The role of sinks in climate policy has been controversial and confused. The major supporters for including sinks in an international climate policy under the Kyoto Protocol were the Umbrella Group of countries, led by the USA and including Australia, Canada, Japan and Russia. This group also pushed strongly for international emissions trading, imagining that countries would distribute emissions allowances to private sector emitters, who would then be required to have an allowance for each tonne of greenhouse gas (GHG) they emitted. With emissions trading, emitters who found they could cheaply reduce their emissions might have allowances to sell, or those who could not easily reduce these could purchase allowances to cover their emissions. With international trading, these permits could be exchanged among allowance holders anywhere among the parties subject to an emissions cap.

In principle, accounting and crediting sinks under a cap-and-trade system should be straightforward: (i) measure the stock of carbon at an initial year; (ii) measure the stock of carbon in subsequent years; (iii) if the carbon stock rises from one period to the next, the increased sequestration is added to the allowances or cap on emissions of the country or entity, and if the stock declines, the net release to the atmosphere is subtracted from the allowances or cap. This simplicity has eluded designers of carbon policy. For various reasons, a desire has developed to identify specific types of sink-enhancement actions that may or may not be included under agreed caps as well as an unwillingness to bring the entire terrestrial biosphere carbon stock within a policy target. The result has been thousands of pages of attempts to define a forest, the difference between afforestation and reforestation, what constitutes 'management', if a change in carbon stocks is due to human action, and spatial and temporal leakage. Most of this would be irrelevant if a simple accounting framework and broad coverage of land use emissions and uptake were adopted in the design of carbon policy. How and why did we get from a simple and straightforward idea to the complex design and controversial issues now discussed as part of sinks policy? Are there good reasons why the problem is not as simple as it at first seems? Is it possible (or desirable) to now try to work towards fairly simple mechanisms for sinks in a carbon policy? These are the questions we hope to address in this chapter.

We first review existing policies with attention to issues that arise with regard to terrestrial sinks, and how sinks are to be included. We then show some of the important aspects of managing sinks that arise because they depend on environmental conditions that are largely outside the control of the land owner. Next we work through a very simple example of two hypothetical countries, and show the effects of including sinks. Finally we address several issues that have arisen as countries have negotiated the inclusion of sinks in GHG mitigation policies. Some of these are important and real issues that must be addressed if climate policy design is to create incentives for efficiently managing carbon in the terrestrial biosphere. However, many of the issues arise from, or in response to, the tangled policy approaches we have designed for sinks enhancement, and attempts to straighten it out seem only to further tangle the issue.

© CAB International 2007