Climate change mitigation opportunities that involve forestry are not viewed as priorities for the national climate change policy, forestry policy or rural develop- ment strategies in transition countries (GRA and GRF, 2002). However, as the above analysis demonstrates, carbon sequestration through afforestation repre- sents an opportunity given declines in production and increases in abandoned land (Swinnenet al., 1997).
Based on the analysis in the preceding section, afforestation of non-forested areas, increasing the level and efficiency of wood utilization, using biomass as a substitute for fossil fuels and the protection of existing carbon storage in forests could be relevant policy measures. However, without sufficient analysis (e.g.
potential for carbon sequestration and renewable energy production on different
types of land) and without implementing effective policy measures to encourage climate change mitigation through changes in land use and forestry nothing is likely to change (Ministry of Environment, 2001).
Ukraine provides an excellent example of this potential. Carbon trading includes the use of ‘sinks’ as a flexible policy mechanism to address goals of the Kyoto Protocol. One option would be to stabilize the collective emissions of Annex B countries at least cost. In order to analyse this option, the carbon uptake poten- tial across these countries was assessed (Fig. 4.2).11The results indicate that, sub- ject to the assumptions considered in the chapter,12especially high carbon uptake benefits would result from afforestation in the wooded steppe zone of Ukraine.
The analysis shows that the variation in carbon sequestration potential across different regions in both countries is related to the variety of conditions.
The NPV of afforestation for carbon uptake in Ukraine is positive in the Polissja and wooded steppe, at 0% through 4% discount rate, and at 0%–2% discount rates in the Carpathian Mountains. In Slovakia, the highest potential for carbon sequestration is in the west, where higher-quality land is available and simulated cumulative carbon uptake is about 38.3 t/ha at a 4% discount rate.
The costs of carbon uptake13 are 18.5–23€/t (4% discount rate) and 8.5–14.2€/t (0% discount rate) in Slovakia. They are the highest in the west where there is higher-quality land. In the central region, despite low opportunity costs of land, the low value of the carbon sequestered results in a negative NPV of carbon uptake for the assessed policy scenarios (Figs 4.2 and 4.3). In Ukraine, carbon uptake costs are 4.6–78.5€/t, with 9.5€/t on average (0% discount rate).
When the benefits are discounted at 4%, the present value of carbon uptake costs is 7.2–173.3€/t, with an average of 18€/t of carbon.
The analysis of renewable energy scenario14has shown that, in Ukraine, the costs per tonne of carbon sequestered are €36.4 in the Polissja,€32.2 in the wooded steppe and€124.6 in the steppe, with a national average cost of 70€/t (at 4% discount rate). In Slovakia, costs range from 37–48€/t (4% discount
-500 -400 -300 -200 -100 0 100 200 300 400 500 Western
Central Eastern Polissja Wooded Steppe Steppe Carpathians Crimea
SlovakiaUkraine
Fig. 4.2. NPV of benefits of carbon storage through afforestation in Slovakia and Ukraine (€/ha, 4% discount rate, carbon in permanent tonnes).
rate), but get much higher when the costs for energy production from the planted trees are included.15
Overall, the costs of carbon sequestration in both countries are relatively low in comparison with the corresponding estimates in some other countries of Europe. However, these costs are often higher than the value of the land. In areas that are strongly affected by the decline in agricultural production and land abandonment, the market prices of land are significantly lower than the prices set by the government (which are based on physical characteristics of the land), and this phenomenon is reflected in the estimates of costs presented in Fig. 4.4 (Bizikova, 2004).
-700 -600 -500 -400 -300 -200 -100 0 100 200 300 400 500 Western
Central Eastern Polissja Wooded Steppe
Steppe
SlovakiaUkraine
Fig. 4.3. NPV of benefits of the substitution of wood as renewable energy in Slovakia and Ukraine (€/ha, 4% discount rate, carbon in permanent tonnes).
average rate of carbon uptake (tC/yr) 00
10 20 30 40 50 60 70 80 90 100
0.5 1 1.5 2 2.5 3 3.5
market price official price market price official price
Fig. 4.4. Estimated costs per tonne of carbon uptake for afforestation
(dashed line) and SRFP (costs of energy production are included, continuous line) in Slovakia, by using land prices set by government (official price) and market price (€/t, 4% discount).
The results suggest that the implementation of a renewable energy strategy based on wood produced by short rotation forest planting (SRFP) instead of the carbon storage policy would increase the costs of carbon uptake substantially. In the majority of cases, the costs would not be compensated by the returns.16Con- sequently, the alternative energy policy is even less viable for transition econo- mies without external funding, except in the wooded steppe of Ukraine. The establishment of forest plantations for CO2emissions in transition economies, therefore, requires new sources of investment, and the question remains whether tree planting for carbon uptake would be a national or project-based agenda.17
Conclusions
The transition countries are moderate emitters of greenhouse gases (GHG), largely as a consequence of their economic problems in the course of transition.
