COMMISSION STAFF WORKING DOCUMENT EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENTThe role of land use, land use change and forestry (LULUCF) in the EU's climate change commitments
Date: 2012-03-12
Institutions: European Commission
Subjects: accounting system, agri-foodstuffs, climate change, disclosure of information, economic accounts for agriculture, environmental standard, farming sector, greenhouse gas, reduction of gas emissions, renewable energy, silviculture

EUROPEAN COMMISSION 

Brussels, 12.3.2012  
SWD(2012) 40 final 

COMMISSION STAFF WORKING DOCUMENT 

EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT 
The role of land use, land use change and forestry (LULUCF) in the EU's climate 
change commitments 

Accompanying the document 

Proposal for a 
DECISION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL 

on accounting rules and action plans on greenhouse gas emissions and removals 
resulting from activities related to land use, land use change and forestry 

{COM(2012) 93 final} 
{SWD(2012) 41 final} 

 
 
 
 
  
 
1. 

EXECUTIVE SUMMARY 

1.1. 

Scope and background 

The  EU  and  other  world  leaders  agreed1  that  global  warming  must  not  exceed  the 
temperatures experienced before the industrial revolution by more than 2˚ C. This long-term 
goal requires global greenhouse gas (GHG) emissions to be reduced by at least 50 % below 
1990 levels by 2050. 

In the short term, the EU has committed to reduce its GHG emissions by  20 % below  1990 
levels by 2020, and by 30 % if conditions are right2. The European Parliament and the Council 
have agreed that all sectors should contribute to reaching the target3. The land use, land use 
change  and  forestry  (LULUCF)  sector  does  not  yet  form  part  of  the  target.  This  impact 
assessment (IA)'s aim is to assess how the sector could contribute. 

GHG emissions in the EU come mainly from energy production and other man-made sources. 
Some  emissions  are  countered  by  carbon  being  absorbed  (removed)  from  the  atmosphere 
through photosynthesis and stored in vegetation, soils and harvested wood products. Various 
land  uses  and  management  practices  in  forestry  and  agriculture  and  the  use  of  long-life 
harvested  wood  products  can  limit  emissions  and  enhance  removals  from  the  atmosphere. 
These practices are covered by LULUCF4. 

1.2. 

Problem definition 

There are good reasons to account for emissions and removals in LULUCF, namely: 

• 

• 

• 

to  ensure  EU's  policy  coherence,  as  accounting  would  be  consistent  with  the 
Europe  2020  strategy  and  would  ensure  that  all  sectors  contribute  to  combating 
climate change. This is important for the EU’s role in promoting a level playing field 
for business and a fair effort distribution; 

improve 

the  environmental 

to 
the  EU’s  climate  change 
commitments  by  ensuring  that  emissions  and  removals  in  all  sectors  are  recorded. 
Currently,  emissions  from  biomass  used  for  energy  are  not  included  in  the 
accounting rules for the energy sector or other sectors that produce biomass energy; 

integrity  of 

to enhance the economic efficiency of EU’s climate policy in the pursuit of more 
ambitious targets by allowing all sectors to contribute. 

Including  the  LULUCF  requires  addressing  its  specific  profile  and  the  different  MSs' 
circumstances.  Accounting  rules  are  needed  to  distinguish  anthropogenic  from  non-
anthropogenic  emissions  and  removals.  The  reversibility  of  emissions  and  removals  can  be 

1 
2 

3 
4 

Decision 1/CP.16 of the Conference of Parties to the UNFCCC (the "Cancún Agreements"). 
Brussels  European  Council  8-9.3.2007  Presidency  Conclusions,  implemented  through  Decision  No 
406/2009/EC and Directive 2009/29/EC. 
Decision No 406/2009/EC and Directive 2009/29/EC. 
Other GHG from agricultural activities, e.g. methane and nitrous oxide from ruminants and fertilisers, 
do not count under LULUCF, which deals primarily with carbon emissions and removals in vegetation 
and soils. Non-CO2 emissions are covered by the ‘agriculture’ inventory sector. 

EN 

2 

   EN 

 
                                                 
caused by natural disturbances such as fires, storms, droughts, pests etc. but also as a result of 
management  decisions,  e.g.  to  harvest  or  plant  trees.  Accounting  must  therefore  be  able  to 
reflect reversals. In addition, monitoring and reporting of emissions and removals is complex 
and requires a robust system. Lastly, the emissions and removals in forests fluctuate sharply 
between years and can amount to very significant shares of the total annual emissions in MSs.  

