Making Money With Your Forest�Forest Carbon Offset Credits

Larry Wilson, RPF

larryW.rpf@gmail.com

707-223-2696

The Industrial Revolution

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• 1776: Commercial-scale steam engine developed by James Watt.

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• 1804: First steam-powered locomotive.

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• 1807: First commercial steamship service, aka Fulton’s Folly.

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• 1869: Completion of the Transcontinental Railway.

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• 1882: First centralized steam driven electric power plant, New York City (Thomas Edison).

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• 1896: Ahrrenius publishes theory that doubling the amount of CO2 in the atmosphere would cause a 4 degree (F) increase in average temperature: the greenhouse effect.

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Global Warming

Climate Action Timeline

1988: Montreal Protocol - the first international Cap and Trade Agreement to curb pollution.

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• objective was to reduce Ozone Depleting Substances.

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1988: First voluntary carbon offset project.

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1992: UN Framework Convention on Climate Change (UNFCC).

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• International treaty aimed at reducing potential negative effects of rapid climate change.

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1997: Kyoto Protocol (UNFCC) - First international cap and trade system with the

goal of reducing GHGs.

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• Integrated with ISO, defined monitoring, reporting, and verification requirements.

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Voluntary Greenhouse Gas Registries:

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• 1996 - American Carbon Registry
• 2001 - Climate Action Reserve
• 2005 - Verified Carbon Standard

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2006: AB-32, California’s Cap and Trade Law signed

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AB 32�California’s Cap and Trade Law

Cap - A legally binding, decreasing limit on the total amount of GHGs that covered entities (power plants, refineries, and other industrial facilities) are allowed to emit.

Allowance - The amount of GHGs an individual company is allowed to release in a given year.

Trade - Individual companies that are not in compliance can purchase allowansell or trade the unused portions of their allowances to companies that are not or purchase offset credits on an exchange.

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2006 - Original Objective was to reduce California’s emissions of GHGs to 1990 levels by 2020 (goal was achieved by 2018).

2015 - Goal updated to reduce GHG emissions to 40% below 1990 levels by 2030.

September 2025 Update:

• Goal extended to reduce GHG emissions to 85% below 1990 levels by 2045.
• Crediting period extended from 2030 to 2045.
• Potential updates to the Forest Carbon Offset protocol, due in 2029, are currently under discussion.

Definitions�

Actual Carbon Stocks (AC)

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The total carbon in live and dead trees (stem, bark, limbs, and roots) in trees that are 5” dbh and larger. Expressed as metric tonnes, CO2 equivalent.

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Additionality

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The requirement that offset credits are only granted for practices that sequester more actual carbon than business as usual.

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Baseline Scenario

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Business as usual. An imaginary management regime that could have been followed under the laws, regulations, and conditions in effect at project commencement.

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Baseline Carbon Stocks (BC)

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The average carbon stocks calculated by modeling the baseline scenario over a

100-year period.

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Quantified Reductions

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Initial crediting period: (AC ₁ – BC)

All other periods: (AC _y – AC _{y – 1})

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* minus relatively small adjustments for carbon stored in wood products and leakage

Project Types�

Reforestation – Planting trees on forest land to enhance natural regeneration

( e.g., post-wildfire rehabilitation). The baseline scenario is no additional planted trees.

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Improved Forest Management (IFM) – Adopting management practices that increase onsite carbon relative to the baseline scenario. The baseline scenario is normally modeled as an intensive timber management regime based on the minimum stocking standards and other requirements of the Forest Practice Rules. Eligible practices include uneven-aged management, longer rotations, reduced or no harvesting, higher stocking levels.

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Avoided Conversion – Protecting forest land from imminent conversion to non-forest (e.g., conservation easement, transfer to public land). The baseline scenario is conversion.

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Non-CARB Project Types:

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Afforestation – Planting trees on land not previously forested.

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Reduced Emissions from Deforestation and Degradation (REDD) – Actions aimed at reducing illegal logging and land conversion (e.g., monitoring, patrolling, signage, community engagement)

CARB Eligibility Requirements

• Projects must occur on forest land, defined as minimum 10% tree cover.

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• Additionality - Projects must sequester more carbon onsite than would occur under a conservative business-as-usual scenario.

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• Located in the continental US and parts of Alaska.

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• Must adhere to CARB’s Natural Forest Management Standards:
• 95% native species
• Mix of native species, except where dominance by fewer species is natural.
• Long-term sustainability:
1. Certification under FSC, SFI, ATFMS or;
2. State approved sustained yield plan e.g., NTMP, SYP, Option a, WFMP
3. Uneven-aged management with at least 40% canopy cover on every 20 acres.

