the most important fund concerning forestry. Among the eligible actions which touch upon climate and forestry, member states have favoured those supporting energy-substitution and to a lesser extent carbon sequestration in forests; Non-mandatory policies such as forest strategies and the forest action plan have diversified objectives touching upon the three mitigation pathways. However their non-legally binding nature brings us to play down their importance. In the end, despite the unbalanced attention given to the different mitigation options, policy objectives are nevertheless coordinated and often complementary in terms of climate change mitigation.

Stand-replacing fires are the dominant fire type in North American boreal forests. They leave a historical legacy of a mosaic landscape of different aged forest cohorts. This forest age dynamics must be included in vegetation models to accurately quantify the role of fire in the historical and current regional forest carbon balance. The present study adapted the global process-based vegetation model ORCHIDEE to simulate the CO2 emissions from boreal forest fire and the subsequent recovery after a stand-replacing fire; the model represents postfire new cohort establishment, forest stand structure and the self-thinning process. Simulation results are evaluated against observations of three clusters of postfire forest chronosequences in Canada and Alaska. The variables evaluated include: fire carbon emissions, CO2 fluxes (gross primary production, total ecosystem respiration and net ecosystem exchange), leaf area index, and biometric measurements (aboveground biomass carbon, forest floor carbon, woody debris carbon, stand individual density, stand basal area, and mean diameter at breast height). When forced by local climate and the atmospheric CO2 history at each chronosequence site, the model simulations generally match the observed CO2 fluxes and carbon stock data well, with model-measurement mean square root of deviation comparable with the measurement accuracy (for CO2 flux ~100 g C m−2 yr−1, for biomass carbon ~1000 g C m−2 and for soil carbon ~2000 g C m−2). We find that the current postfire forest carbon sink at the evaluation sites, as observed by chronosequence methods, is mainly due to a combination of historical CO2 increase and forest succession. Climate change and variability during this period offsets some of these expected carbon gains. The negative impacts of climate were a likely consequence of increasing water stress caused by significant temperature increases that were not matched by concurrent increases in precipitation. Our simulation results demonstrate that a global vegetation model such as ORCHIDEE is able to capture the essential ecosystem processes in fire-disturbed boreal forests and produces satisfactory results in terms of both carbon fluxes and carbon-stock evolution after fire. This makes the model suitable for regional simulations in boreal regions where fire regimes play a key role in the ecosystem carbon balance.

The Doha climate conference (November 26 - December 8, 2012) allowed the UN process to edge forward. Through the definition of the rules for the second commitment period of the Kyoto Protocol with a foreseeable increase in the ambition of Annex I countries second period commitments by 2014, the conclusion of the negotiation process stemming from the Bali Roadmap and by getting the Durban platform off the ground, the “Doha Climate Gateway” tries to pave the way for a more ambitious international agreement in 2015. However, the need for interim financing by 2020 was not clearly nor decisively addressed in Doha. Thus, the route to a stronger agreement in 2015 remains a long one.

According to the latest IEA World Energy Outlook, energy efficiency is a “key option” in transition to a low-carbon economy. A decade of experience with the CDM and JI demonstrates that carbon finance can be used as an effective tool to unlock private investments in energy efficiency. Capital investments in offset projects may significantly exceed the expected carbon revenues resulting in an average weighted leverage ratio of 4:1 and 9:1 for the CDM and JI respectively, which is comparable to other international financial instruments. So far carbon finance has been used mostly for large-scale industrial energy efficiency projects in advanced developing countries and economies in transition, although it is increasingly suited to tap into scattered household energy efficiency projects.

