The Role of Carbon Sequestration in the U.S. Response to Climate Change--Challenges and Opportunities

The Role of Carbon Sequestration in the U.S. Response to Climate Change—Challenges and Opportunities

David J. Hayes and Nicholas Gertler

David J. Hayes is the National Chair of the Environmental Department at the law firm of Latham & Watkins. His practice focuses on counseling, litigation, and transactions involving environmental, energy, and natural resource matters. Mr. Hayes served as Deputy Secretary of the Interior during the second term of the Clinton Administration. He also served as Chairman of the Board of Directors of the Environmental Law Institute. Nicholas Gertler is an associate in the Environmental Department at Latham & Watkins. He is a graduate of Massachusetts Institute of Technology and Harvard Law School. The authors thank Laura D. Davis for her assistance in the preparation of this Dialogue.

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Climate change is widely acknowledged as one of the greatest environmental challenges facing the United States and the international community.¹ The Bush Administration's rejection² of the Kyoto Protocol (the Protocol)³ and related activities have focused a significant amount of public attention on the issue, both at home and abroad. The recent international agreement on rules for implementing the Protocol⁴ has added further currency to the climate issue, by laying the groundwork for an international regime for controlling greenhouse gases (GHGs) to come into force.

Climate change policy is receiving serious domestic consideration⁵ despite the Bush Administration's firm position⁶ that the United States will not ratify the Protocol. The U.S. Congress is considering a number of climate change-related measures⁷ that would establish reporting, monitoring, and potentially, emissions reductions and trading obligations. These may, or may not, mesh with the emerging global scheme. In addition, there is increased interest in exploring policy options relating to carbon sequestration: the trapping of carbon dioxide (CO₂) in forests, soils, and other natural resources.⁸

Carbon sequestration activities are aimed at removing CO₂ from the atmosphere and complement emissions limitations in reducing the atmospheric concentration of GHGs. Although scientific debate remains regarding their robustness over time, forest sinks for CO₂ have the potential to play a valuable role in carbon sequestration while providing collateral environmental benefits. In addition, grasslands, wetlands, and agricultural lands also have carbon absorption and sequestration potential.

Although sinks are only a partial solution to anticipated global warming, they may offer an important, cost-effective approach for removing CO₂ from the atmosphere over the next half century. Carbon sinks offer advantages that are likely to make them important complements to emission reduction measures in any regime for addressing climate change. Investments in forests, rangelands, and other resources also can provide collateral conservation and biodiversity benefits if such assets are managed wisely.

The recent international agreement at the Seventh Conference of the Parties (COP-7) to the Protocol at Marrakech, Morocco, firmly established carbon sinks as legitimate and creditable elements of a climate change mitigation strategy under the Marrakech Accords. The agreement calls for creation of a new type of emissions credit for carbon sinks that can be sold or used to offset a party's emissions and, with certain limitations, allows credit for carbon sinks to be treated equally and interchangeably with emissions credits generated under the Protocol's flexibility mechanisms.⁹

In the United States, Congress and the Bush Administration are both considering what role carbon sequestration should play in the climate change area. Given that the Bush Administration has moved away from support of caps on CO₂ emissions because of concerns about economic impact and energy supply, while acknowledging that climate change is a "real problem," carbon sinks could play a significant role, particularly in the early phases of any long-term comprehensive carbon mitigation plan.

U.S. climate change policy is thus at a critical juncture, creating both risks and opportunities for firms with potential [32 ELR 11351] liabilities in a GHG control regime. With carbon sinks having been firmly established as legitimate elements of GHG mitigation under the Protocol and receiving significant attention domestically as Congress and the Bush Administration consider the U.S. response to climate change, there is a crucial need for considered policy development on carbon sequestration.

The Promise of Carbon Sequestration

Allows Time to Develop and Evaluate More Fundamental Technological Changes

A comprehensive approach to climate change may require fundamental changes in technological systems to achieve a substantially reduced reliance on carbon-based fuels. In the interim, carbon sinks have the potential to offer cost-effective emissions offsets during the decarbonization process. Carbon-intensive businesses in transition to less-intensive technologies, but in need of large near-term carbon offsets during their transition periods, may be able to find immediate benefits in forest preservation and similar carbon sink projects. Alternatively, companies looking to offset future carbon emissions can turn to options such as reforestation and afforestation (the regrowth and creation of forests, respectively), which will provide increasing offsets over several decades.

