Runsheng Yin

The Nationally Determined Contribution architecture of the Paris Agreement has laid the foundation for adopting jurisdictional approaches to governing climate solutions, including those in the forest sector. Meanwhile, the underwhelming aggregate progress and the questionable practices of the voluntary carbon markets call for the nesting of local projects into jurisdictional programs. The objective of this paper is to present our perspective on the comparative performances of the jurisdictional and project-based approaches. Drawing upon the recent developments in the design and execution of climate policy and the theory of political economy, we examine the distinctions between and advantages of the alternative approaches. We show that a jurisdictional approach makes it more feasible for the carbon accounting principles to be followed and the safeguards for emission reduction and removal enforced. Also, jurisdictions tend to have stronger capabilities of measurement, reporting, and verification in carrying out their commitments, and jurisdictional approaches can alleviate the entry barriers and high transaction costs. These advantages can lead to a greater likelihood for countries to accomplish their climate ambitions. In contrast, while individual projects reflect bottom-up initiatives and linkages to local interest and indigenous participation, their weaknesses, such as the limited capacity and coordination and the lack of accountability, have unraveled. However, jurisdictional approaches face their challenges as well, as they may be insufficiently transparent or flexible, or subject to corruption and political turnover. Therefore, we also deliberate how to carry out jurisdictional approaches effectively while avoiding their shortcomings to contribute to an accelerated implementation of nature-based climate solutions.

This article presents our perspective on how to tackle the institutional and technical issues coherently by asserting that it is paramount to build a more balanced portfolio of knowledge base and policy response.

The question of funding necessary climate actions, including those in the forest sector, to drastically reduce greenhouse gas (GHG) emissions and global warming, is important to both national governments and international agencies. The objective of this paper is to address this question by reviewing and synthesizing the economic principles associated with reducing GHG emissions, the pricing mechanisms used to achieve that goal, and the diverse practices of climate finance. Included in the carbon pricing mechanisms and practices are carbon tax, compliance and voluntary emission trading, internal pricing, and funding via issuing bonds or mobilizing public budgetary resources. Then, it proceeds to describe the roles that public and private organizations can play and have played in supporting emission reduction and removal, which serves as a vital backdrop for examining current states and relative costs of forest sector initiatives. Overall, as reported by the World Bank, only about 23% of global GHG emissions are subject to any explicit price, and 75% of the emissions that are subject to a price are charged less than $10 per tCO₂e. Market-based forest finance and international support for reducing emissions from deforestation and forest degradation have accounted for a small fraction of the total spent on climate mitigation and adaptation. Further, the more recent developments in carbon pricing and funding remain slow and disappointing. Without the right scale of green finance at the right time, however, it will be difficult to achieve the needed energy and economic transformation.

This book addresses the major policy, economic and financial issues encountered in global forest carbon. The global forest sector is expected to play a major role in achieving the Paris Agreement’s temperature targets. Therefore, there is an urgent need to explore practical and promising solutions to the challenges facing carbon accounting and policy assessment as the global community undertakes forest sector actions—including the widely known REDD+ initiative. This book demonstrates how vital it is that we identify appropriate perspectives and formulate approaches to address these challenges in an integrated and effective manner. In doing so, it addresses many of the major issues, including the differential potentials for carbon sequestration within various forest ecosystems as well as for storage within a variety of harvested wood products, the joint production of timber and carbon, and the measurement and impact of forest carbon offsets and credits, results-based payments, and other nationally determined contributions centered differences as well. The book examines regional and country-level case studies from across the world and draws on the author's decades of experience working on forest policy and with the forest sector. Overall, this book highlights the technical and policy issues regarding forest sector carbon emission and removal to build useful perspectives, frameworks, and methods for addressing these issues successfully in the future. It advances the knowledge frontiers of global forest carbon policy, economics and finance as well as the ability to assess the effectiveness, efficiency, and equity of forest climate solutions. This book is essential reading for professionals and policymakers working at the intersection of forest policy, carbon storage and climate change, as well as students and researchers in the fields of forestry, natural resource management, climate change and nature-based solutions.

This chapter reviews the relevant provisions of the Paris Agreement (PA) and deliberates their implications for the forest sector. It describes the processes, principles, and practices pertinent to forest sector climate actions, covering such topics as targets and indicators, scope and information requirements of forest-sector actions, progress tracking and stock taking, anthropogenic testing, carbon accounting, and climate governance. Along the way, the chapter offers the author’s perspectives on and proposed solutions for some of the problems likely to be encountered in implementing the PA. Improved measurement and monitoring is necessary if a Party intends to include forest sector carbon pools as part of the offsetting credits in its accounting of greenhouse gas emissions and removal. Furthermore, jurisdictional approaches to governance as established under the PA imply that forest sector actions taken by subnational and other entities should be nested within a Party’s nationally determined contribution. Finally, the chapter explores the prospects for results-based payments schemes to be carried out at scale.