For those who expect “binding” emission reductions targets in the future international climate agreement to be signed in Paris in 2015, the Warsaw Conference (November 11 to 23, 2013) yielded as much progress as it could. That means little beyond a timetable. However, for those who consider the UNFCCC as the depository of common tools on the monitoring, reporting and verification (MRV) of emissions, actions and financing, Warsaw represents a major breakthrough. For the first time, developing countries – at least those wishing to access climate finance for forests – will abide by MRV procedures similar to those governing the greenhouse gas inventories of industrialized countries. Forestry may be seen as a first sectoral NAMA, and it would be difficult to ignore the Warsaw decisions for the future definition of MRV procedures of NAMAs. In spite of the establishment of the Warsaw International Mechanism for Loss and Damage, low outputs on other issues show that achieving an agreement at COP 21 will require significant political progress during the next 15 months.

The Clean Development Mechanism (CDM), launched in 2001, has attracted more than 7 000 projects. Many however, did not fully deliver the emissions reductions promised in their project design documents: out of 1.8 billion of expected Certified Emissions Reductions (CER) by April 1st, 2011, only 576 million had been issued. This study classifies the risks incurred by CDM projects, attributes a share of the non-delivered CER to each risk, and identifies the most influent factors driving each risk. 29% of expected CER will never be issued due to failure of projects (negative validation, project withdrawn, …), 12% were not issued on time due to delays during the approval process (validation and registration), 27% were not issued on time due to delays at issuance, and only 1% will never be issued due to underperformance of projects in terms of CER delivered per day. Technology is identified as a key driver for all these risks: some technologies are less risky than others. Time is mainly influencing approval process and issuance delay. Other factors such as location, size of the project, auditor or consultant are occasionally important, but not for each risk.

On March 12th 2012, after two years of consultations and reviews, the European Commission published a decision proposal regarding the inclusion of the land use and forestry sector in European climate policy. The aim of this proposal is to impose accounting rules that are consistent with the decisions of the United Nations Framework Convention on Climate Change (UNFCCC), and to harmonise them between Member States. Meanwhile, the issue of economic incentives aimed at guaranteeing the sector’s contribution to climate mitigation is postponed until a later date.

International audience; The purpose of this article is to describe an approach adopted by the French forest/woodland sector: the creation of the Club Carbone Forêt Bois [Carbon-Woodland Club]. The Club’s aim is to bring together research efforts relating to Forest Carbon in France, on the basis of exchanges of information between its members and by pooling the resources for devising tools to develop forest carbon. The first part of the article describes the regulatory and economic context for the development of forest carbon in France, where there is a dearth of concrete incentives that could help optimise the forest-woodland sector’s contribution to climate change mitigation. The problem arises from the fact that in spite of the existence of a carbon price, little benefit trickles down to the forest-woodland sector. In Part II, the article describes how the Club operates, introduces its members, its objectives and the outlook for this collaborative research and development effort.; L’objectif de cet article est de présenter une démarche de la filière forêt-bois française: la création du Club Carbone Forêt-Bois. Le Club vise à fédérer les efforts de recherche sur la problématique Forêt Carbone en France, à partir d’une démarche d’échange d’informations entre ses membres et de mutualisation des moyens de développement des outils de valorisation du carbone. Dans un premier temps l’article décrit le contexte réglementaire et économique de valorisation du carbone forestier en France qui est marqué par une absence d’incitations concrètes pour la filière forêt-bois permettant d’optimiser sa contribution à l’atténuation du changement climatique. Le problème résulte du fait que, malgré l’existence d’un prix du carbone, celui-ci n’est pas ressenti par la filière forêt-bois. La deuxième partie de l’article décrit le fonctionnement du club, présente ses membres, ses objectifs et les perspectives de cette plateforme collaborative de recherche et de développement.