Increases in soil carbon sequestration also can play a significant role in delaying the need for more technically complex solutions. For agricultural soil carbon only, estimates are that 35 years of time might be "bought" before major investments in the world's energy production system would be required to meet a goal of 550 parts per million (ppm) atmospheric CO₂. This would allow time over the next quarter century for other carbon management options to be evaluated and implemented.

Carbon sequestration has at times been criticized as being diversionary from the "real" project of reducing GHG emissions. Given the enormity of the challenge entailed by the potential need to reverse increases in atmospheric GHG loadings, rejecting carbon sequestration on this basis may well be a luxury that the United States cannot afford. Emissions reduction strategies will proceed, but sinks also warrant consideration as a complementary strategy to addressing climate change.

Creates Incentives for Conservation and Related Environmental Benefits

In addition to offsetting GHG emissions, properly designed carbon sequestration projects also can offer collateral environmental benefits. Preserving, conserving, expanding, and sustainably managing forests can provide not only carbon sinks, but secondary benefits, including reduced flooding and improved urban water supplies by protecting watersheds, protection of biodiversity, and improved soil fertility and wood supplies. Indeed, the management of forests with the goal of carbon sequestration is not meaningfully different from existing management practices aimed at timber harvesting, wildlife preservation, and recreation, creating possibilities for synergies among these benefits. Forests also may be managed strictly to sequester carbon, with a slight reduction in collateral environmental benefits. However, as a general matter, forest preservation correlates with enhanced protection of biodiversity.

The Building Blocks of Carbon Sequestration: Forests, Grasslands, Wetlands, and Agricultural Lands

A fundamental attribute of the climate change problem that makes reliance on sinks viable is that GHG emissions rapidly disperse into the planet's atmosphere. In this regard, GHGs can be said to be "well mixed." Two implications follow: first, carbon that is removed from the atmosphere by a sink may be roughly equivalent to an equal reduction of GHG emissions¹⁰; and, second, that it does not matter where on the planet emissions are reduced or carbon is sequestered—any reduction anywhere is equally valuable. A further implication of these factors is that sound climate change policy will seek least-cost solutions to carbon sinks and emissions reductions regardless of the location of these activities.¹¹

The primary environmental media that hold promise for sequestering carbon are ecosystems and soil.¹² The fundamental science of carbon sinks in ecosystems is straightforward; biological growth binds carbon in the cells of trees and other plants while releasing oxygen into the atmosphere, through the process of photosynthesis. Ecosystems with greater biomass divert more CO₂ from the atmosphere and sequester it; forests in particular can absorb large amounts of carbon. Grasslands, wetlands, and agricultural lands also offer the potential to act as sinks. Although grasslands do not build up a large above-ground biomass like forests do, they are effective in sequestering carbon into the soil. Wetlands, too, hold large amounts of carbon in storage. Agricultural lands also can contribute to carbon absorption if managed with this goal in mind. No-tillage agriculture offers the potential to restore large volumes of carbon to agricultural soils and contribute to the absorption of carbon from the atmosphere.¹³

Although the fundamental principle on which sinks operate is well understood, quantifying the amount of carbon that is sequestered and determining the robustness of such sinks over time remain the subject of scientific controversy. Forests have featured most prominently as offering the greatest near-term potential for human management as a [32 ELR 11352] sink. Unlike many plants and most crops, which have short lives or release much of their carbon at the end of each season, forest biomass accumulates carbon over decades and centuries. Furthermore, carbon accumulation potential in forests is large enough that forests offer the possibility of sequestering significant amounts of additional carbon in relatively short periods, i.e., on the order of decades. Recent scientific findings, however, have raised questions about the permanence of terrestrial sinks, particularly those that are not actively managed.¹⁴ Others have highlighted the continuing uncertainty regarding the ultimate fate of carbon sequestered by forests.¹⁵

Among potential concerns is the possible release by forests of the large amounts of carbon they store. A forest may become a source of carbon due to biomass reductions from fire, tree decomposition, or logging—any of which will reduce the forest biomass. In the case of decomposition or fire, forest carbon is released into the atmosphere. However, the forest may again become a carbon sink as it is restored through forest regrowth. A comprehensive carbon sequestration policy should take into account the potential of forests and other sinks to both sequester and release carbon into the atmosphere.