The countries, therefore, have reached their Kyoto Protocol targets and stand to profit from the sale of ‘hot air’.18 Many transition countries feel that they achieved emission reduction through significant economic hardship and that the reduction is real, so trade of these credits should not be restricted (Tichý and Billharz, 2000). Though the idea of ‘hot air’ selling sounds optimistic, the countries actually cannot count on it, as ‘hot air’ is a hot topic pertaining to the environmental effectiveness and economic efficiency of the Kyoto Protocol implementation. Since there is now a viable international emissions-trading market as well as the desire to maximize the seller’s own financial revenues from trading, the policy of ‘hot air’ banking is utilized (Den Elzen and De Moor, 2002).
‘Hot air’ banking would significantly raise the permit price, and would increase the abatement efforts of Annex I countries, including Ukraine and Slovakia. In addition, the focus of transition countries on selling ‘hot air’ on the carbon market drives their priorities away from considering climate change mitigation through carbon sequestration.
Countries in transition to market economies are wide open to a range of opportunities for cleaner industrial and energy production. Due to substantial carbon emissions per unit of GDP, these countries also have a high potential for cheap joint implementation (Fankhauser and Lavric, 2003). However, even with this high joint implementation potential, the transition countries have insufficient institutional capacity (Nijnik and Oskam, 2004) for foreign investors to enter their business environment effectively. Hence over and above the emissions reduction, an enhancement of greenhouse gas ‘sinks’ and ‘reservoirs’ via climate change mitigation through afforestation efforts and SFM is important.
The essential potentials of carbon uptake through afforestation in Ukraine and Slovakia make the policy of planting trees to sequester carbon in these coun- tries competitive with other policy measures of removing carbon from the atmo- sphere. The establishment of new forests, particularly in the wooded steppe zone of Ukraine, is a sound climate change mitigation policy, because of the poten- tial of the newly planted forests to contribute to carbon uptake and of the availabil- ity of land suitable for tree planting with relatively low afforestation costs. None the
less, the activities of enhancing terrestrial carbon sink offer a modest solution within emissions reduction measures for Ukraine and Slovakia.
The transformation process in the transition economy is faced with market failures and inadequate institutions. Over recent decades, Slovakia and Ukraine have both been faced with continuously shifting priorities in their rural develop- ment and SFM policies, driven by both internal and external forces. Today, the responsibilities for the environment and its components are divided between dif- ferent institutions. Carbon sequestration policies require strong linkages between the sectors, and this fragmentation of responsibility, therefore, decreases both policy effectiveness and efficiency.19
The level of connection to rural development objectives is crucial for imple- mentation of the strategies involving integrated approaches, such as climate change mitigation by forestry activities. The countries should capture the opportunity of bringing together the rural development and SFM priorities, those of climate change and generally, the issues of sustainable development. It is important to pay more attention to agricultural–environmental linkages and climate change-related measures and to integrate climate change mitigation forest policy to rural and regional developments. Also, there is a need for infor- mation campaigns, training facilities and pilot schemes to demonstrate SFM pos- sibilities pertaining to climate change mitigation and to make them attractive for various stakeholders.
Land-use change and forestry activities, and more precisely those involving carbon sequestration, require a long-term perspective. The optimum offset poli- cies must therefore link a long-term carbon sequestration in forestry with a long-term substitution of wood for fossil fuel in renewable energy projects. Over- all, under the assumptions of this chapter and for the specific conditions of the examined countries, the climate change mitigation option through forests as
‘storage’ appeared to be more cost-efficient. The research results provide evi- dence that, under a renewable energy scenario, the costs of carbon uptake are not compensated by the returns in the majority of the cases. The main reasons are in cost-inefficiency of wood production, and often also in comparatively high land values, where the opportunity costs of maintaining forests on land for a long period appear to be too high. For more useful outcomes, the period under inves- tigation must be substantially extended, so that a continuous process can be shown.20Besides, in the upcoming studies afforestation should be elaborated in view of economic, social and environmental benefits all at once, so that multiple gains from various forest values should be considered jointly.
Afforestation and utilization of biomass produced from the new plantations would provide substantial social benefits. To date, however, SFM policy mea- sures and instruments for supporting biomass as a source of renewable energy are lacking in transition countries (GRA, 2002). There is a need, therefore, for further studies and for measures to be developed and implemented to enhance sustainable production of biomass and its use as a substitute for fossil fuels in the context of regional and rural developments in transition countries. Important research questions include: How can sustainability of biomass production (and trade) be defined in a broadly acceptable and controllable way? How can sustainability requirements be translated into guidelines and rules? How can we
ensure the participation of various stakeholders in defining the sustainability requirements for SFM in transition countries? Most importantly, in these new research activities the aspects of renewable energy production, trade and use, as well as the aspects of SFM, sustainable land use and integrated rural development need to be fully interconnected in the analysis.
The research outcomes presented in this chapter have also shown that the establishment of forest plantations for controlling CO2emissions in the transition countries is not viable without new sources of investment. An elaboration of eco- nomic techniques for receiving credits from the world community for planting trees in these countries is, therefore, a new challenge for the future.