1.3. 

How would the problem evolve, all things being equal? 

The  sink  (i.e.  when  removals  are  greater  than  emissions)  in  the  LULUCF  is  projected  to 
decrease in the EU by 2020 under a business-as-usual scenario5. This sector, as a whole, it is 
expected  to  fall  by  about  10 %  in  2020  compared  to  the  period  2005-2009.  The  decrease  is 
expected to be very pronounced in forest management. This is partly compensated by planting 
‘new’  forests  (afforestation).  Emissions  and  removals  from  agricultural  activities  such  as 
cropland management and grazing land management are expected to remain fairly stable or to 
improve.  Negative  trends  and  emissions  risk  being  ignored  unless  LULUCF  is  part  of  EU's 
climate policy. 

The projected capacity of the sink would increasingly affect policy coherence and economic 
efficiency. Not accounting for the decline in net removals stemming from non-action would 
risk an excessive use of resources for mitigation measures that count towards other objectives, 
thereby  creating  an  unlevel  playing  field  between  different  mitigation  options.  Moreover, 
economic efficiency losses may increase over time given that significant additional action will 
be required in all sectors to meet the long-term climate objectives. 

1.4. 

Objectives 

The  overall  objective  is  to  ensure  that  LULUCF  contributes  to  the  EU’s  climate  change 
commitments. The following operational objectives address the problem definition: 

• 

monitoring  and  reporting  by  MSs  should  comply  with  Good  Practice  Guidance 
(GPG)  as  issued  by  the  Intergovernmental  Panel  on  Climate  Change  (IPCC)  to 
ensure  transparency,  completeness,  consistency,  comparability  and  accuracy  of 
estimates; 

• 

accounting rules should: 

•  be extensive so as to include all emissions and removals, and all main LULUCF 
activities (afforestation, reforestation, deforestation, forest management, cropland 
management and grazing land management); 

•  reflect the non-permanence of emissions and removals; 

•  provide incentives for climate change mitigation; 

•  the  policy  context  for  integrating  LULUCF  should  be  such  that  MSs'  ability  to 
comply  with  GHG  reduction  targets  is  not  put  at  risk  due  to  inter-annual 
variability of emissions and removals or significant natural disturbances. 

5 

In this context, ‘business as usual’ assumes that MSs will reach their 20 % reduction targets, including 
the ones for renewable energy.  

EN 

3 

   EN 

 
                                                 
1.5. 

Options 

Action to account for LULUCF should be taken at two levels. 

Firstly, it is necessary to define options for the policy context in which the sector should be 
accounted as there is already EU legislation on the commitment to reduce GHG emissions by 
20 % in 2020. A non-regulatory/‘no EU action’ option (Option 1) is not realistic as the EU is a 
Party to the Kyoto Protocol (KP) and any commitment there would have to be shared between 
MSs  and  would  necessitate  taking  a  common  approach.  Therefore,  ‘do  nothing’  would 
translate  only  into  delaying  all  action  until  an  international  agreement  has  been  reached. 
Option  2  involves  creating  a  legal  framework  for  LULUCF  that  is  separate  from  the 
frameworks  laid  down  in  the  EU's  Effort  Sharing  Decision  (ESD)  and  Emission  Trading 
System (ETS). This option was subdivided into one without targets (Option 2.I) and one with 
targets (Option 2.II). Option 3 involves including LULUCF in the ESD legal. The option of 
using the ETS was discarded at an early stage. 

Secondly, options were developed to assess how to achieve robust accounting, monitoring and 
reporting. For accounting, the following options were considered: 

(a) 

(b) 

(c) 

the same accounting rules as under the KP's first commitment period (CP), including 
voluntary accounting for agricultural activities, but with mandatory accounting for all 
forestry activities. 

accounting  rules  corresponding  to  the  expected  outcome  of  the  UNFCCC 
negotiations  of  a  second  CP  under  the  KP,  including  mandatory  accounting  for  all 
forestry activities and voluntary accounting for agricultural activities. 

accounting  rules  corresponding  to  the  expected  outcome  of  UNFCCC  negotiations, 
but  with  further  improvements  achieved  by  bringing  in  mandatory  accounting  for 
both forestry and agricultural activities. 