The State of Carbon Sequestration Policy in the United States

Legislative Initiatives

In the United States, Congress and the Bush Administration are both considering what role carbon sequestration should play in the climate change area. More than a dozen bills were introduced in the first session of the 107th Congress that include components related to carbon sequestration and climate change. Several of these initiatives focus exclusively on carbon sequestration. The omnibus Farm Bill, which President George W. Bush recently signed into law, contains provisions aimed at encouraging carbon sinks.¹⁶ And compromise language in comprehensive energy legislation passed by the U.S. Senate would recognize carbon sequestration activities in a voluntary regime for GHG reporting.¹⁷

In general, legislation introduced in Congress includes the following components:

. Creating programs and providing funding to assist land owners/users in setting aside acreage for carbon storage purposes. Many of the provisions are geared toward agricultural lands but some programs include forest lands. (S. 130, S. 785, S. 820, S. 932, S. 1131, S. 1255, S. 1571, H.R. 1335, H.R. 2646);

. Providing investment tax credits for carbon sequestration projects. (S. 765, S. 1293);

. Establishing or updating measurement, reporting, verification, and registration mechanisms for voluntary carbon storage in the United States (S. 820, S. 1255, S. 1294, S. 1571, S. 1716, S. 1731, S. 1781);

. Establishing offices and/or programs to collect, monitor, and analyze carbon sequestration data, including baseline data. (S. 1008, S. 1255);

. Providing research and development money in support of carbon storage research, technologies, and implementation strategies. (S. 1008, S. 1131, S. 1294, S. 1731, H.R. 1335); and

. Providing funds for developing countries to promote climate change and energy efficiency programs including increasing carbon sequestration activities.

Importantly, there appears to be general bipartisan consensus on the need to focus on the issue of carbon sequestration—encouraging demonstration programs on private land in America, providing more money to research and development efforts, and establishing an office(s) in the federal government where carbon storage can be reasonably measured, monitored, and verified. As a result of this consensus, standalone legislation also could be enacted in this session.

The Bush Administration's Carbon Sequestration Initiatives

Carbon sequestration looks to figure prominently in the Bush Administration's approach to climate change as well. After repudiating the Protocol, the Administration focused its climate change policy on encouraging more research and development efforts on the science of climate change and GHG reduction strategies.¹⁸ Following a high-level policy review, President Bush announced in February 2002, his Administration's goal of reducing the GHG intensity of the U.S. economy by 18% over the next 10 years. GHG intensity measures the ratio of GHG emissions to economic output; the approach focuses on reducing the growth of GHG emissions per unit of economic output while seeking to avoid economic disruption that may follow from more aggressive emissions reduction strategies. The Administration's Climate Change Policy Book notes that

until we develop and adopt breakthrough technologies that provide safe and reliable energy to fuel our economy without emitting [GHGs], we need to promote more rapid adoption of existing, improved energy efficiency, and renewable resources that provide cost-effective opportunities to reduce emissions. Carbon sequestration in soils and forests can provide tens of millions of tons of emissions reductions at very low costs.¹⁹

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The Administration plan included a fiscal year (FY) 2003 budget request of $ 3 billion for carbon sequestration initiatives in the Farm Bill. The president also has called on the Secretary of Agriculture to provide recommendations for further, targeted incentives aimed at carbon sequestration by forests and agricultural lands. In addition, the Administration is undertaking a multi-agency process to develop accounting rules and guidelines for crediting sequestration projects, taking into consideration emerging domestic and international approaches. The Administration's plan appears to acknowledge a strong possibility of future regulation, in calling for the U.S. Department of Energy (DOE) to recommend reforms to ensure that businesses and individuals who register reductions are not penalized under a future climate change policy and to give transferable credits to companies that can show real emissions reductions.

