Forest Offset Projects Research Articles

Estimating leakage rates for Ontario forest offset projects

Forest offset projects can contribute to climate change mitigation. The key question is whether mitigation benefits of forest offset projects are undermined by shifting emissions elsewhere—a problem known as leakage. In this study, we estimated leakage caused by market effects for forest offset projects in Ontario, Canada, using a well-known method developed by Murray et al. (2004). Leakage was calculated using price elasticities of supply and demand from a literature search of studies relevant to Ontario. The average leakage rate was 52.2%, with the 5–95th percentile range from 24.7% to 76.2%. Leakage estimates were tested for sensitivity to policy scale and substitutability parameters.

Accounting for harvested wood products in a forest offset program: Lessons from California

Carbon offset programs, such as that overseen by the California Air Resources Board (CA ARB), have emerged as a strategy for climate change mitigation. Offset projects sequestering carbon earn credits that can be traded on the Cap-and-Trade market to compensate for carbon emissions. The carbon stock embodied in harvested wood products can make up a substantial portion of the sequestered carbon in forest offset projects. In this paper we investigate the sensitivity of the calculations for the number of credits allocated to a forest offset project in the California system. We also examine how alternative models for the decay of harvested wood products might better reflect the dynamics of both the lifetime and cascade chain progression of the products and how this might change the amount of credits earned. The results suggest improved data collection and refinement in methodology would help to improve accuracy and reduce uncertainty in a large and important carbon stock. We conclude with offering suggestions on how an understanding of the dependence of harvested wood product stocks on life cycle parameters might affect the economics of offset programs and assist targeted mitigation efforts.

California's regulatory forest carbon market: Viability for northeast landowners

Carbon markets have the potential to reward landowners for improved forest management and forest conservation. To date, the Over the Counter (OTC) voluntary market represents the greatest opportunity for forest landowners to participate in carbon transactions. However, lack of a consistent carbon price signal and sporadic demand coupled by high transaction costs has prevented widespread participation from family forest landowners. Adoption of a U.S. based cap-and-trade program reduces price risk and may provide incentives for sustainable forest management across large areas. Yet few studies have examined the supply side of carbon offsets and factors affecting project financial viability. To address this gap, we assessed how (1) property characteristics (i.e. stocking level, forest type, size etc.); (2) silvicultural treatments; and (3) protocol and legislative requirements affect the financial viability of compliance forest offset projects, focusing on California's Air Resource Board (ARB) program due to its significance as the world's second largest carbon market. We used forest inventory data from 25 properties in the northeastern United States to examine the viability of the sites as ARB offset projects. We utilized the U.S. Forest Service Forest Vegetation Simulator for our growth and yield simulations. To examine the factors that influence project viability, we used a classification and regression tree analysis performed in S-Plus software. Results indicate C stocking and property size are the most important property characteristics driving return on investment. However, protocol requirements and legislative assumptions impacting long-term monitoring costs are also important factors. While reduced price risk in a compliance carbon market has the potential to improve forest management in North America; high initial project development costs, long-term monitoring obligations, and legislative uncertainty are significant barriers that will limit family forest landowner market participation. The model developed here can be used by U.S. landowners to assess the financial viability of their property as a compliance offset project and can be utilized by policymakers to develop cost-effective climate change policy.

What Makes Carbon Work? A Sensitivity Analysis of Factors Affecting Forest Offset Viability

Early implementation experience and a handful of empirical analyses in the literature indicate that the supply of forest carbon offsets may be constrained by, among other factors, transaction costs, access to markets, and carbon accounting rules and regulations. To more fully explore this issue, we use a forest growth and carbon accounting model to assess the relative influence of several key accounting, financial, and market variables on forest carbon offset project viability. We find that project performance, indicated by sequestration rate and project profitability, varies widely across the three project/forest type combinations evaluated here. The effects of carbon price and project length vary in both magnitude and direction from project to project. Project accounting considerations, including baseline establishment method and deductions for “leakage” and other factors, tend to figure prominently in each project, but vary in their absolute effect. These initial results suggest that choice of accounting protocol is a critical decision facing landowners considering forest offset projects. Results also suggest that a one-size-fits-all accounting approach may fail to maximize either landowner participation or the representation of forest types or management systems.

Analysis of the production and transaction costs of forest carbon offset projects in the USA

Forest carbon offset project implementation costs, comprised of both production and transaction costs, could present an important barrier to private landowner participation in carbon offset markets. These costs likewise represent a largely undocumented component of forest carbon offset potential. Using a custom spreadsheet model and accounting tool, this study examines the implementation costs of different forest offset project types operating in different forest types under different accounting and sampling methodologies. Sensitivity results are summarized concisely through response surface regression analysis to illustrate the relative effect of project-specific variables on total implementation costs. Results suggest that transaction costs may represent a relatively small percentage of total project implementation costs – generally less than 25% of the total. Results also show that carbon accounting methods, specifically the method used to establish project baseline, may be among the most important factors in driving implementation costs on a per-ton-of-carbon-sequestered basis, dramatically increasing variability in both transaction and production costs. This suggests that accounting could be a large driver in the financial viability of forest offset projects, with transaction costs likely being of largest concern to those projects at the margin.

Site Productivity and Forest Carbon Stocks in the United States: Analysis and Implications for Forest Offset Project Planning

The documented role of United States forests in sequestering carbon, the relatively low cost of forest-based mitigation, and the many co-benefits of increasing forest carbon stocks all contribute to the ongoing trend in the establishment of forest-based carbon offset projects. We present a broad analysis of forest inventory data using site quality indicators to provide guidance to managers planning land acquisition for forest-based greenhouse gas mitigation projects. Specifically, we summarize two condition class indicators of site productivity within the FIA forest inventory database—physclcd and siteclcd—as they relate to current aboveground live tree carbon stocks. Average carbon density is higher on more productive sites, but compared to the overall variability among sites, the differences are relatively small for all but the highest and lowest site classes. Some minor differences in eastern- versus western-forests were apparent in terms of how carbon on the least productive sites differed from most other forest land over time. Overall results suggest that xeric sites in most regions as well as sites that correspond to the lowest, non-productive classifications of forest land should preferentially not be used forestry-based greenhouse gas mitigation projects, but all other forest areas appear to be suitable.

Managing dependencies in forest offset projects: toward a more complete evaluation of reversal risk

Although forest carbon offsets can play an important role in the implementation of comprehensive climate policy, they also face an inherent risk of reversal. If such risks are positively correlated across projects, it can affect the integrity of larger project portfolios and potentially the entire offsets program. Here, we discuss three types of risks that could affect forest offsets—fat tails, micro-correlation, and tail dependence—and provide examples of how they could present themselves in a forest offset context. Given these potential dependencies, we suggest several new risk management approaches that take into account dependencies in reversal risk across projects and which could help guard the climate integrity of an offsets program. We also argue that data collection be included as an integral part of any offsets program so that disturbance-related dependencies may be identified and managed as early and to the greatest extent possible.

The Role for Sustainably Managed Forests in Climate Change Mitigation

Abstract The United States has not ratified the Kyoto Protocol, restricting the ability of forests from participating internationally as greenhouse gas (GHG) emission offset projects. As a result, a proliferation of different registry and program rules is occurring in the United States, providing an opportunity for the US forestry community to mitigate GHG emissions. This article addresses the Kyoto Protocol principles of additionality, permanence, and leakage, and challenges the way that these principles are being used to qualify forest offset projects as climate change mitigation measures. Policy initiatives are proposed for challenging policymakers and the forestry community to rethink sustainably managed forest offset project rules as the United States considers GHG emission reduction legislation.