A  three-step  approach  to  achieve  robust  monitoring  and  reporting  was  also  outlined.  The 
first  step  would  involve  achieving  complete  reporting  of  emissions  and  removals  from  the 
various activities using at least simple methodologies. The second step would mean increasing 
reported  data's  accuracy  by  using  more  sophisticated  methods.  Lastly,  the  MSs'  data 
comparability would be honed to harmonise monitoring, reporting and related nomenclature. 
The  sub-options  on  accounting,  and  monitoring  and  reporting  are  the  same  for  the  overall 
Options 2 and 3, but their impacts differ depending on the policy context. 

1.6. 

Impact 

The analysis shows that two of the broad policy options would meet the objective of having 
all sectors contributing to the EU’s overall GHG reduction commitment; namely they would 
include  LULUCF  in  the  EU’s  GHG  reduction  commitment  under  a  separate  framework 
(Option 2) or under the ESD (Option 3). The environmental, economic and social impacts of 
the options differ widely depending on the accounting rules applied, as shown in Table 1. 

Table 1. Summary of main impact for the EU 

Type of impact  

Option 1 

Option 2.I 

Option 2.II 

Option 3 

EN 

4 

   EN 

 
No EU 
action 

Include LULUCF 
under a separate 
framework 

Include LULUCF 
under a separate 
framework 

Include LULUCF in the 
Effort Sharing 
Decision 

(No target) 

(Target) 

Accounting option 

n/a 

(a) 

(b) 

(c) 

(a) 

(b) 

(c) 

(a) 

(b) 

(c) 

Environmental 

Net  effect  on  economy-wide 
mitigation  in  addition  to  the 
reference scenario (MtCO2 per 
year) 

Zero 
(delayed) 

0 

0 

0 

-7 

-5 

-5 

80 

13 

39 

Potential  contribution 
emission 
EU’s 
target, 
including 
scenario (MtCO2 per year) 

the 
reduction 
reference 

to 

the 
Potential  contribution 
EU’s emission reduction target 
(in  %  of  total  GHG  emissions 
in 1990)  

to 

Economic 

Zero 
(delayed) 

-10 to 
-86 

-36 to 
-106 

-79 

-15 to 
-91 

-41 
to-111 

-86 

0 

0 

0 

Zero 
(delayed) 

-0.2 to 
-1.5 

-0.6 to 
-1.9 

-1.4 

-1.6 

-0.3 to 
-1.6 

-0.7 t-
2/0 

0 

0 

0 

Zero 

Cost of mitigation  

(delayed) 

0 

0 

0 

40 

27 

27 

-166 

-55 

-156 

Cost  of  improved  monitoring 
and reporting (€ million) 

Social 

Zero 

(delayed) 

0.35 

0.65 

1.35 

0.35 

0.65 

1.35 

0.35 

0.65 

1.35 

Effects on employment 

(delayed) 

0 

0 

0 

Small (neutral or 
positive) 

Small (neutral or 
positive) 

Zero 

Note:  Option  2.II  is  based  on  a  target  of  -5.4  MtCO2  accounted  credits.  This  equals  a  carbon  price  of  € 5  per  tCO2  for 
accounting options (b) and (c), as assumed for Option 3, but a carbon price of € 12 per tCO2 for accounting option (a) due to 
the discounting of forest management. Negative values denote net removals (and positive values for net emissions). Source: 
calculations are based on Böttcher et al. (2011) and update of JRC (2011b), reflecting the UNFCCC review. For option 2.I (b) 
two  estimates  for  the  contribution  to  EU's  emission  reduction  target  are  given:  one  is  based  on  model  projections  and  the 
other relies on model plus national projections. 

In  terms  of  environmental  impact,  action  to  increase  removals  and  reduce  emissions  in 
forestry and agriculture should ideally be considered over a long time horizon because it can 
take  decades  before  measures  such  as  afforestation  have  a  significant  effect.  However,  the 
EU’s  existing  climate  change  commitments  stretch  only  to  2020  and  are  an  important 
milestone.  The  extent  to  which  the  contribution  could  go  beyond  what  is  expected  from 
current efforts (i.e. the reference scenario) depends on the policy context in which LULUCF 
is accounted for. Additional action is expected to be limited in Options 2.I and 3 and greater 
in  Option  2.II.  However,  the  estimate  does  not  fully  capture  the  mitigation  potential  in 
agriculture,  and  neither  does  it  include  the  benefits  obtained  from  material  substitution.  As 
regards  the  economic  impact,  accounting  option  (a)  would  generate  higher  costs  in  Option 
2.II  if  there  are  targets  because  only  a  fraction  of  mitigation  efforts  actually  count.  On  the 
contrary, it also generates high credits in the reference scenario and this leads to cost savings 
under Option 3 where no additional mitigation is required from LULUCF, but credits can be 

EN 

5 

   EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
used to replace emission reductions under ESD. The costs for all accounting options are zero 
in Option 2.I where no targets are set and in Option 1 where no accounting is carried out. The 
social impacts are limited and employment effects are estimated to be low and either neutral 
or positive. There are, however, some distributional effects amongst MSs in Options 2.II and 
3. 