The February 2002, announcement followed a U.S. Climate Change Research Initiative, announced in June 2001, that directed Secretary of Commerce Donald Evans to coordinate climate change research with other agencies and to set priorities for research areas that need additional funding or acceleration. Carbon sequestration research and demonstration efforts form a significant element of this strategy. In July 2001, President Bush announced a $ 1.7 million federal contribution to a joint project with The Nature Conservancy, General Motors, and American Electric Power to study how CO₂ can be stored more effectively by changing land use practices and investing in forestry projects. In this project, researchers will study forest projects in Belize and Brazil to determine their carbon sequestration potential. This partnership is part of DOE's plan to spend $ 25 million on eight carbon sequestration projects, including additional carbon sink research that includes the testing of new software models that predict how carbon is sequestered by soil and vegetation at sites in the United States and abroad.

In addition, DOE's National Energy Technology Laboratory (NETL) administers a carbon sequestration project, focused on commercial carbon sequestration concepts, whose stated purpose is to bring these concepts to commercial "deployment" by 2010. Program goals include sequestering carbon at a cost of $ 10 per ton of avoided carbon, and providing economically competitive and environmentally safe options to offset projected growth in baseline emissions of GHGs by the United States after 2010. The project's website states that "sequestration of carbon in terrestrial ecosystems offers a low-cost means of reducing net carbon emissions with significant collateral benefits." The NETL works with private industry, the U.S. Department of Agriculture, and the U.S. Department of the Interior's Office of Surface Mining.

The Role of Carbon Sequestration in the International Climate Change Regime

Domestic carbon sequestration initiatives cannot be divorced from the Protocol to the United Nations Framework Convention on Climate Change (UNFCCC), the primary international driving force for GHG reduction. Capping a four-year effort to fill in the details necessary to implement the Protocol, negotiators reached agreement at the COP-7 on a set of issues critical for defining the Protocol's emissions reduction framework. The resolution of these outstanding issues is widely believed to have prepared the treaty for ratification.²⁰

The Kyoto regime includes the principle that countries may receive credit toward their emissions targets for carbon absorbed by forests, soils, and other sinks. Disagreement over the scope and extent to which emissions credits could be generated by sinks was among the primary reasons for the failure in November 2000, of COP-6 at The Hague. This issue was resolved on a macro scale by the Bonn Agreement (COP-6.5), which defined the kinds of sink activities that are eligible and, for forest management, set country-specific caps for each Annex I country, i.e., each country with a fixed emissions reduction target, on the total number of credits that could be generated. The Marrakech Accords filled in much of the remaining detail regarding the treatment of sinks under the Protocol, defining the interaction of sinks with the Protocol's flexibility mechanisms and allowing for broad reliance on these mechanisms to offset emissions. These details include:

. Flexibility Mechanisms. The agreement defines operating rules for international emissions trading and the Protocol's two other flexibility mechanisms (the clean development mechanism (CDM) and joint implementation (JI)) and rules defining a party's eligibility to participate in these mechanisms. These issues, among the most controversial throughout the history of the climate change negotiations, were resolved largely in favor of maximum reliance on market forces, as had been advocated earlier by the United States and its umbrella group allies (including Australia, Canada, Japan, and Russia).

. Accounting and Fungibility. The agreement approved accounting procedures that provide for fungibility, meaning that emissions credits obtained by way of carbon sinks or any of the three flexibility mechanisms can be transferred several times as equal units. Full fungibility—treating credits under all three mechanisms equally—is important to ensure maximum cost-effectiveness. Some developing countries, however, had wanted to restrict the trading of credits generated by CDM projects.

. Sink Credit for Land Use Activities. Under the agreement, a broad group of land use activities will be eligible for sink credits, including forest management, cropland management, and revegetation. There is no overall cap on sink credits. For forest management, countries are assigned specific upper limits on the amounts that can be credited against their emissions targets.

