Credited forest carbon sinks: how the cost reduction is allocated among countries and sectors

Forest carbon sinks have been included in the Kyoto Protocol as one of the mechanisms for mitigating climate change. Consequently, credited sinks decrease the need to reduce emissions.We analyse in detail both the economywide and the sectoral effects of inclusion of carbon sinks as agreed upon in Bonn and Marrakesh for the first commitment period of 2008-2012. The focus of our analysis is the special treatment for Canada and Japan that allows them larger sinks. The analysis is performed with the multi-region computable general equilibrium (CGE) model GTAP-E. New Zealand benefits most from the inclusion of sinks as it gains large carbon sinks from afforestation. Also in Sweden, Canada and Japan the costs of achieving the emission target are considerably reduced. Of these countries, only Canada has high costs without sinks. Thus credited sinks partly reduce the difference in economic burden of achieving the Kyoto target among countries. Even though larger sinks clearly benefit Canada and Japan, their effect on other countries, either on the economywide or on the sectoral level, remains marginal. Allowing larger sinks is, indeed, of relatively minor importance for the world economy and emission reduction, compared to the US withdrawal from the Kyoto Protocol.