MODELING THE ECONOMICS OF THE REFERENCE LEVELS FOR FOREST MANAGEMENT EMISSIONS IN THE EU

Jani Laturi (), Jussi Lintunen and Jussi Uusivuori
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Jani Laturi: Natural Resources Institute Finland (Luke), Jokiniemenkuja 1, FI-01370 Vantaa, Finland
Jussi Uusivuori: Natural Resources Institute Finland (Luke), Jokiniemenkuja 1, FI-01370 Vantaa, Finland

Climate Change Economics (CCE), 2016, vol. 07, issue 03, 1-22

Abstract: In the Durban climate change conference of UNFCCC in 2011 new accounting rules were agreed for forest sector in Annex I countries to provide incentives for forest management and emission mitigation. There was also pressure to modify accounting rules to avoid giving credits for sequestration which would occur naturally. New accounting rules are based on reference levels against which greenhouse gas emissions and sinks resulting from forest management are compared during the second commitment period (2013–2020) of the Kyoto Protocol. In this study we investigate the timber market impacts and the effectiveness of the reference level policy in promoting forest management actions in the EU countries. We also study how setting of caps for policy-based gains affects the effectiveness of the policy. We found that the policy enhances carbon sequestration, if it is implemented in such a way that it affects harvests. The market impacts and the effects on forest sinks can be substantial in countries where non-LULUCF sector emissions are high relative to the potential of forest resources to act as sinks. In smaller countries with relatively large forest resources, the effectiveness of the policy is dampened by upper limits imposed on the emission compensations. The results of our study can be used to improve the effectiveness of policies in climate change negotiations.

Keywords: Reference level; carbon sequestration; two-period model; timber demand; policy effectiveness; cap (search for similar items in EconPapers)
Date: 2016
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DOI: 10.1142/S2010007816500068

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