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. Currency for Sink Credits. The agreement calls for creation of a new removal unit (RMU) to represent sink credits generated in Annex I countries (including through JI). RMUs can be used only to meet a party's emissions target in the commitment period in which they are generated, i.e., 2008 to 2012; they cannot be banked for a future commitment period.

. More Limited Sinks Under the CDM. Sinks projects will be allowed under the CDM, but will be limited to projects that either create new forests in place of another existing land use (afforestation) or replace forests that have been lost (reforestation) during the first target period (2008 to 2012). In addition, sink credits under CDM will be capped at 1% of a country's base-year emissions.

. Reporting Requirements. The agreement requires Annex I parties to report on their sinks activities in order to be eligible to participate in emissions trading and other flexibility mechanisms. Parties that report can participate in the mechanisms but their inventories will be adjusted at the close of the commitment period if their reports are deemed inadequate. These reports are to include information on efforts to protect biodiversity in the context of sinks activities.

. Increased Cap for Russian Forest Management Sink Credits. Russia, which had registered an objection at the time of the Bonn Agreement, sought and received an increase of its ceiling for forest management credits to 33 million tons of carbon annually. The Bonn Agreement had allocated Russia no more than 17.63 million tons.

The Need for Policy Development on Carbon Sequestration

The concept of carbon sequestration rests on sound scientific principles and its potential to offer cost-effective mitigation of GHG emissions makes it an attractive area of investment for companies that face liability under potential future requirements to mitigate their climate change impacts. Nonetheless, the approach remains controversial and an accounting system for the measurement, verification, and crediting of carbon sink projects has yet to be developed. With carbon sinks having been firmly established as legitimate elements of GHG mitigation under the Protocol and receiving significant attention domestically as Congress and the Administration consider the U.S. response to climate change, there is a crucial need for considered policy development on carbon sequestration. The goals of this policy development should be threefold:

. Protect existing investments in carbon sinks and encourage future investment in sound carbon sequestration projects;

. Minimize the burdens created by the divergence of the U.S. regulatory framework and the international climate control regime; and

. Foster the development of a well-designed accounting system for carbon sinks.

We address each of these goals below.

Protecting and Promoting Investments in Sound Carbon Sequestration Projects

Several firms already are making significant investments in carbon sequestration in the United States and abroad. The Energy Policy Act of 1992 requires DOE to track voluntary measures to reduce, avoid, or sequester GHG emissions. The Energy Information Agency reports that, in 2000, the latest year for which data are available, U.S. companies engaged in 494 carbon sequestration projects (a 12% increase from 1999), primarily in forests.²¹ However, carbon sequestration remains controversial, and the complexity of implementing a credit regime creates uncertainty that places at risk existing investments and dampens the attractiveness of expanded efforts in this area.

While there is growing interest in carbon sequestration, the accounting approaches, and measurement methods for creating a creditable and marketable commodity have yet to be developed. Unresolved issues include questions as fundamental as the definition of what land use and forestry projects are creditable—and, by necessary implication, what projects are not. A well-designed carbon accounting system would provide transparent, consistent, accurate, and verifiable recording and reporting of changes in carbon stocks from sequestration projects. A carbon sequestration policy approach also should take into account both the concerns and opportunities associated with the continuing utilization of these resources.

Minimizing the Potential Burdens Created by the Divergence of the U.S. Regulatory Framework and the International Climate Control Regime

The United States and the international community are both embarking on GHG control regimes—the European Union (EU) and other industrialized countries under the rubric of the Protocol, and the United States under an evolving set of initiatives being put forward by the Administration and Congress. Although both of these regimes will almost certainly encompass the recognition of carbon sinks as elements of a carbon control program, the extent to which the U.S. approach and the Protocol diverge remains to be seen. It is in the strong interest of firms with operations in areas with disparate GHG control regimes, i.e., in the United States and the EU, to minimize the impact on their operations of inconsistent control and mitigation requirements.

