On 14 July 2021, the European Commission adopted a series of legislative proposals setting out how it intends to achieve climate neutrality in the EU by 2050, including the intermediate target of an at least 55% net reduction in greenhouse gas emissions by 2030. The package proposes to revise several pieces of EU climate legislation, including the EU ETS, Effort Sharing Regulation, transport and land use legislation, setting out in real terms the ways in which the Commission intends to reach EU climate targets under the European Green Deal.
Under current EU legislation adopted in May 2018, EU Member States have to ensure that accounted greenhouse gas emissions from land use, land use change or forestry are balanced by at least an equivalent accounted removal of CO2 from the atmosphere in the period 2021 to 2030.
The LULUCF Regulation implements the agreement between EU leaders in October 2014 that all sectors should contribute to the EU's 2030 emission reduction target, including the land use sector.
It is also in line with the Paris Agreement, which points to the critical role of the land use sector in reaching our long-term climate mitigation objectives.
The Regulation sets a binding commitment for each Member State to ensure that accounted emissions from land use are entirely compensated by an equivalent accounted removal of CO2 from the atmosphere through action in the sector. This is known as the “no debit” rule.
Although Member States already partly undertook this commitment individually under the Kyoto Protocol up to 2020, the Regulation enshrines the commitment for the first time in EU law for the period 2021-2030.
Moreover, the scope is extended from only forests today to all land uses (including wetlands by 2026).
The new rules provide Member States with a framework to incentivise more climate-friendly land use, without imposing new restrictions or red tape on individual actors.
This will help farmers to develop climate-smart agriculture practices and support foresters through greater visibility for the climate benefits of wood products, which can store carbon sequestered from the atmosphere and substitute for emission-intensive materials.
Emissions of biomass used in energy will be recorded and accounted towards each Member State's 2030 climate commitments, through the correct application of accounting in LULUCF.
This breakthrough addresses the earlier broad criticism that emissions from biomass in energy production were not accounted for under previous EU law.
As forest management is the main source of biomass for energy and wood production, more robust accounting rules and governance for forest management will provide a solid basis for Europe's future renewables policy after 2020.
The LULUCF Regulation
Forest reference levels
In October 2020, the Commission amended the existing LULUCF legislation with a delegated act setting forest reference levels (FRLs) that each country must apply between 2021 and 2025.
Forest reference levels are forward-looking benchmarks for accounting net emissions from the existing forests in each EU country. They are based on a continuation of sustainable forest management practices from the period 2000-2009. They draw on the best available data and take into account dynamic age-related forest characteristics.
The Regulation allows some flexibility for Member States.
For instance, if a Member State has net accounted emissions from land use and forestry, they can use allocations from the Effort Sharing Regulation to satisfy the "no debit" commitment.
Moreover, Member States can buy and sell net accounted removals from and to other Member States. This can encourage Member States to increase CO2 removals beyond their own commitment.
On the other hand, a Member State may choose to enhance removals or reduce emissions in the LULUCF sector, thereby helping compliance of the agriculture sector in the Effort Sharing Regulation where emissions from fertilizer and livestock are accounted.
Stakeholders were involved at various stages in the development of this proposal.
Consultations were carried out in 2015, including:
Following these consultations and the analysis of EU climate policy targets for 2030, the Commission carried out an impact assessment.
The public had the possibility to provide feedback on the legislative proposal after it was adopted by the European Commission. A summary of the feedback was presented to the European Parliament and the Council.
To lay down Forest Reference Levels, the LULUCF Expert Group provided feedback and was consulted on the draft delegated act. The public provided views through the public feedback mechanism over four weeks in August and September.
In October 2014, the EU agreed on a clear commitment: all sectors, including land use and forestry, should contribute to the EU's target to reduce greenhouse gas emissions by at least 40% by 2030 compared to 1990 levels. The regulation on land use and forestry sets out a binding commitment for each Member State and the accounting rules to determine compliance and covers CO2 from forestry and agriculture.
Together with the revision of the EU Emission Trading System (ETS) and the Effort Sharing Regulation on national emissions targets for all other sectors not covered by the EU ETS (see fact sheet), this will contribute to the achievement of the EU's commitments under the Paris Agreement on climate change. The new regulatory framework is based on the key principles of fairness, solidarity, flexibility and environmental integrity.
The Regulation establishes a careful balance between more incentives to capture carbon in agricultural soils, forests and wetlands, and the need to maintain the environmental integrity of the EU climate framework, so as to incentivise emission reductions in the buildings, transport and agriculture sectors.
Land use and forestry include our use of soils, trees, plants, biomass and timber, and are in a unique position to contribute to a robust climate policy. This is because the sector not only emits greenhouse gases but can also remove CO2 from the atmosphere. EU forests absorb the equivalent of nearly 10% of total EU greenhouse gas emissions each year.
By helping to preserve and strengthen the capacity of our forests and soils to capture CO2 in a sustainable way, this Regulation benefits all Europeans. Member States and the EU are able to better assess climate change benefits related to agriculture and forestry, get a better understanding of effective climate protection measures in these sectors, while at the same time securing food production, protecting biodiversity, and encouraging the development of a bio-based economy.
