Abstract
Management of forest carbon sinks can be viewed as a strategy to deal with climate change. To promote the establishment and improvement of the forest carbon market, it is important to measure the economic benefits of China’s existing forest carbon sinks with special weighting to forests along with protection of nature. Objectively measuring the value of a carbon sink is an important prerequisite to play the role of forest carbon pool and improve the efficiency of carbon sinks. This paper considers the strategy and process of forest carbon sink value accounting from two aspects of forest carbon storage and value, puts forward a set of forest carbon sink fair value accounting ideas, and considers Yixing forest farm as the research area. The following methods were used to compare the forest carbon stock of the Yixing National Forest Park. First, the economic benefits of forest carbon sink were evaluated with a market approach and carbon fair value. Next, the biomass expansion factor method and income approach were used to compute the forest carbon stock of Yixing National Forest Park, indicating a high carbon fair value.
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Measurement of the Fair Value of Forest Carbon Sinks – Taking Yixing National Forest Park as an Example
Yuanyuan Chen,a,b Jie Qiu,a and Chong Jia a,c
Management of forest carbon sinks can be viewed as a strategy to deal with climate change. To promote the establishment and improvement of the forest carbon market, it is important to measure the economic benefits of China’s existing forest carbon sinks with special weighting to forests along with protection of nature. Objectively measuring the value of a carbon sink is an important prerequisite to play the role of forest carbon pool and improve the efficiency of carbon sinks. This paper considers the strategy and process of forest carbon sink value accounting from two aspects of forest carbon storage and value, puts forward a set of forest carbon sink fair value accounting ideas, and considers Yixing forest farm as the research area. The following methods were used to compare the forest carbon stock of the Yixing National Forest Park. First, the economic benefits of forest carbon sink were evaluated with a market approach and carbon fair value. Next, the biomass expansion factor method and income approach were used to compute the forest carbon stock of Yixing National Forest Park, indicating a high carbon fair value.
DOI: 10.15376/biores.18.4.8187-8211
Keywords: Forest carbon sink; Fair value; Biomass expansion factor method; The income approach
Contact information: a: NFU Academy of Chinese Ecological Progress and Forestry Development Studies, Nanjing Forestry University, Nanjing, 210037, China; b: College of Economic and management Nanjing Forestry University, Nanjing, 210037; c: College of Materials Science and Engineering, Nanjing Forestry University, Nanjing, 210037, China;
* Corresponding author: cyy@njfu.edu.cn
INTRODUCTION
The concentration of greenhouse gases, primarily carbon dioxide (CO2), continues to rise in the Earth’s atmosphere. This has led to the increasingly serious problem of global warming in the world. Forests are the main body of the terrestrial ecosystem and the largest carbon stock on land (Pan et al. 2011). They are receiving increasing attention as carbon sinks (Richards and Stokes 2004; Malhi 2012; Wei and Shen 2022). The reasonable measurement and disclosure of the value of forests as carbon sinks has become the primary focus of many researchers. The value of forest carbon sinks is ascertained by two factors: the physical quantity of forest carbon sinks and the value of carbon sinks per unit.
Accurate measurement of the physical quantity of forest carbon sinks is the basic link of carbon cycle research and carbon sink afforestation. Thus, it is one of the important topics in current studies on carbon sinks (Brown 2002; Versace et al. 2021). The most commonly used method for measuring the physical quantity of forest carbon sinks is by calculating carbon storage through biomass (Yang et al. 2014; Torresan et al. 2020). Some commonly used biomass carbon measurement models are the biomass expansion factor method, the allometric equation, and the volume biomass method. As the basis for forest carbon sink measurement, thousands of biomass models have been established in China and elsewhere (Ter-Mikaelian and Korzukhin 1997; Zianis et al. 2005; Dong et al. 2014; Ozdemir et al. 2019). The industry standards for tree biomass models and carbon measurement parameters of 13 major tree species have been released by China. These models are basically allometric equations (relative growth equations). They are used to solve the relationship problems between tree biomass and other measured factors such as diameter and tree height at a specific time, without involving factors of time and the environment (Xu et al. 2007; Cao and Li 2019). Even though the accuracy of the model is high, the application range of the model is connected to the size of the modeling sample and the sampling range. When estimating the forest carbon storage (source), at least two surveys are required. From this, only the changes in the carbon sinks during the survey period can be obtained. The volume biomass method establishes a fitting equation between the storage and biomass based on the measured data just as in the case of the allometric equation. It then calculates the forest biomass through equation generalization. Xu et al. (2007) used the measured biomass and storage data of different tree species at different age groups to establish a model between the storage and biomass by using regression analysis. This will help in studying the winter variation of vegetation carbon storage in China’s forest ecosystem (Brown and Lugo 1984; Qiu et al. 2023). Forest biomass can be estimated by the biomass expansion method, which is considered as a preferred method for estimation (Brown and Lugo 1984). The method uses the storage data of major global forest types that is provided by the Food and Agriculture Organization (FAO) of the United Nations in order to estimate the aboveground biomass of global forests (Veroustraete et al. 2002; Bai et al 2023). For estimation, the average value of the ratio of biomass to log volume as an expansion factor is taken. Then, the forest carbon storage is calculated based on the forest storage obtained from the forest inventory. There is a good correlation between the forest stand volume and biomass. This is because the forest stand volume comprises forest type, age, condition of the site, and stand density. The relationship between forest carbon storage and forest stand biomass is used to calculate biomass. This can help in removing the influence of these factors on stand biomass (Fang et al. 2001; Fang and Wang 2001). The demand for stand-scale carbon sink measurement has further expanded due to the development of carbon sink afforestation. With the development of carbon sink afforestation, the efficiency and accuracy of the measurement of carbon sinks need be increased.
