Land use, land-use change and forestry (LULUCF)
- Category: European Union Carbon Market Glossary
The land use, land-use change and forestry (LULUCF) sector covers the use of soils, trees, plants, biomass and timber, and is responsible for both emitting and absorbing CO2 from the atmosphere. Emissions and absorptions generated by the LULUCF sector are taken into account in the EU's overall 2030 target. Under the European Climate Law, the contribution of net removals to the 2030 Union climate target is limited to 225 million tonnes of CO2 equivalent to ensure that sufficient mitigation efforts are deployed in other sectors up to 2030.
Land use, land-use change and forestry is a category within the United Nations Framework Convention on Climate Change (UNFCCC) accounting framework for greenhouse gas (GHG) emissions. It includes the carbon pools of living biomass (above and below ground), dead organic matter (dead wood and litter) and organic soil carbon. Emissions from land-use change (such as permanent pasture to arable) and deforestation are also reported under this category. The land-use sector (managed cropland, forestry etc.) can be responsible for GHG emissions (for example from deforestation or draining of wetlands) as well as removals of GHG from the atmosphere (notably CO2 which is absorbed by plant growth and agricultural soil management). Harvested wood products can be a store of carbon (for example when used as building materials), but can also cause GHG emissions (for example when burned as biomass for energy). The EU Member States were bound by the rules of the Kyoto Protocol untill 2020. The said Protokol was aimed to ensure that greenhouse gas emissions from land use were compensated by equivalent removals of CO2 made possible by additional action (such as planting new trees) in the sector (the ‘no-debit rule’). There are no formal commitments for the period after expiry of the Kyoto Protocol.
Within the UNFCCC reporting refers to information included in annual national GHG inventory. Accounting refers to the use of the reported information to meet GHG reduction commitments made by the countries under the Kyoto Protocol (KP).
The LULUCF sector represents a highly complex and dynamic system, where a a number of specific features araise, in particular:
- high uncertainty of emission/removal estimates;
- factoring out, i.e. the difficulty to separate anthropogenic effects from very variable natural background emissions and removals;
-additionality, i.e. the difficulty to distinguish the effects of anthropogenic mitigation actions beyond business as usual projections;
- saturation, and permanence, i.e. the potential of sink pools is not unlimited, and may become a source in the future;
- widely varying national circumstances: difficult to agree on rules applicable to all Parties (even, potentially, within the EU).
European Commission website on LULUCF Regulation
Procedure 2016/0230/COD Eurlex
European Parliament procedure file 2016/230/COD
Given these complexities, a double track has been implemented for LULUCF:
1. land-based approach (under the UNFCCC, Parties report all emissions/removals that occur on managed lands, i.e. "land uses" subject to direct human activities, assuming that most of these emissions/removals are anthropogenic.); and
2. activity-based approach (under the Kyoto Protocol reporting and accounting is restricted to activities occurring on subsets of lands reported to UNFCCC, furthermore, additional reporting requirements exist, e.g. land identification and tracking, demonstrating that uncounted pools are not sources, and demonstrating that some activities are directly-human induced, etc.).
Decision No 529/2013/EU of 21 May 2013
Decision No 529/2013/EU of 21 May 2013 of the European Parliament and Council (LULUCF Decision) lays down accounting rules for greenhouse gas emissions and removals resulting from land use, land-use change and forestry. LULUCF Decision has entered into force in June 2013. The legal framework of this decision outlines rules for how Member States must account for the various land use activities defined for the period 2013-2020 and subsequent periods. The rules and methodologies laid down in the LULUCF Decision are fully consistent with current IPCC guidelines.
The LULUCF Decision includes, in accordance with international obligations, mandatory accounting for forest activities, sets out a road map for how to prepare GHG accounting for management of agricultural soils, which will become mandatory after 2020 and provides for voluntary accounting for the activities of wetland drainage and rewetting. Article 10 of the LULUCF Decision stipulates obligations for the EU Member States to report information on their national LULUCF actions.
