Tag: accounting

New Zealand has landed in a pickle over its forest accounts.  The age structure of NZ’s plantations means that major harvesting is due to start late this decade and continue into the 2020s. Combine this with the new afforestation/reforestation debit-credit rule and the gains NZ wrangled in LULUCF look likely to evaporate – its carbon accounts skewed into the negative. ECO might even have a rare twinge of sympathy for NZ.

But ECO has no sympathy for New Zealand when it comes to gross emissions.  They’ve continued rising since 1990 and are projected to continue rising, even with its much-talked-about-but-rather-weak Emissions Trading Scheme.

Worse, having agreed in Cancun that developed countries should write a low carbon development plan, New Zealand is showing no sign of writing one.  It certainly has no plan to get gross emissions on a downward trajectory.

Instead New Zealand is planning just everything possible to increase emissions: dairy farming expansion, unprecedented levels of coal mining, a major road building programme, more oil and gas exploration, and, to cap it all (no pun intended) off, the state owned mining company wants to dig up 1.5 billion tonnes of lignite and turn it into fuel and fertiliser.

It’s no wonder New Zealand wants rules for setting QELROs that would enable it to meet its 20% by 2020 target and end the second commitment period with over 22 million spare AAUs – a tidy sum for a small country.

So, where does all this leave New Zealand’s decisions on CP2 of Kyoto, its 2020 target and its QELRO? NZ is quietly desperate to accommodate its planned increase in gross emissions and expected blow-out in net emissions.  With no intention of actually reducing gross emissions, NZ’s only course of action is to play with the accounting system. This means trying to ensure maximum carry-over of surplus AAUs from CP1 to CP2, securing access to the cheapest carbon credits possible (euphemistically “full recourse to carbon markets”) and a handout of AAUs from new accounting rules.

It looks like New Zealand’s decision on CP2 will depend on who New Zealand wants to be friends with and whether the accounting system is sufficiently favourable. Failing to meet a voluntary commitment under the Copenhagen Accord has political consequences, but failing to meet a binding commitment under CP2 has political and economic consequences. So no surprises then that New Zealand has not submitted its QELRO, is focused on the accounting and has also created an impossible hurdle (see the demand for a "balancing agreement" in its recent submission) in case an excuse is needed to bail from the Kyoto ship.

As negotiations have now gone into a somewhat un-transparent mode, ECO had little choice but to catch delegates on their way out of the developed country mitigation informal yesterday – and was pleasantly surprised that indeed Parties used the session to address two of the elephants in the room – the lack of ambition of developed countries’ pledges, and the need for common accounting rules. It came as no surprise that while almost everyone recognized the latter, a few considered that such accounting would pose inconvenient hurdles they weren’t ready to take. This “unhelpfully resisting the numbers,” as one delegate put it after the session, doesn’t strike ECO as particularly plausible for a country that in other circumstances insists on level playing fields (when it suits them).

 ECO was pleased to hear the EU referring to its submission on options for increasing ambition. Their proposal indeed contains a useful list to start with. However, the most obvious “option” for the EU does not require a submission but bold action – upping its own target to 30% reductions by 2020. One (large) developed country has been reported to have suggested that the meeting was not the place to discuss increasing ambition by developed countries. If not here, then where, wonders ECO. Yet, there has been no lack of ideas to increase ambition. ECO cannot resist to line them up into four broad steps, as a service to the hurried negotiator and to help the upcoming next informal meeting today:

Step 1would seek full clarity on developed countries’ net domestic emissions in 2020 resulting from current pledges, based on assumptions on LULUCF accounting, AAU carry-over, or the use of carbon offsets.

Step 2would close the damn loopholes. For instance, LULUCF rules would use historic reference levels rather than some bogus projections into the future; AAU carry-over would be limited and no new hot air allowed to enter the system – you get the picture.

Step 3would move developed countries to the high end of their pledges as a first step. Where needed, countries would clarify (a) what part of the conditions have been met so far and (b) what would fulfill the remaining conditions.

And finally, Step 4, developed countries would go beyond the high end of their current pledges to get them into the 25-40% IPCC range, and then (double-check with them if they are still up for 2°C) to at least 40% cuts by 2020. Difficult? Ask Denmark.

Parties don’t want to have to account for forestry emissions not caused by humans, like wildfires. Fair enough you might say, but this is being used as another attempt to hide emissions.

Until recently, only events classified as force majeure - large-scale events beyond the control of Parties - would be excluded. However, the language of “force majeure” has now been dropped in favour of the less specific  “natural disturbance”. Whether its called natural disturbance or force majeure, the CAN view is that any mechanism agreed in the LULUCF rules must transparently and conservatively factor out emissions and removals from extraordinary natural disturbances only.

So what the heck does that mean?

 “Extraordinary” has to be defined.  And its definition shouldn’t be wildly at odds with a plain English meaning of, well, extraordinary.  Common sense suggests that it should only be used for statistically extremely rare events and the same provisions for natural disturbance should be consistent for all Parties.

It also means you can’t hide just any (or all) of your debits.  And it means you shouldn’t hide emissions if they come from stuff you did (like harvesting, or salvage logging).  Because its natural disturbance, remember?  It means you need to really clearly say where, why, and how much you are calling natural disturbance (i.e. show your work!)

It means that you have to treat natural disturbances in exactly the same way in your baseline as you do in the commitment period you’re accounting emissions. Finally, it means you have to be able to measure them really well, and that requires high quality data.

So in short, a natural disturbance mechanism for LULUCF has to retain the common sense meaning of force majeure. If parties are worried their carbon sequestration will go up in smoke, they should discount the credits.