The Clean Development Mechanism (CDM) is the first and by far the largest carbon offset instrument in the world. To date, it is the only market based on an environmental commodity which managed to attract several billions of euros of private capital on an annual basis. Being the first-of-a-kind climate change mitigation instrument, the CDM followed a "learning by doing" pattern undergoing numerous reforms throughout its more than 10-year history. Although the post-2012 fate of the mechanism remains uncertain, one should not "throw out the baby with the bath water" as the lessons from the CDM experience may be useful not only for the CDM reform but also for new market instruments. One of the widely discussed topics is the economic efficiency of the CDM. Despite being largely concentrated on the supply side (93% of all issued credits come from 5 countries), the CDM provided a useful ―search tool‖ to identify new greenhouse gas abatement opportunities although in most cases failed to scale them up across the economies. The lion’s share of the demand for carbon offsets comes from the European Union Emissions Trading System (EU ETS), where the CDM helped companies save millions of euros by reducing emissions where it was the cheapest. With the quantitative restrictions in place, the demand for CDM offsets from projects registered after 2012 will likely dwindle to a few public buyers, dwarfed by the size of supply. The CDM has also raised criticism regarding its environmental integrity. For example, there is strong evidence that HFC-23 destruction projects provided perverse incentives for installations to engage in strategic behavior. Besides, there are concerns over the additionality of some large renewable energy projects, in particular in China and India. The transparency of the framework has allowed identifying loopholes and implementing the reforms that have been ongoing since the inception of the CDM. Finally, the evaluations of the contribution of the CDM to sustainable development are mixed and largely depend on the project type and national circumstances. The principle of national sovereignty dominates the existing sustainability assessment which fully rests on the host country without any standardized criteria or monitoring. These issues have been and keep being addressed in reforms that have not ceased since the inception of the CDM. The gradual introduction of more stringent baselines has been one of the tools used to reinforce environmental integrity. Standardized baselines and positive lists help simplify and speed up the registration of projects, and hence the scaling up of local projects. This paper reviews the CDM’s achievements and challenges and derives 10 key lessons that should be taken into account while reforming the mechanism as well as while designing new instruments to tackle climate change. As the Green Climate Fund is still wondering how to raise the pledged 100 billion dollars until 2020, the CDM recipe for attracting private investments in the billions of euros per year to climate action is worth some attention.

The Common Agricultural Policy (CAP) has had a very small climate component since 1992. The recent inclusion of green payments and the climate risk management tools proposed for the CAP for the period beyond 2013 illustrate the European Commission’s willingness to expand this climate component. Furthermore, there is little mention of the agricultural sector in the tools rolled out by the European climate policy, particularly those derived from the 2009 “Climate & Energy” Package. Therefore, even if this autumn’s parliamentary debate results in the reform proposals being diluted, the post-2013 CAP could nevertheless become a principal tool for a common EU climate policy in the agricultural sector.

Reducing CO2 emissions from forests was slow to get off the ground as a subject of international climate negotiations, but it has picked up considerable momentum since 2005. In particular, agreement has been reached on the urgence to set up a global REDD+ mechanism. The mechanism aims to provide developing countries with incentives to reduce emissions from deforestation and forest degradation and to increase forest carbon stocks through appropriate forestry practices or through planting. Agreement has also been reached that REDD+ incentives should be result-based and ultimately awarded at the national level. Nevertheless, local initiatives are a useful mean of tackling deforestation. However, when carbon incentives depend on national performance, linking them to local initiatives is a technical and financial challenge. Technically, the national accounting framework must be able to track emissions-reduction initiatives at the sub-national level (regional, local or projet level). Financially, investors are likely to be scared away if their reward depends on deforestation occuring outside the area of their investment. Ultimately, the issue of transferring national incentives coming from supranational agreements to the local level can be reduced to a political decision on risk sharing between the State and private stakeholders. Industrialized countries have already faced this issue during the first commitment period under the Kyoto protocol and they have often found it difficult to develop satisfactory solutions. Two notable exceptions are New Zealand, which included its forest sector in its emissions trading scheme, and Australia, which is developing a „Carbon Farming Initiative‟ for forestry and agricultural offsets. This study draws lessons from a comparison of the treatment of the Land Use, Land Use Change and Forestry (LULUCF) sector in industrialized countries during the first Kyoto protocol commitment period and the current discussions and initiatives on the architecture of a future REDD+ mechanism. Two opposite alternatives are identified: a State guarantee that project developers are rewarded based on the success of their project no matter the national performance, as in New Zealand; and a carbon incentive for project developpers which is scaled down in proportion of the national performance, as it has been discussed in France. Beyond the political decision concerning the risk sharing, three technical keys to a successful transfer of carbon incentives to local actors are presented through the analysis of a number of case studies: (1) a consistent set of baselines; (2) a monitoring system which includes both emissions reductions and the causes behind them; and (3) a clear regulatory framework. The variety of approaches to including project reference baselines in the national reference level is analyzed based on experiences in the European Union, Guyana and Peru. Regarding monitoring, building on national GHG inventories from Annex 1 countries and Brazil‟s experience in monitoring deforestation could help leapfrogg the technical challenges posed by Monitoring, Reporting and Verification (MRV) in REDD+. Lastly, the study explores the progress made by Colombia in setting up a national regulatory framework and by the state of Acre in Brazil in building an institutional framework for REDD+ at a regional level.