The Bush Administration has made clear that the United States will not ratify the Protocol, but the core provisions of the treaty mirror key flexibility elements that the United States had insisted upon throughout its earlier participation in the Protocol's development.²² And, despite the Administration's lack of interest in acceding to the Protocol, legislation proposed or being developed in Congress creates uncertainty regarding evolving U.S. regulations geared toward addressing climate change and how they may relate to international treaty obligations, e.g., the availability of credits for agricultural practices that sequester carbon in soil and carbon emissions trading in the United States if it develops [32 ELR 11355] outside the framework of the Protocol. Businesses need to understand the Protocol to help develop a U.S. strategy for addressing climate change in a way that minimizes the potential for serious divergence of approaches with potential long-term impacts. Because the Protocol, as specified by the Marrakech Accords, reflects a U.S. preference for reliance on market mechanisms such as emissions trading, the groundwork exists for harmonizing the nascent U.S. regulatory approach with that adopted by other members of the international community. This possibility applies fully with respect to the crediting of carbon sinks, for which a settled mechanism exists under the Protocol.

Developing a Well-Designed Carbon Accounting System

A well-designed accounting system for carbon sinks must provide transparent, consistent, accurate, and verifiable recording and reporting of changes in carbon stocks that are attributable and creditable to a given carbon sequestration project. In order to create such an accounting system, a number of issues need to be addressed, including the following.

Baselines

Baselines for carbon stocks within the boundaries of a carbon sink project need to be established as points of reference for determining how much a given project contributes to carbon sequestration relative to the sinks or releases of carbon that would occur in its absence. Baseline measures require the development and acceptance (and, potentially, standardization) of protocols to estimate carbons stocks. In many instances, such as for the estimation of forest biomass, such protocols already exist,²³ while for other applications they need to be developed.

Additionality

Baselines also are needed to help substantiate that the carbon sequestration claimed is "real and additional," and the result of some management or conservation activity over and above what would have occurred in the absence of the creditable carbon sequestration program.

Leakage

Leakage refers to the possibility that a carbon sink project may result in the displacement of emissions-creating activities outside the project boundary, such that the project receives sink credits while the displaced emissions are not counted. Such leakage is most likely to occur in cases in which carbon sequestration is evaluated at the project level, rather than within the framework of a national carbon budget. Ideally, a carbon budget program administered at the national level would monitor total additions and deletions to carbon stocks with reference to a defined baseline. Such an approach is complex and costly, and however, is unlikely to be practical on the scale of the United States. Short of such a comprehensive national inventory, an accounting system for carbon sinks should address the potential for leakage by including an evaluation of individual projects to determine their potential to displace, rather than sequester, emissions.

Verification

Third-party audits are likely to be a desirable approach to verifying forest-based and land use-based carbon sinks. Such audit practices are at least partially developed, and are currently applied to certify that timber is properly harvested from sustainably managed forests. If the scope of carbon sequestration develops to include agriculture and other land uses, verification methods will have to accommodate the potentially large number of land use portfolios that comprise the global carbon stock.

Risk of Unintended Consequences

The crediting of carbon sequestered in biomass creates a risk of unintended consequences if incentives are not included to account for non-carbon benefits of forestry and land use practices. The carbon stock held by monoculture plantations of trees known to sequester carbon rapidly may be simpler and less costly to measure than the carbon stored by complex ecosystems, but may not provide the full range of additional environmental benefits offered by heterogeneous forests. To avoid such consequences, incentives could be put in place that reflect the entire set of social objectives to be met by a forest ecosystem, including biodiversity, in addition to carbon emissions reductions.

Avoiding Both "Gaming" and Undue Burden

The development of rules calls for a delicate balance between making the accounting system as simple and transparent as possible to minimize transaction costs, and creating enough rigor to ensure the environmental integrity of projects. If the rules are too simple, there is the potential for "gaming," where both carbon credit buyers and sellers have an incentive to create inflated project results. On the other hand, if the rules are too burdensome, the high transaction costs that they entail may scare off investment in potentially desirable projects.