To deal with global climatic changes, many countries around the world have taken to increasing forest carbon sinks as a way to slow down carbon emissions. This has been done because of the important role and cost advantage of forest carbon sinks in climate changes (Kooten et al. 1995). The process of measurement of forest carbon sink value is very complex. It involves ecology, economics, forestry, accounting, etc. (Liu et al. 2013). The forest carbon sink value is dependent on the physical quantity (carbon storage) and the carbon sink value per unit. The method used for determining the price carbon sink price depends on the purpose of measurement. This includes the shadow price, industrial emission reduction costs, carbon tax, and the transaction price of carbon sinks. The carbon sink price determined based on the industrial emission costs varies greatly and is unstable, since the cost of reduction of industrial emission, too, varies greatly. Although the carbon tax is relatively stable, it lacks real-time adjustment with the market. The shadow price is not suitable for measurement. However, in the generally free market, it is very close to the actual market price. Therefore, the transaction price of carbon sinks is best suited to reflect the market price of carbon sinks. It can also best reflect the fair value of carbon sinks.
In July 2014, the Ministry of Finance promulgated the Accounting Standards for Enterprises No. 39-Fair Value Measurement (CAS39). Under this, the fair value is defined as: “The price paid to receive or transfer a liability when selling an asset in an orderly transaction between market participants on the measurement date.” Fair value is also known as fair market value and fair price. The value of forest carbon sinks is mainly obtained by multiplying the fair price of forest carbon sinks based on physical measurement (carbon storage). The fair value is used for this purpose. The method to choose and determine the fair price of carbon sinks to constitute the fair value is the primary focus of the paper. As mentioned in the relevant provisions of CAS39, it can be concluded that in a mature market, the market price reflects the fair value of the transaction. The carbon trading price can best reflect the market price of carbon sinks. It can also best reflect the fair value of carbon sinks. It will be difficult to the price inquiry of carbon sinks if the forest carbon sink markets at home and abroad are not mature enough. Thus, according to CAS39, finding the primary market or the most favorable pricing for trading is the difficulty faced in obtaining the fair value of forest carbon sinks. It is also difficult to measure the value of forest carbon sinks objectively and fairly.
Under the huge pressure of emission reduction, the government has started using carbon emissions trading as the major means of emission reduction to control greenhouse gas emissions (Nay and Bormann 2014). According to the “Emissions Gap Report 2020” that was released by the United Nations, presently there are 31 trading markets of “carbon emission allowances” that can be referred to as “carbon markets” and 30 carbon tax mechanisms in the world. The carbon pricing mechanisms cover nearly 12 billion tons of carbon dioxide emissions in 46 countries and 32 regions. These account for approximately 22% of the total global greenhouse gas emissions (Neagu and Teodoru 2019). Through years of development, the carbon pricing mechanisms have gradually become well-developed. The geographic scope of participating countries has continuously expanded. The market structure, too, has been deepened at multiple levels. As early as 2011, local pilot carbon emissions trading markets were launched by China in Beijing, Tianjin, Shanghai, Chongqing, Hubei, Guangdong, and Shenzhen. These markets have subsequently been opened to the public since June 2013. On July 16th, 2021, the national carbon emissions trading market was officially opened at Shanghai Environment Energy Exchange as one of the core policy tools to achieve emission peaking and carbon neutrality. The first national carbon trading price was 52.78 yuan per ton. Presently, the first to enter the national carbon emissions trading market is the key emitter of the power generation industry. It no longer participates in the local carbon emissions trading. The other industries whose emissions do not meet the standards for “key emitters” still participate in the local carbon emissions trading.