A series of extreme events affecting forests that are perhaps related to climate change — pests, storms, firesand droughts — has recently received much coverage in the media and in scientific publications. These documentsdescribe forests as sources of carbon. In contrast, all the methods for estimating the carbon balanceof forests worldwide show a net absorption, a global sink of over a billion tons of carbon per year (1 PgC/yr.).Changing land use strongly affects the global balance, especially in the tropics, highlighting that an evengreater “natural” forest sink is necessary to ensure consistency with the values recorded in the atmosphere.The four main determining factors for this “natural” forest sink are: climate change, increased carbon dioxide(CO2) concentration in the atmosphere, increased nitrogen deposition and changes in the intensiveness offorest management. Even though our understanding of the causes of forest sinks is still imperfect, it appearsthat the concentration of CO2 and nitrogen deposition are the major causes on the global scale. The effectof CO2 is particularly important in the tropics while nitrogen deposition is thought to be predominant everywhereelse. Simultaneous assessment of different adaptation options for forest management in terms of theirbenefits in the areas of adaptation and mitigation shows up examples of “no regrets” measures in spite ofthe uncertainty connected with climate risk.

Medium-term (i.e. pre-2015) demand for credits from the EU ETS and secondary sources of demand appears to be limited to 1.6 billion tCO2e. The supply of Kyoto credits is relatively predictable, and will cover demand between now and 2013-2014 according to our base-case scenario. Our view is that the demand-supply equilibrium will lead to a decorrelation between the price of Kyoto credits and the EUA price, and may lead to a price for Kyoto credits that is very low, or almost nil. Unless CER and ERU demand-side policies are modified, we do not foresee any rebound in CER and ERU prices beyond the current year.

Based on specific projects rather than economy-wide emissions reductions, and driven by the demand from the installations covered by the European Union Emissions Trading Scheme (EU ETS), Joint Implementation (JI) turned out to be a largely private sector mechanism. Besides attracting private investors in GHG abatement projects, JI creates an opportunity for countries to exploit the arbitrage price spread between different carbon offsets: Emission Reduction Units (ERU), the credits issued from JI projects, trade with a premium of up to 50% over Assigned Amount Units (AAU), the country-level carbon allowances. Some countries, like for instance Ukraine, quickly realized the added value of JI and boosted its development, while in others, like Russia, JI lacked political support and efficient frameworks took time to be established. According to the ERU supply forecasting model developed by CDC Climat Research, Annex I countries are expected to generate up to 356 million ERUs for the first Kyoto commitment period. Around 80% of these credits shall originate from Russia and Ukraine, and up to 70 million shall be generated from countries participating in the EU ETS. Within the EU, JI has been used as a “frontier mechanism”: JI projects mostly explored abatement opportunities not covered by the scheme and, as highlighted by the case of nitrous oxide emissions from the production of nitric acid, played an important role in identifying abatement technologies and providing information to extend the scope of the EU ETS. One of the most complex issues related to JI is the practice of additionality. The cases of France and Ukraine demonstrate that the stakes associated with additionality may differ depending on a country’s compliance position. In Ukraine, additionality was not perceived as a significant economic risk due to a large anticipated AAU surplus, which, however, turns it into a threat to the environmental integrity of the mechanism – as is the case for the Clean Development Mechanism (CDM) – unless a stringent additionality screening is performed. In France, on the other hand, additionality was perceived as a threat to the treasury due to the uncertain compliance position of the country. In that case, additionality becomes more a matter of economic efficiency than environmental integrity.