European Commission‘s proposal of 20 July 2016
On 20 July 2016, the European Commission presented a legislative proposal concerning GHG emissions and removals from LULUCF (Proposal for a Regulation on the inclusion of greenhouse gas emissions and removals from land use, land use change and forestry into the 2030 climate and energy framework and amending Regulation No 525/2013 of the European Parliament and the Council on a mechanism for monitoring and reporting greenhouse gas emissions and other information relevant to climate change (COM(2016) 479 final - 2016/0230 (COD)). The proposal covered the draft legal framework for GHG emissions and removals from the LULUCF sector from 2021 onwards. The scope included carbon dioxide (CO2), methane (CH4) and nitrous oxide (N2O). This sector comprises mainly forest land and agricultural land, as well as land whose use has changed to, or from, one of these uses. The approach, which is aligned with the UNFCCC ‘land-based’ reporting framework, simplified and adapted the current accounting methodology under the Kyoto Protocol.
Similar to Kyoto Protocol commitments, each EU Member State would have to ensure that the LULUCF sector on its territory has no net emissions (save for some flexibilities) over two five-year periods (2021-2025 and 2026-2030) - the ‘no debit rule’. The flexibilities proposed by the European Commission on 20 July 2016 included:
- the EU Member States may accumulate net removals over the 10-year period:
- excess removals may be transferred to other EU Member States,
- the EU Member States would be allowed to use removals from the LULUCF sector towards their obligations under the Effort Sharing Regulation (up to 280 million tonnes CO2 at EU level over the 2021-2030 period),
- Member States with a larger agricultural sector would have more flexibility.
Accounting rules in the European Commission’s proposal were based on the LULUCF Decision:
- the rules exclude double-counting,
- reporting would be annual,
- compliance checks would take place every five years,
- the methodology for accounting for harvested wood products in maintained,
- emissions from biomass used in energy would be accounted for (which is not the case under the existing legislation),
- the EU Member States would be allowed to exclude emissions from natural disturbances (such as forest fires or pest invasions) from their accounts.
The proposal also amended the EU ETS Monitoring and Reporting Regulation (525/2013/EU) in order to extend the GHG reporting requirements.
Outcome of trilogue negotiations
Trilogue negotiations with the Council regarding the above European Commission’s proposal of 20 July 2016 started on 19 October 2017 and concluded with a provisional agreement in the third meeting on 14 December 2017. The agreed text retained the flexibility on the accounting of managed forests, however, with some modifications:
1. flexibility can be used up to 360 million tonnes of CO2 and will be available to all Member States;
2. ‘managed forest land’ flexibility mechanism can only be activated if:
- the EU collectively meets the ‘no-debit’ rule,
- the EU Mamber States’ national forests still represent a carbon sink, up to an amount calculated for each Member State on the basis of their average sink over the 2000-2009 period.
Other trilogue alignments covered the following areas:
1. national forest management reference levels will be set on the basis of historical levels in the period 2000- 2009;
2. managed wetlands, which store large amounts of CO2, will be included in the accounting system for the 2026-2030 period;
3. from 2030, Member States’ CO2 removals should exceed emissions, in line with the EU’s long-term objectives and the Paris Agreement.
The European Parliament approved the LULUCF Regulation on 17 April 2018, and the Council did so, as a final legislative step, on 14 May 2018, hence, from the latter date the new law is formally adopted (see Regulation (EU) 2018/841 of the European Parliament and of the Council of 30 May 2018 on the inclusion of greenhouse gas emissions and removals from land use, land use change and forestry in the 2030 climate and energy framework, and amending Regulation (EU) No 525/2013 and Decision No 529/2013/EU - the LULUCF Regulation)).
