Legal Institutions Of Forest Carbon Sequestration Transactions

Forest carbon sequestration is highlighted in UNFCCC and Kyoto Protocol,which will be an important measures for China to deal with climate change.Its effect is not only to reduce GHG concentrations but also to bring economic and social benefits to our society.Numerous academic research has discussed about forest carbon sequestration from scientific and economic view,but scholars have not pay much attention to this problem with legal institutions.This article is to summarize the experience of international and national forest carbon sequestration projects,and try to develop the system of legal institutions of national forest carbon sequestration.Chapter One is to discuss some basic concepts of forest carbon sequestration transactions.Forest carbon sequestration is different from traditional property.It is difficult to distinguish the features of forest carbon sequestration rights in civil law system.But common law system has developed its property law regulations,it is better for us to analyze this problem from this point.Furthermore,according to public trust doctrine,nation is to assume fiduciary duty of natural resources for public interest.Forest carbon sequestration is a kind of public good,and nation should take responsibilities to protect people's fiduciary interests.Chapter Two is to discuss civil legal relationship of forest carbon sequestration transactions with its subject,object and content.The most important part is to analyze validity of contract from contract law.Chapter Three is to debate potential perils to developing countries.In many countries,forests fees have historically been kept below the actual value of the timber,because forests have been traditionally undervalued,it is easy for governments to continue to do so under carbon contracts.This suggests the possibility of a race to the bottom emerging in this area,where countries compete with one another by lowering taxes and royalties in an effort to capture limited profits.Chapter Four is to discuss because of asymmetric information,the agent has information that is unavailable to the principal and the agent often acts in hidden from and contrary to the desires of the principle.When it comes to carbon offsets,there are several layers to the PA(Principal-Agent)problem and identifying the parties of a contract can be difficult.Fourthly,regardless of the use of a carbon sequestration right,there is an ever-present risk of loss inherent in an offset project.Insurance is therefore necessary to protect the project's promised emission reduction from human or natural destruction that may hinder the carbon sequestration and storage.Unfortunately,insurance companies do not yet provide standard policies for offset projects.Chapter Five is to summarize some advices to deal with the problems above.Domestic implementation of the LULUCF provisions in Kyoto Protocol will present challenges of many types for countries seeking to reduce their net GHG emissions through the biotic sequestration of atmospheric carbon.The first element is designed to provide investors in LULUCF projects and purchasers of the resulting emissions credits with the basic legal foundation for these transactions.This foundation consists of secure and transferable legal rights in sequestration,contractual arrangements that can be negotiated without excessive transaction costs and that will achieve the results expected by the parties,and reliable liability rules and enforcement mechanisms for giving effect to these rights.These mechanisms would contribute to providing market participants with the legal certainty that is necessary to secure investment in LULUCF projects and to facilitate efficient trading of sinks-based emissions credits.To some extent,government has an interest in achieving the full social value from biotic carbon management and in ensuring that emissions offsets from carbon sequestration contribute to the broader national effort of reducing net GHG emissions to levels established through international negotiations.Since the benefits from sequestration include both public and private goods,market prices may not reflet their full value.Furthermore,government has a significant role to play in addressing some of the structural obstacles to large-scale carbon sequestration.For these reasons,the legal and policy mechanisms to implement biosphere GHG management should include a carefully designed package of incentives and regulations,along with the direct support of sequestration by government.