International audience; A number of global land surface models simulate photosynthesis, respiration, and disturbance, important flows in the carbon cycle that are widely tested against flux towers and CO 2 concentration gradients. The resulting forest biomass is examined in this paper for its resemblance to realistic stands, which are characterized using allometric theory. The simulated biomass pools largely do not conform to widely observed allometry, particularly for young stands. The best performing models had an explicit treatment of stand-thinning processes, which brought the slope of the allometry of these models closer to observations. Additionally, models that had relatively shorter wood turnover times performed were generally closer to observed allometries. The discrepancy between the pool distribution between models and data suggests estimates of NEE have biases when integrated over the long term, as compared to observed biomass data, and could therefore compromise long-term predictions of land carbon sources and sinks. We think that this presents a practical obstacle for improving models by informing them better with data. The approach taken in this paper, examining biomass pools allometrically, offers a simple approach to improving the characteristic behaviors of global models with the relatively sparse data that is available globally by forest inventory.

The purpose of this document is to estimate the supply and potential demand as regards Kyoto carbon credits (CER and ERU) up to 2020. Two distinct periods have been pinpointed: 2008-2012, the first commitment period of the Kyoto Protocol, and 2013-2020, the phase when the climate-energy package will be implemented in Europe, and the period for compliance with international commitments agreed in Cancún. Demand for Kyoto credits is estimated at between 2.2 and 4.4 billion for the 2008- 2020 period. The large spread reflects 1) uncertainty about the size of European demand (EU ETS and Member States), which could rise from 1.3 to 2.2 billion credits if Europe’s 2020 emissions reduction target were increased from 20% to 30%; and 2) uncertainties regarding the use of Kyoto credits by other actors. The estimate of Kyoto credit supply by CDC Climat Research is 1.3 billion between now and 2013 (1.1 billion in CER and 0.2 billion in ERU). By 2020, Kyoto projects could generate up to 4 billion credits. All in all, we estimate that the credit market will be in deficit by 2013 and should be in surplus by 2020, unless there is an increased European commitment, or new sources of demand appear throughout the world.

The agricultural sector accounts for 14% of global anthropogenic greenhouse gas emissions. If we also take into account carbon emissions and sequestration from upstream – production of fertilisers, deforestation, etc. – and downstream – bio-energies, etc. – the share rises to 30%. Many practices and technologies enable agriculture's impact on climate change to be reduced. According to a number of estimates that are summarised in this research, the agricultural sector’s mitigation potential is of the same order of magnitude as its emissions over a period of 30 years. However, changing agricultural practices comes at a cost, and in most cases such changes are not made without economic incentives. Carbon offsetting projects are one of the economic tools available to reduce agricultural emissions by paying for metric tons of avoided CO2e emissions. A summary of the emission reductions enabled by agricultural projects to date is provided in this report. It covers most projects certified by quality assurance standards, including those set up by the Kyoto Protocol (Clean Development Mechanism and Joint Implementation) and those in the voluntary market (Verified Carbon Standard, Climate Action Reserve, Gold Standard, Chicago Climate Exchange, and American Carbon Registry). The assessment drawn up on this basis shows that emission reductions enabled through carbon offsetting are thousand times lower than actual emissions and their potential mitigation. Agricultural projects have reduced emissions by 14 MtCO2e in 2010, i.e. 7% of the reductions generated by all carbon offset projects across all sectors for this year. Initiatives focus on three technologies: bio-energies (crop residues), methanisation of livestock waste, and soil carbon sequestration using no-till practices. This is very little compared with the large number of mitigation technologies that could be used in this sector. The diffuse nature of agricultural emissions and the cost of the abatement measures are the main obstacles to developing agricultural projects. However, the introduction of multi-farm aggregators enables to share costs. Moreover, research on new techniques for measuring emissions more efficiently and less costly is a mean to overcome these obstacles and release the mitigation potential.