Emissions of biomass used in energy will be recorded and counted towards each Member State's 2030 climate commitments. This addresses the common criticism that emissions from biomass in energy production are not currently accounted for under EU law. As forest management is the main source of biomass for energy and wood production, more robust accounting rules and governance for forest management provide a solid basis for Europe's future post-2020 renewables policy.
The new rules support farmers in developing climate-smart agriculture practices, which seek synergies between productivity, resilience and emissions reductions, without imposing restrictions or red tape for individual farms. It supports foresters and forest-based industries through greater visibility for the climate benefits of wood products which have a longer life-time and which store carbon from the atmosphere for long periods. It provides a framework for Member States to incentivise more climate-friendly land use.
The Regulation requires each Member State to ensure that accounted CO2 emissions from land use are entirely compensated by an equivalent accounted removal of CO2 from the atmosphere through action in the LULUCF sector. This commitment is referred to as the "no debit rule". In essence, if a Member State converts forests to other land uses (deforestation), it must compensate the resulting emissions by planting new forest (afforestation) or by improving the sustainable management of their existing forest, croplands, grasslands or wetlands. In this way the "no-debit" commitment incentivises Member States to take actions that increase the absorption of CO2 in agricultural soils and forests. Although Member States individually undertook this commitment under the Kyoto Protocol up to 2020, the Regulation establishes the commitment in EU law for the period 2021-2030.
The Regulation also contains the accounting rules to be used by all Member States so that compliance with the "no-debit" commitment is calculated consistently across all Member States. The accounting rules regulate how emissions and removals – i.e. the absorption of CO2 by agricultural lands and forests – are to be recognised, measured and compiled in a standardised way.
The upgraded and robust accounting rules in the Regulation build on those previously established at international level under the Kyoto Protocol, which already committed Parties to internationally binding emission targets in relation to forests.
The Kyoto-style technical rules have been simplified and updated, with the current principles and methodology regarding land use accounting mostly kept, but upgraded and made relevant for a post-Kyoto protocol period (post-2020) to improve environmental integrity. The main updates are:
The Regulation provides several flexibilities to Member States to meet their "no-debit" commitment while maintaining environmental integrity. If the accounted removals of CO2 are greater than the accounted emissions of CO2 from land use in the first compliance period (2021-2025), these can be banked and used in the next compliance period (2026-2030). This gives Member States the flexibility to deal with fluctuations caused by growth cycles or other variable conditions, typical of the LULUCF sector.
If a Member State has net accounted emissions from land use and forestry, it can use allocations from the Effort Sharing Regulation to satisfy its "no debit" commitment. Member states can also buy and sell net removals from and to other Member States. This would encourage Member States to increase CO2 removals beyond their own commitment.
If a Member State generates net removals beyond their commitment for example by increasing forest area (i.e. afforestation) or through improved practice in agriculture (i.e. managed grassland, cropland or wetlands), a limited number of these net removals can be used to comply with national targets in the Effort Sharing Regulation. This amount is strictly limited to ensure the environmental integrity of the non-ETS national targets, and is dependent on the share of the agricultural sector emissions in each Member State. Moreover, only domestic action can be transferred and used for compliance under the Effort Sharing Regulation.
Before a similar flexibility is considered for managed forest land, the robustness of the reference levels for all Member States based on the new EU governance process will need to be confirmed through a delegated act.
The Regulation establishes two compliance periods: from 2021-2025 and from 2026-2030 respectively. A five-year cycle is appropriate for land use because absorptions and emissions in the sector can vary significantly from year to year, due to weather and other natural phenomena. This closely aligns the proposal with the 5-year review cycle set out in the Paris Agreement and is in line with the Commission commitment to Better Regulation.
Member States are nevertheless expected to report on their emissions and removals annually, applying the standardised rules and methods, and on policies and measures undertaken in the sector every second year. The Commission will carry out a comprehensive review of the accounted data after each 5-year period and determine compliance with the "no debit" commitment, proposing action if needed.
In order to ensure overall compliance, where a Member State does not meet its commitment in either period, the shortfall with respect to the “no-debit” rule is deducted from their allocation in the Effort Sharing Regulation.
Certain natural events can cause trees to fall during storms or burn in wildfires. In the last 25 years, globally, forest fire seasons have already become 20% longer and more severe; and this trend is expected to worsen in the coming decades due to increasing global temperatures.
The scale of emissions associated with extreme events that are driven by nature – i.e. natural disaster – can be substantial. Exceptional emissions that are outside the control of Member States may be excluded from the accounts for land use and forestry. Clear rules limit this exemption to ensure that it does not, however, create a loop-hole, and to provide also for an incentive to undertake preventive action in the cause of adaptation to climate change.
A Forest Reference Level (FRL) sets a forward-looking benchmark for accounting emissions and removals from land on which forests already exist for the period 2021-2025. Under EU law, Forest Reference Levels are based on the continuation of sustainable forest management practices from the period 2000-2009 and take into account dynamic age-related forest characteristics and best available data. They should not unduly constrain future forest management intensity, such that long-term carbon sinks can be maintained or strengthened. By this Forest Reference Levels are a theoretical estimate projecting past management practices into the future; they are not to be mistaken with actual emissions or projected emissions under current or future policy scenarios.
The legal process for Forest Reference Levels for the period 2026-2030 will begin on 30 June 2023. Accounting of emissions and removals for the period 2021-2025 will be undertaken in 2027 when the greenhouse gas inventory for the period 2021-2025 will be completed.