Breaking Down Forest Carbon Opportunities For Small/Medium-Sized Landowners

So you’re interested in selling carbon credits. Many people are these days, and with good reason. The market for forest carbon credits is active and growing, and the “buzz” around these markets is everywhere in the world of forestry. For instance, consider the following:

“There are some states in the U.S. right now where there’s not a timber market that can compete with Carbon.”

Tommie Elder, Director of Forest Carbon Project Origination, Bluesource

Delaware blockchain company spends $1 million for the carbon on a 46-acre forest in Washington state. — Nicholas Turner, Blockchain company buys $1M in carbon credits generated by Issaquah forest, the biggest such deal in U.S. history, June 3, 2022, The Seattle Times

“Forest carbon has emerged as a viable alternative source of income for forest landowners.” — Dr. Leah Rathbun and Dr. Rajan Parajuli, Forest Carbon as an Income Source: A Case Study at North Carolina State University, January 2022, The Forestry Source

There are now several opportunities for forest landowners to participate in carbon markets and sell carbon credits, sometimes for substantial sums of money. The carbon market may be a major shift in the economics of owning forestland. Or it may be the next dot-com bubble. Or maybe, it’s a combination of the two. There is clearly a lot of opportunity, but there is also risk and, like a lot of things, the devil is in the details. In this article, I will dig into some of these details to answer the questions that landowners may have about this emerging market:

What are carbon credits?

What issues should be considered by a forest landowner when weighing options in a carbon market?

What opportunities are available to an owner of forestland?

What role do forest carbon markets play in the big picture: in forest economics and in addressing global climate change?

This article is intended to be an overview of these issues, and we encourage you to speak with your F&W forester to carefully consider opportunities available to you.

Part 1: Forest Carbon Basics

The following concepts are foundational to an understanding of forest carbon:

Sequestration of Forest Carbon: In a plant, a pine tree for instance, carbon dioxide is pulled from the atmosphere and converted into sugar through photosynthesis, which the plant uses to grow a stem, branches, and needles and which people then use to make cardboard for boxes, cross-laminated timbers, and a million other forest products. The carbon dioxide is taken out of the atmosphere and held (sequestered) in the tree, and then it is held (sequestered) in the forest products made from the tree.

Why Forest Carbon Matters: Most human activities emit carbon dioxide into the atmosphere. Some human activities emit a lot of carbon dioxide. The current high level of carbon dioxide in our atmosphere is widely believed to be changing the climate of the planet, potentially causing disruptions which will have long-term consequences for society. Even if we were to drastically reduce carbon emissions right now, the higher levels of carbon dioxide will continue to affect the climate for centuries. Sequestering carbon in trees and in forest products is not a full solution to this problem, but it is one of many tools that may be deployed to address the problem.

What are Carbon Markets? Some governments have developed systems to control and limit the amount of carbon dioxide emitted into the atmosphere. Examples are the U.S. (through EPA regulation of greenhouse gases), the state of California (through the California Air Resources Board), the Northeastern U.S. (through the Regional Greenhouse Gas Initiative), and the European Union (through the EU Emissions Trading System). Additionally, many companies have promised to voluntarily reduce or eliminate their own carbon emissions, including Walmart, Ford, General Motors, BP, Microsoft, and Amazon.

So, either by regulation or voluntarily, efforts are being made to reduce carbon emissions. In response, markets have developed to allow companies and individuals to acquire the rights to sequestered carbon, to credibly show that they have reduced their “carbon footprint.” These markets trade in credits resulting from projects that sequester carbon, often through specific forest practices.

What are Carbon Offsets? In these markets, the sellers are those who can prove that they are sequestering extra or “additional” carbon than would be sequestered otherwise. (The “additional” carbon sequestered is in excess of what would be sequestered under the “business-as-usual” scenario.) The buyers are those who want to compensate for or offset their own emissions, by buying the rights to extra carbon sequestration. Therefore, the markets are structured to offset carbon that will be emitted into the atmosphere.

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