Once the program was shown to work, other entities – including large timber investment and publicly traded forestry companies – followed suit. In the last two years, Finite Carbon has
worked on projects with The Forestland Group, Lyme Timber,
Molpus Woodlands, and Potlatch, among others. The Forestland
Group, for example, had two projects – one on 102,899 acres in
the Adirondacks and another on 141,062 acres in northern New
Hampshire – successfully registered with the California offset
program in 2014. Together, these projects were awarded roughly
1. 3 million offset credits, which generated nearly $12 million
in revenue. The Passamaquoddy Tribe of Maine is currently
working with Finite Carbon to have a 99,000-acre parcel accepted
into the California program, and the expectation is that it, too,
will generate more than one million credits.
While the payoffs are big, so is the commitment required to
get the credits. One of the first steps is to be sure a particular
parcel of forestland is suitable for the program. For starters, it
needs to be big in order to make economic sense. Figure a bare
minimum of 2,500 acres, and usually much larger than that,
given all of the costs involved.
The forestland also really has to start with above-average
stocking levels because part of the initial credits issued will
essentially be a reward for past behavior. For example, if a forest
has 100 tons of carbon per acre and the comparison level is 80
tons per acre (based on U.S. Forest Service Forest Inventory and
Analysis datasets for similar forests), then the landowner will
receive credit for 20 tons per acre.
There are different ways that forestland owners can earn
offset credits in the California program: Avoided conversion
projects are those that keep land that otherwise might be cleared
or developed in forestland. Improved forest management projects,
which are the most common, are based on forest owners
managing in a way that will sequester more carbon than would
normally be the case. That’s what creates the offsets.
Once the land is deemed suitable, the real work begins,
starting with the mother of all inventory jobs. “When a traditional
forester looks at an inventory, they think merchantable product,”
says Carney. “We’re thinking about a merchantable product,
too. Except that our merchantable product is carbon.” A carbon
inventory is focused on biomass, he explains. “That’s everything
– the roots, the stumps, the tops, the branches, all of that gets
factored in. When we go out to do a measurement, we’re looking
to calculate total carbon, not just board feet or cords. So within
every plot being sampled we have to measure diameter on every
tree one inch DBH and up; we have to measure the merchantable
tree height and the total tree height on every tree. As you can
imagine, when you’re in an eastern hardwood forest, this is not
an easy task at all.” Even standing dead trees are accounted for.
Finite Carbon’s own foresters design the inventory and bid
the job out to local forestry firms who have been trained in
the nuances and precision of the work, which can take several
months. Field cre ws as large as 10 people are not uncommon, with
Finite Carbon’s foresters overseeing everything in conjunction
with the local firms. “Quality control is incredibly important.
Because after we finish all of our work, a verifier who has been
approved by the state of California comes out into the field and
does a random sample of all the plots that we measured and
goes through them tree by tree,” Carney explains. “Failing on
even one tree in a plot can cause you to fail the verification.”
While a typical inventory is capturing just a snapshot in
time, a carbon inventory needs to be a tool that can be used
to monitor that forest for a 100-year timeframe – the life of a
carbon project. Plots are mapped, marked with rebar, and will
be monitored regularly for the next century.
It’s not only the carbon identified in the inventory, but also
the management plan that will ultimately determine how many
offset credits California will issue to a project. “It becomes a
calculation of how much of your growth you’re harvesting.
The golden rule of a forest carbon project through the state of
California is that you don’t harvest more than annual growth,”
says forester Dylan Jenkins, the company’s vice president of
portfolio development. “You can absolutely actively manage
these forestlands. Almost all of our projects are actively
managed for a mix of forest products and forest carbon offsets.
So the revenue a forest landowner receives [for carbon] can be
additional. It’s not necessarily alternative revenue.”
Once a project has been completed and verified, the state of
California issues a certain number of compliance offsets (credits),
based on all of the parameters of the project. These credits
can then be sold directly to an individual buyer. Here again,
Finite Carbon handles the process for the landowner, which is
good because the big buyers are mostly the big oil companies –
Chevron, BP, Shell, and so on – and negotiating with
multinational corporations is beyond the expertise of most
landowners. “There are some pitfalls you want to avoid, and
having extensive transactional experience helps us look out for
our sellers and protect them,” says Carney.
At the moment, Finite Carbon has 18 projects under
development across the U.S. on over 1. 3 million acres generating
over 20 million offsets through 2020. Given the built-in demand
coming out of California, Carney expects the number of carbon
offset projects to increase. But will the program ever make sense
for smaller landowners, say those with a 500-acre woodlot?
“I really hope it will. But since we started in 2009, the cost of
doing these projects has increased dramatically,” he explains.
“I would say the cost to verify a project has doubled, and the
cost to inventory a project has quadrupled. So things are going
in the wrong direction, and the minimum size requirements
just keep going up.” He hopes that, in the future, there may be
different sets of program requirements for different-sized projects,
allowing those with smaller parcels to get paid for their carbon.
Wagner Forest Management, Ltd., is pleased to underwrite Northern Woodlands’ series
on forest entrepreneurs. www.wagnerforest.com