1.7. 

Comparison of options 

1.7.1.  Choosing the right policy context 

The objective to limit the impact of high inter-annual variability of emissions and removals 
and their inherent reversibility on compliance poses a major challenge in including LULUCF 
in  the  current  EU's  reduction  targets  legal  frameworks.  The  ESD  (Option  3)  is  based  on 
annual compliance and requires MSs to decrease (or limit increases in) emissions following a 
linear  trajectory.  However,  annual  compliance  with  a  linear  trajectory  would  be  difficult  to 
apply  due  to  variations  in  net  emissions  between  MSs,  and  the  frequent  and  significant 
recalculations  of  reported  data.  In  many  cases  it  would  greatly  exceed  the  ESD’s  scope  for 
flexibility. In addition, the long lead-time of many measures in LULUCF means that annual 
accounting  is  not  as  meaningful  as  in  other  sectors,  and  a  linear  trajectory  with  required 
emission reductions each year will generally not be relevant. Option 2 would address these 
issues by averaging emissions and removals over the CP and therefore meet the objective on 
inter-annual variability. A risk related to Option 3 is that including LULUCF would reduce 
the  agreed  efforts  for  the  sectors  that  are  already  part  of  existing  commitments  and  so 
effectively reduce the EU’s commitment. Option 2 would avoid this risk. 

1.7.2.  Ensuring robust accounting 

Table  2  provides  a  summary  assessment  of  how  the  various  accounting  options  meet  the 
objectives. As regards providing a level playing field between different mitigation options, the 
most  important  activity  is  forest  management.  Table  1  shows  that  accounting  option  (a) 
generates substantial credits, which are largely ‘windfall’ (free) as they include removals that 
would  have  occurred  without  any  change  in  management  decisions.  Any  mitigation  efforts 
will be discounted by 85 %. This will make mitigation more expensive and so limit incentives 
to  take  additional  action.  It  would  also  allow  for  substantial  decreases  in  net  removals  and 
increases in net emissions without any real economic impacts. Lastly, it would not ensure that 
non-permanence is reflected in accounting because it would not cover emissions and removals 
related to agricultural activities, and only a fraction of those related to forest management. 

Table 2. Performance of the various accounting options 

Objectives 

Extent to which the objectives are met by the various accounting options 

Accounting option (a) 

Accounting option (b) 

Accounting option (c) 

Small changes 

Likely outcome in the 
UNFCCC negotiations 

UNFCCC+ 

Provide  a  level  playing  field  between 
different mitigation options 

Ensure  extensive  coverage  of  emissions 
and removals 

Ensure  that  non-permanence  is  reflected 
in accounting 

EN 

X 

● 

X 

6 

● 

● 

● 

●● 

●● 

●● 

   EN 

 
Prevent  large  natural  disturbances  from 
negatively affecting the compliance risk of 
MSs 

● 

●● 

●● 

Notation key: x Objective not or insufficiently addressed by option, ● Objective partially addressed by option, ●● Objective 
sufficiently addressed by option 

Accounting options (b) and (c) allow for a change in the sink due to natural saturation and 
existing  policies  without  generating  debits  or  credits.  They  do  so  to  factor  out  changes  in 
emissions  and  removals  that  are  not  human-induced.  However,  they  require  full  accounting 
for  any  deviations  from  the  ‘reference  level’.  This  means  that  in  the  reference  scenario,  all 
abatement  options  and  uses,  whether  sequestration  or  additional  use  of  biomass  for  energy 
production (e.g. for reaching the RES-D targets) or material substitution, will face the same 
opportunity cost. This will ensure a level playing field between the various mitigation options. 

In terms of ensuring extensive coverage of emissions and removals and that non-permanence 
is reflected in accounting, only accounting option (c) requires MSs to mandatory account for 
emissions and removals in both agriculture and forestry. Accounting options (a) and (b) make 
accounting for agriculture voluntary, which may put the credibility of the EU’s commitment 
at  risk.  Extending  the  scope  of  accounting  would  increase  consistency  between  MSs.  It  is 
important that all sectors in all MSs contribute to reaching the ‘Europe 2020’ strategy targets, 
to  secure  a  level  playing  field  for  business  and  MSs  and  a  fair  effort  distribution,,  and  to 
ensure  a  consistent  treatment  of  agriculture,  forestry  and  industry  within  the  EU’s  internal 
market. In the longer term, a more inclusive accounting system  would also be conducive to 
increasing the cost efficiency in reaching any given overall target. 

