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The Forest Carbon Opportunity for Woodlot Owners

The Forest Carbon Opportunity for Woodlot Owners
By Jamie MacKinnon
VP, Environmental Solutions
Bluesource

Photo for article on Carbon
 

A carbon cap-and-trade program entered into force on January 1, 2017, putting a price on greenhouse gas (GHG) emissions associated with fossil fuel use throughout Ontario. The program will allow for GHG reductions from such things as carbon sequestration from forests to generate offsets that can be sold to entities within the cap-and-trade program to meet their compliance requirements. Between now and 2020, such companies can use up to 43 million tonnes of CO2 worth of offsets for this purpose. With current carbon pricing at over $18 per tonne, and regulated floor prices scheduled to rise, the Ontario market offers a significant new revenue opportunity for forest owners in the province. The Ontario Government is working on developing several forest carbon protocols for recognition of offsets. The most promising for private woodlot owners are Improved Forest Management (IFM) and Avoided Conversion (AC). These initiatives are based on the California protocol, which has been very successful at rewarding forest owners for sustainable forest management.

 What is Improved Forest Management?

IFM projects reward forest owners for committing to sequester more CO2 than they otherwise could by maintaining sustainable forest management practices over the long term. It allows for sustainable harvesting of wood products. Forests that can demonstrate that carbon stocking in their forests is greater than the regional average are likely to be eligible under the impending protocol. Such projects can generate a large quantity of offsets in the first year due to the recognition of the carbon sequestered in the standing forest (represented by vertical parenthesis between the regional average and the IFM Project lines). Incremental offsets volumes can be generated in subsequent years to recognize increases in carbon stocks associated with harvesting less than growth rates.

IFM Ex 002 2

The revenues from forest carbon need to compensate forest owners for making such long-term commitments. More and more landowners are finding such commitments worthwhile and are benefitting from revenues from IFM.

What is Avoided Conversion?

Avoided Conversion recognizes the carbon sequestered in forests for which it can be demonstrated that they would otherwise be converted to an agricultural or development use. Such projects require forest owners to accept a conservation easement on their property to guarantee the lands will not be converted, but allows landowners to still engage in sustainable levels of harvesting. Such projects might have a broad application in southern and eastern Ontario, given the extent of forest conversion. However, the requirement for a conservation easement is an impediment to many forest owners.

AC Ex 002 2

Great Lakes−St. Lawrence Forest Region

Bluesource has successfully developed IFM and AC offsets from 11 projects to date, some of which are in the Great Lakes−St. Lawrence forest region. We are also working with many more landowners on current projects and seeing evidence that more and more are convinced of the net benefit to make the long-term commitments required to generate IFM offsets.

Is an IFM or AC project right for your forest?

IFM and AC projects tend to work for landowners who are already committed to sustainable forest management and have a long-term perspective. Scale is also an important consideration for two reasons: 1) to provide sufficient absolute revenues to make the long-term commitments worthwhile; and 2) to cover the fixed costs associated with forest inventories and verifications. There is no steadfast rule on what acreage is needed to provide sufficient scale as the value will depend on the price of carbon. However, only the larger woodlots over a few thousand hectares will have sufficient scale to undertake a stand-alone IFM or AC project. Smaller woodlots will depend on offset project aggregation to provide sufficient economies of scale. In a project aggregation, the offset project documentation is managed by an umbrella organization, and many smaller projects can fit under this structure and benefit from a streamlined process for forest inventories, third-party verifications and project approval.

The rules for project aggregation in Ontario have not yet been established but are expected to be released shortly as part of offset regulations. If they prove to be workable rules that reduce project costs, smaller private landowners will need a strong organization to step into the aggregator role to unlock the potential.

 

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