While an accounting system for the crediting of carbon sequestration projects has yet to be developed, it is possible to identify a number of necessary attributes for creditable sinks projects.²⁴ High-quality, creditable carbon sequestration projects should: (1) be underpinned by a comprehensive and long-term management plan attached through a covenant to the title or titles to the land and vegetation; (2) be the subject of clear contractual arrangements between all parties to a project, defining roles and responsibilities and share of project outputs; (3) claim only up to the average biomass and soil carbon increase which can be sustained over extended time frames; (4) claim only net project benefits in any year, with all associated emissions deducted; (5) be quantified in 10 years of guaranteed sequestration; [32 ELR 11356] and (6) be risk-managed through pooling, underselling against the storage of projects or pools and/or project duration, or through insurance.

Conclusion

Carbon sinks have the potential to create common ground in the climate change arena because they can be harnessed to advance the parallel interests of industry, agriculture, and conservation. Further, sinks offer an area of potential convergence between evolving U.S. policy and the international control regime under the Kyoto rubric. Although sinks are only a partial solution to anticipated global warming, they offer an important, cost-effective approach for removing CO₂ from the atmosphere over the next half century. While U.S. climate change policy is still in its formative stages, there is widespread interest in the creation of marketable credits for carbon sequestration because of a consensus that carbon emissions will be regulated in the future.

U.S. climate change policy is thus at a critical juncture, creating both risks and opportunities for firms with potential liabilities in a GHG control regime. With carbon sinks having been firmly established as legitimate elements of GHG mitigation under the Protocol and receiving significant attention domestically as Congress and the Bush Administration consider the U.S. response to climate change, the time is right for considered policy development on carbon sequestration. The goals of this policy development should be threefold: (1) to protect existing investments in carbon sinks and encourage future investment in sound carbon sequestration projects; (2) to minimize the burdens created by the divergence of the U.S. regulatory framework and the international climate control regime; and (3) to foster the development of a well-designed accounting system for carbon sinks.

1. See Donald A. Brown, The U.S. Performance in Achieving Its 1992 Earth Summit Global Warming Commitments, 32 ELR 10741 (July 2002).

2. See Miranda A. Schreurs, Competing Agendas and the Climate Change Negotiations: The United States, the European Union, and Japan, 31 ELR 11218 (Oct. 2001); Eric Pianin, U.S. Aims to Pull Out of Warming Treaty: "No Interest" in Implementing Kyoto Pact, Whitman Says, WASH. POST, Mar. 28, 2001, at A1.

3. Kyoto Protocol to the United Nations Framework Convention on Climate Change (UNFCCC), Dec. 10, 1997, U.N. Doc. FCCC/CP/197/L.7/Add. 1, reprinted in 31 I.L.M. 22 (1998).

4. See generally Brown, supra note 1, at 10758.

5. For a discussion of change initiatives at the state and local levels, see John C. Dernbach, Moving the Climate Change Debate From Models to Proposed Legislation: Lessons From State Experience, 30 ELR 10933 (Nov. 2000).

6. See, e.g., Robert C. Barnard & Donald L. Morgan, The Administration's Emerging Position on Global Warming, ELR NEWS & ANALYSIS ONLINE, available at http://www.eli.org; Andrew C. Revkin, Burden Seems to Be on Japan to Salvage the Fast-Eroding Climate Treaty, N.Y. TIMES, July 2, 2001, at A9.

7. See generally Brown, supra note 1, at 10758.

8. Princeton University's Robert Socolow distinguishes between "fossil-carbon sequestration" and "biological carbon sequestration." Fossil-carbon sequestration entails the capture and engineered storage of the carbon content of fossil fuels prior to its release into the atmosphere. Biological sequestration entails the removal from the atmosphere of carbon that was released previously. Robert Socolow, The Century-Long Challenge of Fossil-Carbon Sequestration, at http://www.princeton.edu/cmi/research/papers/century-long.pdf (last visited July 9, 2002). This Dialogue addresses biological sequestration only, while using the more inclusive label for ease of reference.

9. The Protocol's flexibility mechanisms include international emissions trading, the clean development mechanism (CDM), and joint implementation (JI). See Brown, supra note 1, at 10758; Robert R. Nordhaus et al., International Emissions Trading Rules as a Compliance Tool: What Is Necessary. Effective, and Workable?, 30 ELR 10837, 10838-39 (Oct. 2000).