As  regards  reducing  the  impact  of  natural  disturbances  on  compliance  risk,  accounting 
options (b) and (c) would include accounting rules for large natural disturbances and so limit 
the risk of non-compliance with GHG reduction targets if emissions occur as a result of such 
disturbances which are beyond the control of MSs. The impact on the EU’s overall accounting 
would  be  negligible,  but  it  would  provide  the  necessary  safeguards  for  those  MSs  most 
affected. 

1.7.3. 

Improving monitoring and reporting 

This IA outlines a three-step approach to meet the objective of ensuring that monitoring and 
reporting comply with IPCC's GPG. A first step would involve achieving complete reporting 
using at least simple methodologies. A second step would mean increasing the accuracy of the 
reported data by using more sophisticated methods. Progress is expected during the first CP of 
the KP, but efforts will have to continue during the period 2013-20. Lastly, the comparability 
of  data  between  MSs  can  be  improved  by  harmonising  monitoring,  reporting  and  related 
nomenclature.  

The  above  steps  would  form  part  of  the  Commission’s  proposal  for  a  revised  Monitoring 
Mechanism Decision.  

EN 

7 

   EN 

 
1.8. 

Concluding comments 

An international agreement on revised accounting rules for LULUCF for the second CP under 
the KP was only achieved  during the 17th  Conference  of the Parties  (COP17) in  Durban in 
December 20116 

There  are  good  reasons  now  to  include  LULUCF  in  the  EU’s  GHG  emission  reduction 
commitments, namely to improve the policy coherence, environmental integrity and economic 
efficiency.  But  it  requires  addressing  the  special  features  of  LULUCF  and  the  varying 
circumstances in the MSs. It is therefore important to ensure that robust accounting rules and 
monitoring and reporting are in place. 

Accounting option (c) involves mandatory accounting of emissions and removals from both 
forestry and agricultural activities and gives equal weight to mitigation action, whether taken 
in the forestry, agriculture, industry or energy sectors. This is conducive to cost efficiency and 
will  ensure  a  level  playing  field  for  both  MSs  and  the  various  sectors  of  the  EU’s  internal 
market. It will also provide a framework to give incentives for mitigation action by farmers, 
foresters and industry, ensuring they are visible and correctly reflected. A wide coverage of 
emissions and removals will also ensure that potential reversals are reflected in the accounting 
system. 

Monitoring and reporting needs to be improved to underpin the accounting framework and the 
indicators tracking progress in agriculture and forestry. The Commission proposes to achieve 
this  through  separate  framework,  i.e.  by  revising  the  Monitoring  Mechanism  Decision.  For 
reasons  of  comparability  and  cost-efficiency,  better  use  should  be  made  of  EU-wide 
monitoring instruments such as LUCAS and CORINE. 

To  provide  strong  incentives,  the  results  of  action  taken  by  sectors  must  count  towards  the 
EU’s  GHG  emission  reduction  commitments.  This  will  only  be  possible  if  the  right  policy 
context for LULUCF is put in place. The high variability of emissions and removals in forests 
means that annual emissions reduction targets that apply to other sectors are unsuitable. The 
long  lead  times  needed  for  mitigation  measures  to  take  effect  also  set  LULUCF  apart  from 
most  other  sectors.  This  IA's  results  suggest  that  a  separate  legal  framework  for  LULUCF 
would be the best option. 

The  EU  has  already  committed  to  reducing  GHG  emissions  by  20 %  by  2020  compared  to 
1990 through efforts in other sectors. Before the ambition level is increased beyond 20 %, the 
conditions need to be right. LULUCF should therefore be formally included in commitments 
only  once  the  EU  decides  to  increase  this  ambition  level  (Option  2.I).  This  does  not  mean 
that  mitigation  actions  should  be  put  on  hold.  National  action  plans  could  be  prepared  to 
provide a strategy and forecast for LULUCF. This would be an intermediate step towards the 
sector's full inclusion with current policies. 

6 

Decision -/CMP.7 of the Conference of the Parties serving as the meeting of the Parties to the Kyoto 
Protocol. 

EN 

8 

   EN