The Natural Fix?

Although ecosystem carbon management is not necessarily

very costly, other land uses may offer a better return, at least lo-

cally and in the short term. One factor that can shift the balance

is the level of incentives made available to landholders. Higher

incentives will make carbon management more competitive

with other land uses. For example, the economic mitigation po-

tential of forestry would double if carbon prices increased from

20 US$/t CO2e to 100 US$/t CO

e (IPCC 2007a). These levels

of carbon sequestration could offset 2 to 4% of the 20 Gt C per

year of projected emissions by 2030 on the basis of current

growth rates (Canadell

et al.

2007; Raupach

et al.

2007).

For agriculture, the same increase in the price of carbon (from

$20 to $ 100 per tonne CO

e) more than doubles the economic

carbon mitigation potential (from 1.5Gt CO

e per year to 4 Gt

e per year (Smith

et al.

2007a).

As discussed above, only afforestation and reforestation activi-

ties have access to the global carbon market through the Kyoto

Protocol’s Clean Development Mechanism (CDM) and there

are very few forestry projects under way. Voluntary carbon mar-

kets are much smaller than the regulatory market, but forestry

projects are better represented, making up about a fifth of all

transactions (Ebeling and Fehse 2009). Some voluntary mar-

kets allow non-forest carbon projects: the Chicago Climate Ex-

change (CCX) allows offsets through rangeland and agricultur-

al soil management in the United States of America (Chicago

Climate Exchange 2008).

Providing direct financial incentives for ecosystem carbon is

only one of many policy options and incentives to change land

use decisions. For forests, avoided deforestation strategies can

include eliminating perverse incentives by changing input sub-

sidies, land titling systems, forest governance arrangements

and taxation regimes. Positive incentives can also be imple-

mented to directly or indirectly change drivers of deforestation,

including strengthening property rights. For agriculture, some

interventions may need no financial incentive as they are ben-

eficial in themselves, but instead require investment in sharing

best practice (see below). Even within a financial incentive ap-

proach, a broader system of payments for ecosystem services

may be more appropriate for some ecosystems and types of ag-

riculture. Selecting the right mix of incentives will depend on

what policies and processes are driving land use change.