Foreword

Since 2005 the European Emissions Trading Scheme (ETS) is running for an initial trial period of three years. In the second trading period 2008-2012 corresponding to the first commitment period of the Kyoto Protocol, the trading system will be in accordance with Article 17 of the Protocol. In the ongoing trial period, the ETS is limited to include only large emitters of greenhouse gases mainly from the Energy and Industry sectors leaving other important sectors outside. Discussions on how to broaden the ETS to incorporate important Carbon dioxide emitters and removers from other sectors and activities have for this reason started. Carbon credits from the land-use, land use change and forestry (LULUCF) sector are up to now excluded from the EU ETS according to Directive 2004/101/EC. The ongoing discussions under the UNFCCC process concerning how to provide a market incentive for maintaining forests to counteract emissions from deforestation in many countries, has made the possibility to include the LULUCF sector in the ETS an interesting option. For a forest rich country like Sweden it is likewise of interest to further explore possibilities as well as limitations of linking Carbon sinks to a future ETS. In consequence of this, the Swedish Environmental Protection Agency (EPA) has asked Mrs Eveline Trines of Treeness Consult to prepare this report, which analyses pros and cons of allowing Carbon sinks from the LULUCF sector be integrated in a future EU ETS to mitigate Climate Change. The opinions expressed in this report are those held by the author and not the Swedish EPA.

Stockholm, October 2006