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 2 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 2 e) more than doubles the economic carbon mitigation potential (from 1.5Gt CO 2 e per year to 4 Gt CO 2 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.

48