Under the LULUCF Regulation the EU Member States have to ensure that greenhouse gas emissions from land use, land use change or forestry are offset by at least an equivalent removal of CO₂ from the atmosphere in the period 2021 to 2030 ( the "no-debit" rule). It means, for example, that forest land changed to another use, such as settlements – has to be compensated by an equivalent afforestation effort, or by improving sustainable management of existing forests beyond a projected benchmark.
To conclude, the LULUCF Regulation emerged as the fully-fledged third main pillar of the EU's 2030 climate and energy policies (the Effort Sharing Regulation and the EU ETS being the other two).
Directive (EU) 2018/2001 of the European Parliament and of the Council of 11 December 2018 on the promotion of the use of energy from renewable sources (recast), Recitals 81 - 83, 91, 114, 115
(81) Directive 2009/28/EC introduced a set of sustainability criteria, including criteria protecting land with high biodiversity value and land with high-carbon stock, but did not cover the issue of indirect land-use change. Indirect land-use change occurs when the cultivation of crops for biofuels, bioliquids and biomass fuels displaces traditional production of crops for food and feed purposes. Such additional demand increases the pressure on land and can lead to the extension of agricultural land into areas with high-carbon stock, such as forests, wetlands and peatland, causing additional greenhouse gas emissions. Directive (EU) 2015/1513 of the European Parliament and of the Council recognises that the magnitude of greenhouse gas emissions-linked indirect land- use change is capable of negating some or all greenhouse gas emissions savings of individual biofuels, bioliquids or biomass fuels.
While there are risks arising from indirect land-use change, research has shown that the scale of the effect depends on a variety of factors, including the type of feedstock used for fuel production, the level of additional demand for feedstock triggered by the use of biofuels, bioliquids and biomass fuels, and the extent to which land with high-carbon stock is protected worldwide. While the level of greenhouse gas emissions caused by indirect land-use change cannot be unequivocally determined with the level of precision required to be included in the greenhouse gas emission calculation methodology, the highest risks of indirect land-use change have been identified for biofuels, bioliquids and biomass fuels produced from feedstock for which a significant expansion of the production area into land with high-carbon stock is observed. It is therefore appropriate, in general, to limit food and feed crops-based biofuels, bioliquids and biomass fuels promoted under this Directive and, in addition, to require Member States to set a specific and gradually decreasing limit for biofuels, bioliquids and biomass fuels produced from food and feed crops for which a significant expansion of the production area into land with high-carbon stock is observed. Low indirect land-use change-risk biofuels, bioliquids and biomass fuels should be exempt from the specific and gradually decreasing limit.
(82) Yield increases in agricultural sectors by means of improved agricultural practices, investments in better machinery and knowledge transfer, beyond levels which would have prevailed in the absence of productivity- promoting schemes for food and feed crop-based biofuels, bioliquids and biomass fuels, as well as the cultivation of crops on land not previously used for the cultivation of crops, can mitigate indirect land-use change. Where there is evidence that such measures have led to an increase of production going beyond the expected increase in productivity, biofuels, bioliquids and biomass fuels produced from such additional feedstock should be considered to be low indirect land-use change-risk biofuels, bioliquids and biomass fuels. Annual yield fluctuations should be taken into account in that context.
(83) Directive (EU) 2015/1513 called on the Commission to submit, without delay, a comprehensive proposal for a cost-effective and technology-neutral post-2020 policy in order to create a long-term perspective for investment in sustainable biofuels with a low risk of causing indirect land-use change with a headline target of decarbonising the transport sector. An obligation on Member States to require fuel suppliers to deliver an overall share of fuels from renewable sources can provide certainty for investors and encourage the continuous development of alternative renewable transport fuels including advanced biofuels, renewable liquid and gaseous transport fuels of non-biological origin, and renewable electricity in the transport sector. Since renewable alternatives might not be available or cost-efficient to all fuel suppliers, it is appropriate to allow Member States to distinguish between fuel suppliers and to exempt, if necessary, particular types of fuel supplier from the obligation. As transport fuels are traded easily, fuel suppliers in Member States with low supplies of the relevant resources are likely easily to obtain renewable fuels from other sources.