An achievement at the Durban summit (November 28 to December 9, 2011) is the decision to extend the Kyoto Protocol after its first commitment period ends in 2012. This extension essentially allows the continuity of the existing mechanisms and tools: the Clean Development Mechanism, Joint Implementation and the registries. Further, for the first time emerging economies, especially China, are willing to discuss emission reduction targets to be implemented in 2020. The summit has also led to implement the Green Fund and make changes to the accounting of forest emissions.

Local authorities (regions, departments, metropolitan areas and towns) are increasingly involved in defining and implementing policies to combat climate change. This is not a simple task, as beyond emissions generated by their administrative services, most greenhouse gas (GHG) emissions in their territorial jurisdiction are beyond their direct control. Often given responsibility for the emissions of all actors within their administrative boundaries, different local authorities are often restricted in their ability to foster reductions through their attributed jurisdictional competencies. Faced with such limitations in fostering reductions, voluntary offsetting is one of the tools available to local authorities for reducing territorial emissions, by either purchasing carbon credits in order to offset emissions or by selling generating credits in order to create a source of financial income. Although the voluntary offset market is still small in comparison with the compliance market created by the Kyoto Protocol, market participants find it to be a more flexible, innovative and responsive framework. In exchange, average prices, which are determined on an over-the-counter basis, are usually lower than those for compliance credits. At the same time, the compliance and voluntary markets reveal very significant differences linked to the nature of the project. This Climate Report presents ten case studies in order to better understand how and why local authorities use this instrument. Analysing the offer, local authorities that sell carbon credits account for a very small percentage – just 3% – of voluntary offset projects. Their typical profile is that of a US local authority, which is implementing a methane elimination project at its waste disposal site, primarily in order to anticipate future regulation and to obtain a source of additional financing. Local authorities’ share of the demand for voluntary credits is harder to quantify. The case studies nonetheless shed some light on the determining factor for a successful offset programme: namely a carefully designed project rooted in the local authority specific context and is shared by local players. In fact, the vast majority of local authorities prefer to buy carbon credits generated by projects implemented within their jurisdiction, in order to maximise other economic, social and environmental benefits than the simple reduction of GHG emissions. The choice of the financing vehicle (dedicated framework, tender or tax) depends on the size of the offset programme and on the type of projects targeted. It has no determining impact on the success and sustainability of the offset programme.

This study examines the possibilities to monetize on carbon markets four types of actions through which the forestry and wood sector can mitigate climate change: - Increasing the carbon stock in the forest - Increasing the carbon stock in wood products - Using wood as a substitute for fossil fuels (wood for energy) - Using wood as a substitute for materials more energy intensive (wood as a material) Actions of the "stock increase" type can theoretically be valued on the voluntary carbon markets. Developments are nevertheless necessary to make these valuations operational. Mechanisms of the "substitution" type can be valued only on the compliance market. They are currently valued at the level of the user (electric power generation, heating etc.); the forestry and timber industry can only participate in this system via agreements such as "supply contracts". - This report analyses three project types that could be carried out to activate these mechanisms: - Reforestation / Avoided deforestation - Improved forest management - Optimized utilization of products On the basis of seven hypothetical projects, this study identifies a strong carbon sink potential in France (several million metric tons of CO2), including afforestation, the conversion of coppice forest into high forest and the changes in the uses of harvested wood. Carbon certification is expensive and makes sense only above a critical size that enables project developers to recover their expenses. For reforestation projects in metropolitan France, for example, we estimate this size to be around 100 hectares. Several certification programs coexist on the voluntary carbon market. Their pertinence to the seven hypothetical projects is also analyzed, together with the conditions for carbon credits generated in the French forestry and wood sector to be monetized on carbon markets. To achieve this, two conditions need to be met: methodologies approved by standards should be developed, and the forestry and wood sector should implement a proper organization.

