Carbon Credits for Forestland

1. Carbon Credits for Forestland Presented by Dean Current, PhD Center for Integrated Natural Resources and Agricultural Management (CINRAM) Department of Forest Resources University of Minnesota Sponsored by the Minnesota Wood Education Project With funding from the Northeast Minnesota Regional Sustainable Development Partnership Minnesota Wood Education Project / 26 E. Exchange Street, Suite 405 / St. Paul, MN 55101 / USA Tel +1-651-223-5629 / www.MinnesotaWoodEducationProject.com / Info@MinnesotaWoodEducationProject.com

2. Content • Background on CO2 and carbon sequestration • Carbon credits/offsets • Carbon markets past and future • Options for carbon credits for forestland • Current issues related to the carbon markets

3. Global Carbon Cycle http://www.netl.doe.gov/technologies/carbon_seq/overview/what_is_CO2.html

4. Carbon Sequestration • Carbon sequestration can be defined as the capture and secure storage of carbon that would otherwise be emitted to or remain in the atmosphere. • Growing plants sequester carbon from the atmosphere and release it when they decompose unless converted Source: Iowa Farm Bureau, 2006

5. Mechanisms for Sequestration & Storage • Terrestrial Carbon Sequestration • Trees • Perennial Grasses • Conservation Tillage • Methane Capture (Digesters) • Geologic Carbon Storage • Secure capture and storage

6. Terrestrial Carbon Sequestration • Trees • Afforestation, Reforestation or Agroforestry • Species and age dependent • 5.5 mT/acre/year • Perennial Grasses • Deep root systems • Mix of species • 1.6 mT/acre • Conservation Tillage • Low-Till / No-Till • .3-1 mT/Acre • Controversial Source: Minnesota Terrestrial Carbon Sequestration Initiative

7. What are Carbon Credits? Carbon credits are provided for: • Prevention/reduction of carbon emissions produced by human activities from reaching the atmosphere by capturing and diverting them to secure storage. • Removal of carbon from the atmosphere by various means and securely storing it.

8. Carbon offsets are reductions in the emissions of CO2, or removal of CO2 from the atmosphere, used to compensate/offset emissions occurring elsewhere often by industries. Forestry activities that sequester carbon can receive carbon credits/offsets for the CO2sequestered and those offsets are traded on markets Carbon Offsets

9. For carbon sequestered and stored for a defined period of time (15-100 years) Forestry credits – net sequestration Payments based on no. of tons of CO2 equivalent per year Credit/offset Carbon sequestered (tree growth, soil storage) -Carbon emitted (mortality, harvest, etc.) = Net carbon sequestration above base “business as usual” case (basis for payment)

10. Opportunities in Forestry Climate Action Reserve (CAR) • Reforestation • Improved forest management • Avoided conversion of forest land • Urban forestry Voluntary Carbon Standard (VCS) • Afforestation, Reforestation and regeneration – ARR • Improved Forest Management - IFM • Low to high Productivity - LtHP

11. Offset Integrity (Source: Climate Action Reserve) • Real – Can be measured to a high degree of accuracy – Is based on an activity that has occurred, not one that is projected to occur in the future • Additional – Occurs outside of any regulatory requirement – Would not have occurred but for the incentive provided by a GHG market • Verifiable – Can be (and has been) independently verified • Enforceable – Ownership is undisputed and enforcement mechanisms exist to ensure all program rules are followed • Permanent – Is removed from the atmosphere for a minimum of 100 years

12. Leakage: • Leakage may be caused by shifting harvest to another location if harvest is reduced on one site. • Permanence: • The requirement that GHGs must be permanently reduced or removed from the atmosphere to be credited as carbon offsets. In CAR must be stored for 100 years. Market mechanisms

13. Dealing with Leakage from Improved Forest Management

14. Buffer established – Credits held back based on established level of risk. Buffer used to offset any loss of stored carbon. Ask risk is lowered the buffer is reduced. As commitment is met, buffer funds are returned to landowner Dealing with permanence

15. Market Mechanism Greenhouse Gas Emission Reductions Achieved via qualifying GHGemission reduction projects • Carbon Credit Program • Eligibility Assessment • Protocol Development • Monitoring • Reporting • Verification • Registration Protocols (CCX, CAR, VCS, others) Carbon Credits (certified, tradable, $$) Sell on market through an aggregator

16. Aggregators • The Chicago Climate Exchange (CCX), when operating, required that credits be sold in increments of at least 12,500 mT, approx.2,500 acres • Landowners need to work with an aggregator. • An aggregator combines credits to create a large enough bundle to sell to the market. • Aggregators charge a fee of between 8-10% of gross carbon credit payments to sustain their business

17. Compliance/Kyoto Market • Europe – higher prices • Voluntary/Chicago Climate Exchange • Forestland options • Global Market for Forest Based Offsets • 0.3 Million Metric tonnes equivalent (MtCO2e) in 2002 to 30.1 MtCO2e in 2010. ($5-$15/tCO2e in 2010) • US Markets • Lack of regulation • Project based markets

18. Blue Source – Nature Conservancy ‘Working Woodlands’ Program Public Benefits Landowner Benefits • No up-front, out-of-pocket costs • Full forest + carbon inventory and assessment • 10-year FSC management plan and certification • 100% of FSC-certified wood product revenues • 50%+ of forest carbon revenues – important new source of annual cash flow • Inclusion in landscape-scale conservation project designed by TNC • Focus and protect public/private investments • Active and engaged landowners • Repair degraded forests; maintain desired conditions • Keep working landscapes working and in private ownership

19. Co-Benefits of Carbon Sequestering Land Practices • Improved forest management • Healthier, more resilient forests • Increased and Improved Habitat • Water quality • Agroforestry buffers

20. Forestland has potential for generating carbon credits for landowners • Growing global and US regional markets for forestland credits • Few current opportunities for Minnesota landowners • Economic conditions • Lack of regulated market • A market with potential but still needing development Summary

21. California Climate Action Reserve (CAR) http://www.climateactionreserve.org/ Voluntary Carbon Standard (VCS) http://www.v-c-s.org/ Websites for addl. Information

22. Dean Current Center for Integrated Natural Resources and Agricultural Management (CINRAM) Dept. of Forest Resources University of Minnesota curre002@umn.edu 612-624-4299 Thank you!