(91) Feedstock which has low indirect land-use change impacts when used for biofuels, should be promoted for its contribution to the decarbonisation of the economy. Feedstock for advanced biofuels and biogas for transport, for which technology is more innovative and less mature and therefore needs a higher level of support, should, in particular, be included in an annex to this Directive. In order to ensure that it is updated in accordance with the latest technological developments while avoiding unintended negative effects, the Commission should review that annex in order to assess whether new feedstock should be added.
(114) If land with high stocks of carbon in its soil or in its vegetation is converted for the cultivation of raw materials for biofuels, bioliquids and biomass fuels, some of the stored carbon will generally be released into the atmosphere, leading to the formation of carbon dioxide (CO2). The resulting negative greenhouse gas impact can offset the positive greenhouse gas impact of the biofuels, bioliquids or biomass fuels, in some cases by a wide margin. The full carbon effects of such conversion should therefore be taken into account in calculating the greenhouse gas emissions savings of particular biofuels, bioliquids and biomass fuels. This is necessary to ensure that the greenhouse gas emissions saving calculation takes into account the totality of the carbon effects of the use of biofuels, bioliquids and biomass fuels.
(115) In calculating the greenhouse gas impact of land conversion, economic operators should be able to use actual values for the carbon stocks associated with the reference land use and the land use after conversion. They should also be able to use standard values. The methodology of the Intergovernmental Panel on Climate Change (IPCC) is the appropriate basis for such standard values. That work is not currently expressed in a form that is immediately applicable by economic operators. The Commission should therefore revise its guidelines of 10 June 2010 for the calculation of land carbon stocks for the purposes of the rules for calculating the greenhouse gas impact of biofuels, bioliquids and their fossil fuel comparators, which are set out in an annex to this Directive, while ensuring consistency with Regulation (EU) No 525/2013 of the European Parliament and of the Council (1).
Fit for 55 amendments
According to the Commission Communication of 14 July 2021 ('Fit for 55': delivering the EU's 2030 Climate Target on the way to climate neutrality COM/2021/550 final), as part of the updated Land Use Land Use Change and Forestry Regulation, the Commission proposes to set an EU target of net greenhouse gas removals in the LULUCF sector of 310 million tons of CO2 equivalent by 2030. Specific national targets are proposed to contribute to this shared goal. Member States will retain a certain flexibility in dividing the effort between the Effort Sharing Regulation and LULUCF sectors.
On 17 March 2023 the Council adopted, as an integral part of the Fit for 55 packageRegulation (EU) of the European Parliament and of the Council amending Regulation (EU) 2018/841 as regards the scope, simplifying the reporting and compliance rules, and setting out the targets of the Member States for 2030, and Regulation (EU) 2018/1999 as regards improvement in monitoring, reporting, tracking of progress and review. The new regulation sets an overall EU-level objective of 310 Mt CO2 equivalent of net removals in the LULUCF sector in 2030. For the period from 2026-2030, each member state will have a binding national target for 2030 for the increase of net greenhouse gas removals, which together will deliver the collective EU target of 310 Mt. In addition, each member state commits to achieving a sum of net greenhouse gas emissions and removals for the period from 2026 to 2029 (‘the budget 2026-2029’). The regulation provides for flexibilities for the member states to help them reach their targets.
Certification framework for carbon removals
On 30 November 2022 the European Commission published the Proposal for a Regulation of the European Parliament and the Council establishing a Union certification framework for carbon removals (COM(2022) 672 final) As the draft recitals explain, the aim of the Regulation is to develop a voluntary Union certification framework for carbon removals, with the view to incentivise the uptake of high-quality carbon removals, in full respect of the biodiversity and the zero-pollution objectives. It would be a tool to support the achievement of the Union objectives under the Paris Agreement, notably the goal of collective climate neutrality by 2050.
