Franco-Polish workshop on the introduction of forest carbon credits in the EU-ETS Pologne

Context of the service

Directive 2003-87-EC, which created the European carbon market (EU-ETS), was supplemented by Directive 2004-101-EC, which authorises the use of carbon credits from projects carried out under the Clean Development Mechanism (CDM) or the Joint Implementation Mechanism (JI). Article 11 bis of Directive 2004-101-EC prohibits the use of forest carbon credits from afforestation/reforestation CDM projects. This ban is linked to three fears: (i) carbon removals are not permanent in afforestation (trees may be destroyed), (ii) that the credits are not additional (because the forest would grow "alone"), (iii) that the entry of these credits causes the carbon market to fall (because afforestation would be inexpensive to achieve).
As EU-ETS is the main regulated market under the Kyoto Protocol, the ban on forest carbon credits in this market has completely inhibited the rise of afforestation CDM projects. At the beginning of 2007, there were only seven projects approved and only one registered. In order to change this state of affairs, the French Government has ensured that the Conclusions of the European Environment Council of spring 2007 mention the fact that the European Union could "consider the inclusion of forest carbon credits in the European market".
Following this breakthrough, the expert drafted a technical note without letterhead called "non paper" and entitled "Why Member States have an interest in including forest carbon credits in the European market", which was then translated and widely disseminated by the Environment Attachés of the France Embassies located in the European Member States. In addition to this dissemination, the expert organized a joint workshop with Poland, which shares French views on the issue.

Services provided

The expert wrote a "non paper" articulated around three main arguments: 1/ Environmental interest of the inclusion of forest carbon credits: (i) forests are more than carbon. Putting a price on this carbon does not reduce them to this single dimension, but makes it possible to provide co-benefits (protection of water, biodiversity, etc.), (ii) the objective of stabilizing the temperature below +2°C will only be achieved if developed countries reduce their greenhouse gas emissions by -20/30% by 2020... And this is only achievable by mobilizing all sectors, forest included. However, the ban on forest carbon credits in the European market does not encourage developed countries and their foresters to improve sequestration, 2/ Economic interest: (i) the marginal cost of abatement in the forest sector is low and therefore interesting ("low hanging fruits"), (ii) but this cost is not so derisory as to cause a massive transfer of mitigation efforts from the fossil sectors to the forest sector, (iii) temporary credits generated for afforestation CDM projects (CER and CER) are less expensive than "standard" CDM credits and allow carbon-constrained industries to "buy time": they can use inexpensive CERs, before replacing them after five years by "normal" credits, 3/ Political interest: 2/3 of CDM credits come from India, China and Brazil... And only 6% from Africa. The CDM potential in the fossil fuel sectors is indeed low in Africa and LDCs in general: the establishment of afforestation CDM projects could make it possible to restore some of this imbalance. The non-paper was presented in Poland, debated with MEPs and proposals for amendments to Directive 2003-87 were identified.

Summary of the service

Drafting of a "white note" entitled "Why Member States have an interest in including forest carbon credits in the European market"; Wide distribution to the Environmental Attachés of France Embassies established in the European Member States; Preparation and facilitation of a joint Franco-Polish workshop on the issue; Identification of proposed amendments to Directive 2003-87 to facilitate the introduction of forest carbon credits in the EU-ETS.