Australia's forests poised for CO2 trade boom

Reuters 22 May 09;

(Reuters) - Forests soak up planet-warming carbon dioxide gas as they grow and planting large stands of trees is one strategy that carbon-polluting firms hope will offset emissions from industry and transport.

Emissions trading laws before the Australian parliament, if passed in coming weeks, would allow the nation's forestry sector to be the first to operate under the scheme from July 1 next year, giving it a competitive advantage.

Here are some facts about Australia's forestry sector and how it will operate under the planned emissions trading scheme.

HOW LARGE IS AUSTRALIA'S FORESTRY SECTOR?

Forests cover nearly 21 percent of Australia's landmass, sprawling over about 150 million hectares (375 million acres). Of this, 147.4 million ha are native forests and nearly two million ha are plantations. About 800,000 ha of plantations are dedicated to carbon sequestration, a process of locking carbon away in natural structures.

The sector employs about 77,000 people with total economic turnover of A$19 billion.

Under the federal government's 2020 Vision, there is a national target to increase the area of commercial plantations to 3 million ha over the next decade.

HOW MUCH CARBON DO PLANTATIONS LOCK AWAY?

This varies greatly, depending on the location, tree species and climate. For some species of native eucalypts, it can be any where between 10,000 and 40,000 tonnes per annum per 1,000 ha.

At present, Australian plantations soak up 20 million tonnes of CO2 each year but there is huge potential to increase this if emissions trading laws pass parliament. This would set a national carbon price and the tougher the carbon reduction target, the greater the likely incentive to invest in forests.

Government projections estimate the growth in land under forestry could provide a cumulative net carbon sink of between 1.3 billion and 4.3 billion tonnes of CO2 from 2005 to 2050, depending on the carbon price and targets.

HOW ARE CARBON OFFSETS ISSUED?

At present, forestry firms can only issue voluntary carbon market credits called verified emissions reductions, or VERs, and these are issued based on a calculated annual amount of carbon a plantation locks away.

Forestry firms use complex carbon accounting methods to monitor and verify the carbon reductions. These methods must meet national standards, such as the federal government's Greenhouse Friendly scheme or state-based rules, such as the New South Wales Greenhouse Gas Abatement Certificates scheme and the United Nations' Kyoto Protocol.

For example, under Kyoto, an eligible forest must have a potential crown cover of at least 20 percent of the area occupied by the stand; has been established by direct human efforts; and is on land that, as at 31 December 1989, was clear of trees with a potential height of at least two meters and a potential crown cover of at least 20 percent.

Native forests will not be initially included in national emissions trading.

HOW WILL FORESTRY WORK UNDER EMISSIONS TRADING?

The final regulations have yet to be announced but an eligible forest would have a carbon permit life of 130 years. This means a plantation owner must guarantee the carbon underpinning the permit for 130 years.

For commercial production forests, owners would have to ensure that somewhere in the forest estate there is enough carbon sitting there to underpin the carbon permit for 130 years.

(Sources: Department of Agriculture, Fisheries and Forestry (www.daff.gov.au/ ); Department of Climate Change (www.climatechange.gov.au ); National Association of Forest Industries (www.nafi.com.au/site/ )

(Writing by David Fogarty; Editing by Clarence Fernandez)