The Union certification framework will support the development of carbon removal activities in the Union that result in an unambiguous net carbon removal benefit, while avoiding greenwashing. In the case of carbon farming, such certification framework should also encourage the uptake of carbon removal activities that generate co-benefits for biodiversity, therefore achieving the nature restoration targets set out in Union law on nature restoration. The Union certification framework will be instrumental in meeting the Union climate change mitigation objectives set in international agreements and in the Union legislation.
The provisions and structure of the proposed Regulation corresponds to the objective of the initiative to create a transparent and credible certification framework for carbon removals with high climate and environmental integrity, in order to support physical and legal persons that are willing to make the extra effort, beyond reducing as much as possible their GHG emission, and bring their activities to the level of sustainability, within the context of the increased climate ambition stated in the European Green Deal and the objective of the 2050 climate neutrality set out in the European Climate Law.
The key provisions of the proposed Regulation are the following:
The objective and scope of the Regulation is defined in Article 1. This proposal aims to facilitate the deployment of high quality carbon removals through a voluntary Union certification framework. This Article also defines the overall structure of the proposal, which consists of three pillars: the first sets out the four quality criteria, the cumulative compliance of which makes the carbon removals eligible for certification. The second pillar determines the key elements of the verification and certification process. The third pillar provides rules for the functioning of the certification schemes that are responsible for implementing the Union certification framework.
Article 2 provides for the key terminology necessary to complete the provisions of the proposed Regulation, in particular the definitions of carbon removals and carbon removal activity.
Article 3 identifies the two conditions for carbon removals to be eligible under the Union certification framework: first, to be generated by carbon removal activities that meet the quality criteria; and, second, to be verified by an independent certification body.
The first pillar of the proposed Regulation is defined in Articles 4 to 8. Article 4 establishes rules for the quantification of the net carbon removal benefit against a baseline, whereas Articles 5, 6 and 7 set out the quality criteria on additionality, long-term storage and sustainability of carbon removal activities. Article 8 provides the empowerment for Commission delegated acts, which will establish tailored certification methodologies for the assessment of compliance with the quality criteria. Annex I lists the elements to be included in those certification methodologies.
The second pillar of the proposed Regulation regarding the certification of compliance is set out in Articles 9 and 10.
Article 9 defines the key elements of the certification process which is composed of two steps. In an initial stage, an operator submits comprehensive information concerning the carbon removal activity and its expected compliance with the quality criteria to a certification body. The certification body carries out an audit to verify the operator’s claims, issues a certification audit report and – if the quality criteria are met – a certificate.
In a second stage, the certification body carries out a re-certification audit to verify that the carbon removal activity has been implemented correctly and in full compliance with the quality criteria, and issues a re-certification audit report and an updated certificate, on the basis of which the certification scheme issues and registers the certified carbon removal units. Annex II lists the minimum information to be included in the certificate.
Article 10 sets minimum conditions for certification bodies to ensure their competence to carry out the certification audits and their independence and impartiality. It also sets an obligation for the Member States to supervise the operation of certification bodies.
The third pillar regarding the certification schemes is determined in Articles 11 to 14. Article 11 sets the obligation for operators to use certification schemes, recognised by the Commission, to demonstrate compliance with the quality criteria. This article lays down also a number of requirements for the functioning of the certification schemes, including measures to ensure the good governance, transparency, and accountability.
Article 12 imposes the obligation for certification schemes to set up and maintain public registries for evidence of carbon removal activities and carbon removal units. It is of key importance that registries use automated systems and are interoperable in order to prevent fraud and avoid double counting.
Article 13 provides the legal basis for the recognition of certification schemes through Commission decisions and Article 14 prescribes reporting requirements on certification schemes.
Article 18 provides for a review of the Regulation: for a first time three years after its entering into force and not later than by the end of 2028, and then at regular intervals after each stocktake exercised as laid down in the Paris Agreement.