Although still accounting for a small segment of the global carbon market, the voluntary carbon market is a place for innovation where original solutions are proposed to deal with some challenges faced by the regulatory market, including efforts to value the occasional ancillary benefits of climate action, to simplify methodologies, or to guarantee the permanence of forestry assets. These innovations are reflected in the different standards used for voluntary offset projects and may provide some valuable lessons for on-going post-2012 negotiations. This study analyses two aspects of these standards: the type of projects they attract, and the transaction costs entailed by their procedures.Projects certified by “basic carbon standards” such as the VCS, the VER+ and the CCX are very similar to regular CDM projects, albeit for their size which can be smaller. Projects certified by “multiple benefits carbon standards” such as the GS and the CCB Standards however tend to be more diverse than CDM projects, both in terms of project location and technology.For large-scale projects, transaction costs can differ by up to 100% between standards, although they remain small compared to credit prices. For small-scale projects however, they can represent a real burden with costs around 2-3 €/tCO2e. The analysis of the internal rate of return (IRR) of hydro projects leads to a similar conclusion: as overall project costs dwarf certification costs, the choice of the standard has little influence on the IRR. However, for projects that require lower initial investments, such as biogas capture or manure management, the conclusion could be very different.

Although still accounting for a small segment of the global carbon market, the voluntary carbon market is a place for innovation where original solutions are proposed to deal with some challenges faced by the regulatory market, including efforts to value the occasional ancillary benefits of climate action, to simplify methodologies, or to guarantee the permanence of forestry assets. These innovations are reflected in the different standards used for voluntary offset projects and may provide some valuable lessons for on-going post-2012 negotiations. This study analyses two aspects of these standards: the type of projects they attract, and the transaction costs entailed by their procedures. Projects certified by “basic carbon standards” such as the VCS, the VER+ and the CCX are very similar to regular CDM projects, albeit for their size which can be smaller. Projects certified by “multiple benefits carbon standards” such as the GS and the CCB Standards however tend to be more diverse than CDM projects, both in terms of project location and technology. For large-scale projects, transaction costs can differ by up to 100% between standards, although they remain small compared to credit prices. For small-scale projects however, they can represent a real burden with costs around 2-3 €/tCO2e. The analysis of the internal rate of return (IRR) of hydro projects leads to a similar conclusion: as overall project costs dwarf certification costs, the choice of the standard has little influence on the IRR. However, for projects that require lower initial investments, such as biogas capture or manure management, the conclusion could be very different.

Forests have an essential carbon function, removing each year about 20% of global anthropogenic CO2 emissions. Models have been designed to quantify the distribution of CO2 fluxes and ecosystem carbon dynamics at the global scale, but these global vegetation models usually do not account for management and stand structure. In most cases - and in particular in the biosphere component of the IPSL ESM model (ORCHIDEE) - forests are represented as an average single tree that has reached a near-equilibrium state. This coarse representation has so far impaired the capacity of global models to correctly simulate the interactions between managed forests and the climate system. This presentation describes a new module that explicitly simulates forest management, stand structure, and tree mortality within ORCHIDEE. Forest representation is detailed from an "average tree" to an "average stand", with an explicit distribution in diameter classes that varies with stand age, location and climate. A set of rules are defined to calculate the critical tree density, intensity and frequencies of thinning, etc... Through a sensitivity analysis, the reaction of the model to changes in management and physiological parameters is presented. The model¿s fit to forest inventory data and yield tables is assessed. Eventually, the explicit simulation of forest management is shown to have an important impact on the simulation of biochemical cycles, both in terms of carbon fluxes and stocks.