The so-called “carbon emissions trading” refers to the Carbon Emissions Allowance (Neagu and Teodoru 2019) trading. CEA is mainly a market mechanism for trading carbon emission allowance as commodities. The so-called “carbon emissions allowance” refers to the allowances given to enterprises to emit greenhouse gases into the atmosphere. After approval from the local competent departments of the environment, enterprises will have a certain amount of allowance for “legal” greenhouse gas emissions within a stipulated time. When the actual emissions exceed the allowance, the enterprise will have to purchase the excess. On the other hand, when the actual emissions of the enterprise are less than the allowance, the balance can be sold externally. The Chinese Certified Emission Reduction (CCER) refers to greenhouse gas emissions registered in the Voluntary Greenhouse Gas Emission Reduction Transactions System in compliance with the relevant management regulations. This is done to reduce voluntary greenhouse gas emissions, as issued by the Ministry of Ecology and Environment. A total of 5 forest carbon sink transactions have been completed in the primary state-owned forest areas of Greater Khingan and Inner Mongolia, with a total transaction value of 1.91 million yuan since the year 2014. In 2020, the first forest carbon sink was delivered by the Forestry and Grassland Administration of Qinghai Province to Shell Energy (China) Limited based on certified carbon standards. The certified emission reductions amounted to 254,600 tons.
The carbon sinks owned by national forest parks such as Yixing National Forest Park Farm cannot be widely traded in the carbon market. However, their contribution to carbon neutrality cannot be ignored. The reasonable measurement of forest carbon sinks can help realize its value. This will eventually promote forest carbon sink trading. A direct, positive influence of this will be seen on the construction of ecological forestry, the improvement of climate and environment. It will also help in increasing the income of forest farmers. Simultaneously, it will urge China’s carbon market entities to shift from emission-controlled enterprises to diversified market entities. These include emission-controlled enterprises, non-emission-controlled enterprises, financial institutions, intermediaries, and individuals. This will accelerate the realization of emission peaking and carbon neutrality.
In this paper, the three common biomass carbon measurement models are compared at the forest stand scale. An effective method for small-scale forest carbon sink measurement is explored in order to form a scientific basis for the accurate measurement of carbon sinks. According to the CAS39, measuring the value of forest carbon sinks helps to reasonably measure the fair value of forest carbon sinks.
EXPERIMENTAL
Overview of the Research Area
The paper takes the forest of Yixing National Forest Park Farm (Yixing National Forest Park) as the research area (Fig. 1). Yixing National Forest Park is located southwest of Yixing, at the junction of Jiangsu, Zhejiang, and Anhui provinces. It has a total area of 3,400 hectares and includes Mount Song in the southern region and Mount Tongguan in the northern region. It belongs to the extension of the Tianmu Mountains. The main peak in the area, Mount Tongguan, is 521 meters above sea level. The mountains include ups and downs with ravines and gurgling streams. The region has a subtropical monsoon climate. It remains warm and humid throughout the year. There are four distinct seasons. The forest is dense, and the vegetation is rich. This is the zonal vegetation on the northern edge of the mid-subtropical zone. There are more than 200 kinds of wild animals. The main tree species of the region are Pinus massoniana Lamb., Cunninghamia lanceolata (Lamb.), Quercus acutissima, etc.
Data Sources
Field data from the Forest Planning and Design Survey (Second Class Investigation Data) of 2008 was used in this work. It is provided by Yixing National Forest Park, and it was used to calculate the forest carbon sinks. This mainly includes the dominant tree species (group), average diameter at breast height (DBH), average tree height, age class, and age group in each small class of the research area.
Fig. 1. Map of site location
Biomass Measurement
Allometric equation
The allometric equation is based on the field measurement of standard stand biomass. It fits the growth curve to establish a fit equation of DBH, tree height, and biomass. The allometric equation is a commonly used method for estimating tree biomass (Jenkins et al. 2003; Nay and Bormann 2014; Poudel and Temesgen 2016). In this paper, the allometric equations of dominant national tree species (group) which have been compiled according to the Main Technical Regulations of National Forest Inventory are used. The allometric equation of Jiangsu Province is also used here. If the data from Jiangsu Province is unavailable for some dominant tree species, data from the adjacent province is used. The allometric equation of each part of the standing tree is shown in Table 1. Here, D is the diameter at breast height (cm), H is tree height (m), WS stands for trunk biomass, WB is branch biomass, WL is leaf biomass, WT is total biomass aboveground, WR represents underground biomass, and W is total tree biomass quantity. Summarizing the biomass of each part gives the total biomass quantity W in the research area.
Volume-biomass method
Changes in factors such as age, site, individual density, and stand status are comprehensively reflected by the stand volume. The volume-biomass method establishes the functional relationship between the volume and the biomass. It also calculates the biomass based on the volume. In this work, the one-way log volume table of Jiangsu Province has been used to calculate the volume of standing trees as provided by the Jiangsu Forest Resources Monitoring Center (see Table 2).
Table 1. The Allometric Equation of Each Part of the Standing Tree
Table 2. One-way Log Volume Table of Chief species in Jiangsu Province
Table 3. Parameter Table of Volume-biomass Method