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• Comply with standing and lying dead wood requirements.

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Accounting for Risk

Forest Buffer Account

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An account that ARB uses to record carbon credits generated by carbon offset projects as insurance against unintended reversals (e.g., wildfire, storm damage).

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Reversal Risk Rating

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The calculated probability that a project will suffer an unintentional reversal during the project lifetime. It is typically 17.6% but can be reduced to 15.9% via fuels reduction treatments.

CARB Forest Carbon Offset Projects�Public Information

Credit Issuance Map: https://webmaps.arb.ca.gov/ARBOCIssuanceMap/

This map shows the boundaries of all forest carbon offset projects registerd with CARB and links to detailed information including offset project data reports.

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Cap and Trade Program Dashboard: https://ww2.arb.ca.gov/our-work/programs/cap-and-trade-program/program-data/cap-and-trade-program-data-dashboard

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Home page with links to a wide assortment of data and reports on the Cap and Invest program.

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Compliance Offset Program: https://ww2.arb.ca.gov/our-work/programs/compliance-offset-program

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Home page with links to a wide assortment of documentation pertaining to the Compliance Offset Program.

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Market Transfers Reports: https://ww2.arb.ca.gov/our-work/programs/cap-and-trade-program/program-data/summary-market-transfers-report

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Reports include average prices of forest carbon offset transactions compiled annually.

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Lost Coast Forestlands IFM�Project Area

Lost Coast Forestlands IFM�Carbon Accounting

Lost Coast Forestlands IFM�Carbon Revenue & Expenses

Process

Get Organized

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• Determine landowners and parcels to be included
• Gather land title records
• Make sure all legal documents are current and in order
• Engage a technical advisor / consultant

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Feasibility Study

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• Preliminary GIS mapping and field reconnaissance
• Confirm eligibility
• Estimate Expense and Revenue streams

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List Project with Registry

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• Landowner and/or representative must register with CITSS
• Submit listing form

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Forest Carbon Inventory

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• Field work
• Data processing

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Process

Initial OPDR

• Provide all information required in the OPDR Initial Form
• Conduct and document the forest carbon inventory
• Calculate carbon statistics and the confidence deduction.
• Modeling of the Baseline Scenario, and documentation thereof.
• Can be 100 pages or more of technical writing including forms and supplemental documentation, along with databases, GIS layers, etc.

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First Annual Report

• Includes calculation of credits for first reporting period.

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Verification

• VB reviews OPDR and all supplemental data.
• VB issues findings detailing every instance where the OPDR does not comply with the requirements of the protocol.
• Client resolves all findings to satisfaction of VB
• VB issues Offset Verification Statement
• Client uploads all public project documents
• Registry issues credits

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Reversals

Reduction of project total carbon stocks during a reporting period (e.g., harvest, wildfire, storm damage, thinning)

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Unintentional reversal

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Reversal resulting from events outside of landowner’s control (e.g., wildfire, storm damage)

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Intentional reversal

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Reversal resulting from planned activities or gross negligence on the part of landowner (e.g., over harvesting, clearing, excessive mortality from understory burn)

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Landowner Responsibilities

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• Notify ARB, describing the reversal and circumstances within 30 days
• Conduct full carbon stock inventory with full verification
• Submit verification report to ARB

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Reversals, Continued

Unintentional Reversal

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• Landowner has 23 months from the date of discovery to submit the updated, verified carbon stock inventory report.

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• If ARB determines an unintentional reversal has occurred, it will retire credits from the Forest Buffer Account to compensate.

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• If carbon stocks are reduced below the baseline, ARB may terminate the project, which may be re-enrolled under a different baseline.

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Intentional Reversal

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• Landowner must complete updated, verified carbon stock inventory within 1 year.

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• If ARB determines an unintentional reversal has occurred, the landowner must submit compensating offset credits.

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• If landowner does not submit compensating offset credits, they are subject to enforcement measures and possible legal action.

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• If carbon stocks are reduced below the baseline, the project is automatically terminated.

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Landowner’s Obligations

For 100 years following the final issuance of registry credits:

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• Continue annual monitoring and recording harvest and other management activities and disturbance.

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• Continue maintaining a forest inventory with no inventory plot data more than 12 years old.

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• Continue record keeping and submitting annual OPDRs.

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• Remain in compliance with eligibility and other requirements of the forest offset protocol.

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• Continue full onsite verification at six-year intervals, with less-intensive desk verifications in between.

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The End