A Forester’s Guide to Carbon Offsets

Carbon markets present a new way for timberland owners to derive value from well-managed forests, and can serve as an additional source of conservation benefit on lands already protected by a conservation easement. Landowners with tracts in excess of 1000 acres currently stand well positioned to profit from both regulated and voluntary carbon markets, even if their lands are already under conservation easement.

What are carbon markets?

There are two major categories of carbon markets. The first is a regulated market created by “cap and trade” regulations at the state and regional level. These markets set a “cap” on total amount of allowable greenhouse gas emissions. In order to prevent an amount of emissions from exceeding this cap, each major polluter is allowed a specific amount.

Under a regulated market, emitters of greenhouse gases generally have two ways to meet there obligations. They can 1) reduce their overall emissions or 2) they can purchase an offset from another emitter that is below its cap, or from organizations and private individuals that reduce overall greenhouse gases through carbon sequestration efforts such as growing trees. It is important to note that many of these regulated carbon offset markets were initiated by various state governments, such as California, although sequestration projects may be conducted in any of the lower 48 states while still participating in another state’s program.

Forestland owners can also sell forest carbon credits onto the voluntary market, where businesses and individuals voluntarily buy credits to offset emissions of things like yearly business operations or a long plane trip. Though this market isn’t regulated by government, forest carbon credits that meet high standards can generate significant revenue. There are many forest carbon protocols developed by non-profit organizations to quantify, track, and manage voluntary carbon reductions according to rigorous standards.

Is my forest a good fit for a carbon project?

If you own and manage forestland, there is a possibility you may be able to sell carbon credits generated from management activities on your land. It is important to consider several questions before pursuing a carbon project:

1)    Do you have enough forest land holdings to make a carbon project worthwhile?

Carbon project development costs are high, and at today’s carbon prices, projects on less than 1,000 acres are not likely to generate a profit.

2)    Are you willing to commit to a new long term management regime?

Carbon projects are required to store additional carbon for 50 to 100 years in order to qualify for payments, meaning that landowners and their families must be comfortable with the new management practices necessary for a successful carbon project before embarking upon one.

3)    I have a relatively young forest. Is it a good fit for a carbon offset program?

Forests of all ages are eligible, however forests with timber volumes greater than the regional average are likely to deliver more credits under some protocols.

What eligibility requirements must a carbon project meet?

While eligibility requirements differ depending on what protocols are followed, there are several elements that all rigorous forest carbon protocols share.

A.    Additionality

A forest carbon project must create additional carbon in its trees and other plant biomass, beyond business-as-usual scenarios. That can be accomplished through actions such as selective tree harvesting and land management for wildlife habitat. But a project would not receive credits for simply  following state law. For example, carbon stored from trees planted after harvesting would not constitute additional carbon in California, Oregon or Washington, since reforestation is required in all three states.

B.     Baseline

A forest project must establish a carbon storage baseline, which represents the amount of carbon that would be stored in the forest and harvested timber without the new forest carbon project. Additional carbon stored by the project is compared against this baseline. A baseline could rely on historical practices or practices of similarly situated neighbors.

C.   Leakage

Leakage is defined as a loss of carbon in forests outside of a project area. For example, if a forest landowner is reducing his harvest on lands managed to store additional carbon, he cannot increase his harvest on another area of land to make up for lost timber revenue.

D.    Permanence

The climate benefits of forest carbon sequestration would be compromised through harvests or a change in ownership and management that reduced the carbon stored on the project lands. To guard against this, project developers need to provide legal assurance as to the permanence of forestry projects. Most projects will need to guarantee carbon storage for 100 years.

E.     Risk

All forest projects create a buffer pool of carbon credits that are held in case of forest fires, insect outbreaks, or other unplanned activities. A percentage of carbon credits from each project are not sold on the carbon market and, instead, kept in reserve to guard against risk.

What if my land is already under conservation easement?

Just because land may already be under conservation easement does not prohibit landowners from realizing benefit from an effective carbon sequestration project. Additionality stemming from the provisions of a conservation easement may be captured by a carbon sequestration project, and redeemed for carbon credits, so long as the land was placed under easement within one year of the commencement of the sequestration project.

The only circumstances under which a conservation easement might interfere with a profitable carbon sequestration project, are when the land has been under easement for more than a year, and the terms of the easement are such that the sequestration of additional carbon is not attainable, or not attainable at a level significant enough to translate into a viable and profitable project.

Contact Us

If you are a landowner that would like to explore the possible financial and environmental benefits that may be realized from implementing a carbon sequestration project on your lands, call us at Lee Stephens Law, PLC today.