On May 30, 2018, the European Parliament and Council adopted Regulation (EU) 2018/841 "on the inclusion of greenhouse gas emissions and removals from land use, land use change and forestry in the 2030 climate and energy framework" ("LULUCF Regulation"). Removals of greenhouse gases from the atmosphere occur as a result of absorption of such gases in forests or other natural environments that act as carbon sinks.

Building on the Paris Agreement, which emphasizes the importance of climate mitigation through land use activities, the LULUCF Regulation supplements the regulatory framework to reduce greenhouse gas emissions. This consists of: (i) the EU Emission Trading System ("ETS"), which covers mainly large-scale industrial facilities and the aviation sector; (ii) the Emission Sharing Decision for non-ETS sectors (e.g., waste, agriculture); and now (iii) the LULUCF Regulation regarding greenhouse gas emissions and removals from land use, land use change, and forestry.

In order to limit deforestation and conserve carbon stocks, the LULUCF Regulation provides that Member States must ensure that emissions do not exceed removals, calculated as the sum of total emissions and total removals on their territories in all of the land accounting categories (so-called "no-debit rule"). There is some flexibility in how Member States comply with the no-debit rule, including but not limited to the ability of Member States to trade their total net removals with other Member States.

The LULUCF Regulation does not set any obligation for private parties, but it may ultimately result in stronger obligations for actors in the LULUCF sector. It also recognizes land use and forestry as acceptable methods of greenhouse gas removal, contrary to the European Union's previous position on this matter.

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