10. There is a difference, however, between emissions reductions and sinks, in terms of the length of time that a sink removes carbon from the atmosphere. The need to account for this time dimension of the sequestration issue is discussed hereinbelow.

11. These attributes allow an analogy to the U.S. Environmental Protection Agency's (EPA's) air emissions offset policy, albeit on a global, rather than regional scale. This program grew out of concern for how to allow the construction of new sources in areas whose air quality does not meet the national ambient air quality standards for pollutants such as ozone. To avoid exacerbating the already substandard air quality in such areas without cutting off growth, EPA's offset policy requires all new sources to install state-of-the-art pollution control equipment and offset any remaining emissions by securing even greater reductions in pollution from existing sources in the area. In this manner, a source's emissions are balanced by equal or greater emissions reductions in the same airshed.

12. Other repositories have been proposed, including carbon injection in oceans and underground strata. See OFFICE OF FOSSIL ENERGY/OFFICE OF SCIENCE, U.S. DEP'T OF ENERGY (DOE), CARBON SEQUESTRATION RESEARCH AND DEVELOPMENT (1999).

13. See generally Roger A. Sedjo, Forest "Sinks" as a Tool for Climate-Change Policymaking: A Look at the Advantages and Challenges, RESOURCES, Spring 2001, at 21.

14. See D.S. Schimel et al., Climate Change: Accounting for Carbon, 414 NATURE 169-72 (2001).

15. John Grace & Yadvinder Malhi, Global Change: Carbon Dioxide Goes With the Flow, 416 NATURE 594-95 (2002).

16. The Farm Bill creates a carbon sequestration research, development, and demonstration program. Farm Security and Rural Investment Act of 2002, Pub. L. No. 107-424, § 9009 et seq. (2002). The bill includes the finding that "there are opportunities for increasing the quantity of carbon that can be stored in terrestrial systems through improved, human-induced agricultural and forestry practices." The law provides grants to landowners to offset the costs incurred in developing, validating, and testing marketable carbon sink credits.

17. See Senate Amendment 3239, as modified, 148 CONG, REC. S3354 (daily ed. Apr. 25, 2002) (text of Brownback Amendment, as modified).

18. President George W. Bush stated in a July 13, 2001, press briefing that solutions for climate change will require "investments in scientific and technological knowledge on which progress on this long-term challenge must be based." President's Statement on Climate Change, at http://www.whitchouse.gov/news/releases/2001/07/20010713-2.html (last visited June 10, 2002).

19. See Global Climate Change Policy Book, at http://www.whitehouse.gov/news/releases/2002/02/climatechange.html (last visited July 11, 2002).

20. The Protocol, negotiated in 1997 but as of yet unratified, established a broad framework for international action to address climate change. It set an overall emissions reduction target of 5.2% below 1990 levels for developed countries (identified as "Annex I" countries), to be achieved during the 2008 to 2012 commitment period. The Protocol established market-based flexibility mechanisms such as international emissions trading to help reduce emissions cost effectively. A host of critical details were left unresolved, however, which have been addressed with varying success through a succession of COPs. The COP-7 Agreement at Marrakech represents a watershed because it resolves sufficient implementation details to give shape to the contours of an international climate change control regime, effectively setting the stage for countries to ratify the Protocol.

21. See ENERGY INFORMATION AGENCY, U.S. DOE, VOLUNTARY REPORTING OF GREENHOUSE GASES 2000, available at http://www.eia.doe.gov/oiaf/1605/vrrpt/index.html (last visited July 8, 2002).

22. See generally Brown, supra note 1.

23. The amount of carbon held in the forest depends on the amount of dry biomass there. Most developed countries have accurate forest inventories that can provide the baseline for estimating forest biomass. About 50% of the dry weight of the biomass will be carbon. Different tree and plant species have different densities, but these differences are well known, and forest biomass is easy to estimate by using sampling techniques.

24. See generally Mark Jackson, Director. The Carbon Store Pty Ltd., Carbon Sharefarming: Owning a Measured Sequestration Commodity, Address Before the AiC Worldwide 2d Annual Emissions Trading Forum, Sidney, Australia (Aug. 1999).