Tropical deforestation is responsible for 15-20% of total man-made emissions of greenhouse gases. In December 2007, at the international conference of Bali, the United Nations acknowledged that a viable solution to climate change must include a mechanism to limit deforestation and forest degradation. Today, the most widely used economic tool to reduce emissions is carbon markets: caps on emitters, and trade allowed between emitters and reducers, drive a price signal on carbon and provide incentives to control emissions. This report examines the different possibilities to broaden the range of this tool so that it helps reduce emissions from deforestation. The three main possibilities presented are a tax-based fund, the use of auctions revenues, and the issuance of tradable credits. The report does not discuss other instruments unrelated to carbon-related payments. We first summarize existing information on the causes of deforestation, and the impact forest loss has on the global climate. To the contrary of a commonly held view, we find that farmers, more than loggers, are driving deforestation. Some, mostly in Africa, cut the forest to grow staple crops, while others, especially in South America, do so in response to the increasing demand for commercial crops and cattle. Building on this analysis, we describe the different possibilities to link carbon markets to the fight against deforestation. In the latter case of the issuance of tradable credits, we find that while carbon markets could substantially increase the amount of funding available to develop projects and programs that reduce deforestation, demand for carbon credits must keep up with this potential new source of supply, probably around one billion ton of CO2 per year. As an analysis conducted by EDF shows, the emission caps currently advocated by the European Commission for Europe and by the Lieberman-Warner bill for the US would create enough demand to generate a price signal around 20 €/tCO2. Other solutions such as reserve prices in auctions or credits banking have been put forward to mitigate the risk of too many deforestation credits flooding carbon markets. In any case, reducing deforestation and maintaining a high price signal on carbon markets are like conjoined twins in the fight against climate change. Their link can be both a source of strength and vulnerability, but they eventually are both essential to achieve the ultimate goal of stabilizing the climate.

Parallel to the implementation of the Kyoto Protocol, a growing number of companies and private individuals are making a voluntary commitment to offset their greenhouse gas emissions. The voluntary offset market is rapidly growing, with over 10 million tons of CO2 resulting from emissions reduction projects already being traded. Voluntary offsetting finances projects that are not subject to the “Kyoto” methodological framework, are often smaller, varied and sometimes innovative. This diversity is a source of richness, but the vagueness of the methodological rules and low product traceability can allow for poor quality projects and does not provide secured information for the buyer. This results in a troubling lack of price uniformity. The various quality labels and good-conduct approaches should permit progress towards improved product standardization and the emergence of a genuine market. Voluntary offset projects are most often developed in forestry and renewable energies sectors. Voluntary compensation projects involving industrial gases (N2O and fluorinated gases) are far less common than those under the Kyoto Protocol.

There is broad consensus that human emissions of greenhouse gases— principally carbon dioxide, but also methane and nitrous oxide—contribute to global warming. Because of water’s high capacity for heat retention, the warming effect is not nearly as clear in the atmosphere as it is in the oceans, which have warmed by approximately 0.5ºC (0.9ºF) over the past 65 years. Warming seas translate into numerous negative impacts, including coral reef bleaching, fish stock depletion, Gulf Stream disruption, stronger hurricanes, and, of course, a rising sea level. In order to better understand the challenges presented by sea level rise, in this study we review recent scientific publications and seek both to explain the phenomenon and to predict future effects. In order to gauge the potential benefits of a climate stewardship policy, we illustrate a range of possible impacts below one meter of sea level rise for selected sites both in the United States and worldwide, with three different scenarios for the 21st century in the background. The three scenarios are based on potential greenhouse gas concentrations that would result of three different types of climate policies.