The Emerging Market for Land-Use and Forest Carbon

Brennan, K., Durschinger, L., Vogt, T.
April, 2013

Importance of Forest and Land-use Carbon to Climate Change Mitigation  
Human-induced climate change caused by greenhouse gas emissions is impacting the earth’s ecosystem stability through effects such as ocean acidification, thawing of permafrost regions, shrinking sea ice, increased incidence of extreme weather, and shifting precipitation patterns. These negative climate impacts are expected to cost the world between 5% and 20% in GDP annually.

Forest and land-use changes make a significant contribution to emissions through greenhouse gases (GHGs) released during deforestation and soil disturbance. Deforestation, after accounting for re-growth and afforestation/reforestation, accounts for 17.4% of global greenhouse emissions and the agriculture sector accounts for another 13.5%. To put these volumes into context, the forestry sector alone generates more carbon dioxide emissions than the entire transport sector, a level comparable to the annual carbon dioxide (CO2) emissions of the U.S. or China (given that the current GHG emissions are almost equal). Furthermore, a 2011 study released by a large group of leading climate scientists found that forest growth sequesters more carbon and deforestation releases more carbon than previously understood.

Given this dual impact, policy-makers are increasingly recognizing the need to address emissions levels from the land-use sector. And the forest and agricultural sectors are both core to effective sustainable development: economic benefits extend beyond emissions reductions to include stabilization of regional rainfall, improved soil stability, improved watersheds that reduce flood risk, maintenance of habitat, and improvements in livelihoods. The world’s forests support the livelihoods of up to 1.6 billion people and provide habitat to 80% of the world’s terrestrial biodiversity. And such “co-benefits” that have a critical important economic value. The deep impact of forest and land-use change programs means that today the sector is increasingly a focus of the impact investment community. Market commentators expect continued emphasis in 2013 on carbon program’s social and other “non-carbon” benefits along with continued standardization of approach and the development of frameworks assessing emissions reduction program opportunities across jurisdictions rather than on a project-by-project level.