The question of the funding necessary for mitigation and adaptation, including that in the forest sector, to drastically reduce greenhouse gas (GHG) emissions is important to both domestic governments and to international agencies. This chapter begins with an exposition of the economic principles associated with reducing GHG emissions and the mechanisms used to achieve that objective through various forms of carbon pricing. Then, it proceeds to describing the roles that the public and private sectors can play and have played in financing emission reduction and removal. This is important background for examining current states and relative costs of different initiatives for supporting forest sector actions. The existing evidence suggests that only about 25% of global GHG emissions are subject to any price whatsoever, and 75% of the emissions that are subject to a price are charged at less than $10 per tCO₂e. REDD+ and market-based forest finance have accounted for a tiny fraction of the total finance spent on climate change mitigation. The economic rewards and penalties for incentivizing polluters to abate their emissions continue to be very weak.

This chapter examines the potential for the forest sector in an example country as it decarbonizes. China is more than an important example because its trajectory of emission reduction and removal is crucial for the entire global impact on climate change. An assessment of the role of China’s forest sector in achieving its goals of carbon emission reduction and neutralization requires projections of carbon sequestered in forest ecosystems (FESs) and stored in harvested wood products (HWPs), and these projections must be placed in a coherent framework of carbon accounting. Building on these steps, the chapter shows that during 2006–2020, China’s forest sector’s biomass and soil carbon sequestration reached 2.589 petagrams (Pg) and 1.275Pg. Its storage in HWPs was 0.491Pg. These outcomes would have offset 11.76% of the country’s cumulative carbon emissions. For the period from 2006 (the baseline) to 2060 by which time it will achieve net zero, FES biomass and soil carbon sequestration project to 7.574Pg and 3.730Pg, and carbon storage in HWPs projects to 1.709Pg—even under conservative assumptions. These estimates would lead to an overall ratio of 14.72% of carbon emissions offset by the forest sector.

This chapter provides an organized sorting of jurisdictional and other approaches to governing forest climate solutions. Adopting the nationally determined contribution (NDC) framework by the Paris Agreement (PA) has made what we learned under the Kyoto Protocol (KP) no longer adequate. Moreover, compared to the KP’s project orientation, the NDC architecture creates a foundation for jurisdictional approaches. As a result, it has become vital to harmonize our past experience and lessons with the changed landscape of climate governance regarding emission reduction by sources and removal by sinks. The chapter draws on the recent literature to consider: (1) the differences between the project orientation of the KP and the jurisdiction architecture of the PA as displayed in their different baselines, financing mechanisms, and mitigation potentials; (2) the comparative advantages of jurisdictional approaches as manifested in the compatibility of the PA’s carbon accounting requirements, the essential capacity of measurement, and monitoring, reporting, and verification, and the alleviation of entry barriers and costs; and (3) the ways to implement jurisdictional approaches while avoiding their shortcomings.

In forest carbon accounting at the micro level, inconsistencies and even confusion abound regarding how timber and carbon are treated as joint products, whether the Paris Agreement principles of additionality and permanence are followed, and if the varied composition and duration of harvested wood products (HWPs) are captured. This chapter addresses these issues using two alternative frameworks. The first features a Hartman modification of the Faustmann model for forest growth and harvest without incorporating the accounting principles and HWPs. The second builds from a profit function of forest production incorporating the accounting principles and measures of HWPs. Based on the pine plantations of the US south, it is found that the carbon outcomes of the two frameworks vary greatly. The Hartman-Faustmann framework exaggerates carbon credits for a landowner by a factor of ≥2.76. Furthermore, while adding carbon to the valuation has limited effect on the optimal harvest age, it increases net revenue by a substantial margin. These distinctions are of broad importance as policymakers and foresters in all regions of the world look for appropriately integrated assessments of forest sector solutions to the climate crisis.

This final chapter summarizes the main findings of previous chapters, and it then draws overall conclusions and discuss broader implications for further research and for continued deliberations of forest sector policies and strategies for mitigating, as well as adapting to, climate change. A basic conclusion is that the data and analyses we do have suggest that carbon sequestration and storage of the forest sector can offset a significant share of the total greenhouse gas emissions of many countries or the whole world. However, existing data do not always permit consistent or comprehensive assessments of forest sector carbon policies; better inventory data on the relevant carbon pools are crucial. Meanwhile, further attention must be directed to resolving a multitude of challenges to enable the sector to live up to its expected role in offsetting and ultimately neutralizing carbon emissions on a more efficient and sustainable basis. These challenges pertain to forest tenure and governance, carbon pricing and market-based solutions, adoption of a proper term structure of discounting, alternative practices of carbon accounting and assessment, and contextualization of the impact evaluation of different programs and projects.