Preparing for the Carbon Market:

1
Preparing for the Carbon Market Forestry Offsets
Where are the State and Federal Policies on
Forestry Offsets Headed? What is Coming Over
the Horizon?
Linc Cannon Oregon Forest Industries
Council April 21, 2009
2
IPCC 4th Assessment Report (2007)
In the long term, a sustainable forest
management strategy aimed at maintaining or
increasing forest carbon stocks, while producing
an annual sustained yield of timber, fibre or
energy from the forest, will generate the largest
sustained mitigation benefit.
From Forestry. In Climate Change 2007
Mitigation. Contribution of Working Group III to
the Fourth Assessment Report of the
Intergovernmental Panel on Climate Change B.
Metz, O.R. Davidson, P.R. Bosch, R. Dave, L.A.
Meyer (eds), Cambridge University Press,
Cambridge, United Kingdom and New York, NY, USA.
3
Put another way

• Sustainable Forest Management can best contribute
  to reduction of atmospheric carbon by
• Maintaining Forest Stocks
• Keep Forestland in Forest Use
• Reforestation
• Increasing Forest Stocks
• Afforestation
• Active Management to Increase Growth Rates
• Rotation Age
• Sustainable Production of
• Forest Products
• Bioenergy, biofuels, biochemicals

4
How it all fits togetherManaged Forest Carbon
Effects
5
How it all fits togetherForest Carbon Effects
6
Wood Product Life Cycle (from CCAR)
http//www.climateregistry.org/resources/docs/prot
ocols/agendas/CCAR_Workshop_February3.ppt
Imported
Recycling
wood product

Harvested

Long
-
term wood
Mill
Landfill
wood product


products
Landfill

-
Short
-term
wood products

Substitution

Biomass
Forest
Energy
Green Bldg

7
Private Forest Carbon Reduction (Offset)
Opportunities

• Keep Forests in Forest Use (avoided conversion)
• Afforestation Conservation Forests (longer
  rotation)
• Forest Management (reforestation, increased
  yields)
• Forest products and landfill
• Bioenergy biofuels (renewable energy
  credits/green tags)
• Energy substitution (green building)
• Cobenfits?
• Federal Forests
• Avoided wildfire emissions
• Feedstock for bioenergy biofuels
• Increased sequestration from active management

8
The Multi-Billion Dollar Question!
Will Private Forests Managed for Sustainable
Wood Production Get Credit (Offset Payments) for
Their Contributions to Reducing Atmospheric
Carbon??
9
Cap Trade - Forestry Offsets

• Regions
• Regional Green House Gas Initiative
• (RGGI)
• Midwest GHG Reduction Accord
• Western Climate Initiative (WCI)
• States
• California
• Washington
• Oregon
• Utah
• Federal

10
U.S. Regional GHG Reduction Initiatives
11
Regional Greenhouse Gas Initiative RGGI
12
RGGI

• First mandatory, market-based effort in the
  United States to reduce GHG emissions.
• Cap and then reduce CO2 emissions from the power
  sector 10 by 2018.
• Compliance obligations begin in 2009
• Sell emission allowances through auctions
• 2nd Auction 12/17/08, 31.5 million allowances _at_
  3.38 106.5 million

13
RGGI Forestry Offsets

• Draft Recommendations (May 08)
• Conservation Managed Forests
• FIA Average Regional Inventory Baseline
• Forest Products
• Above Business As Usual BAU
• Biomass Plantations
• Displace Fossil Fuel Use
• No Avoided Deforestation
• NOT included in Dec 08 Model Rule
• Afforestation only, permanent easement

14
Western Climate Initiative WCI
15
WCI Recommendations (Sept 2008)General

• Regional cap and trade program framework
• WCI ONLY recommends,
• its up to states/provinces to adopt!
• Phase 1 takes effect in 2012
• Phase 2 takes effect in 2015

16
WCI Recommendations (Sept 2008)Offsets

• Offsets Emission reductions outside the cap
• Limited to no more than 49 of total emissions
  reductions from 2012 to 2020
• Priority offset types for investigation
• Agricultural
• Forestry
• Waste management

17
WCI Recommendations (Sept 2008)Key for Forest
and Forest Products

• Forestlands are not included under the cap
• Carbon neutral biomass emissions
• determined by each state
• Cogeneration unresolved
• Biofuel exempt, with possibility that upstream
  emissions could still be counted
• Priority consideration for Forestry offsets
• WCI Offsets Working Group

18
WCI Work Plan (Feb 2009)

• Offset Protocols (Ag, Forestry, Urban Waste)
• Forestry Offset Types to be Evaluated
• Afforestation
• Reforestation
• Forest Management
• Forest Preservation/Conservation
• Forest Products
• Urban Forestry
• The Committee will aim to identify those
  stakeholders with knowledge, experience and
  resources to be directly involved in the
  appropriate protocol task teams

19
California
20
California

• AB 32 (2006) Mandates
• 1990 GHG emissions levels by 2020
• 80 reduction from 1990 levels by 2050
• California Air Resources Board (CARB) adopts AB
  32 Scoping Plan on December 11, 2008
• identifies cap and trade program as one of the
  main strategies to reduce GHG emissions
• Must adopt cap and trade regulation by Jan 1,
  2011
• Program begins in 2012
• Rule development coordinated with WCI timeline

21
California Climate Action Registry Climate Action
Reserve

• What is the Climate Action Reserve?
• CCAR program to register and track carbon offset
  projects throughout the U.S.
• Established as its own name, but co-branded with
  CCAR
• Intended to be the premier place to register
  carbon offset projects for North America (VCS
  approved)
• Until now, U.S.-based projects only
• Expanding to Mexico and Canada

22
California Climate Action Registry Climate
Action Reserve

• Draft Forest Project Protocols (Dec 2008 Jan
  2009)
• Eligible Forest Project Types
• Afforestation
• Improved Forest Management
• Natural Forest Management Practices
• Mixed native species, multiple ages, multiple
  scales
• Baseline
• BAU regulatory baseline modeled on forest
  practices regulations
• Reference is FIA average mean stocking
• Additionality is above and beyond Business as
  Usual (BAU)
• Allows limited credit for harvested wood products
• Minimum 100 year duration
• No credit for wood in landfills
• Avoided Conversion
• Immediate site specific threat
• Conversion uncertainty discount

23
California Climate Action Registry (CCAR)

• Forest Protocols Process/Timeline
• Original protocols recognized afforestation and
  conservation forestry project types
• Draft Revised Forest Project Protocols (December
  2008)
• Public workshop on wood products quantification
  and other miscellaneous items on February 3,
  2009.
• Additional two week public comment period to
  address wood products or other protocol issues.
  Concluded on February 20, 2009
• Final draft delivered to CCAR on March 8, 2009
• Final Forest Project protocol to CCAR Board in
  April 2009

24
Washington
25
Washington

• House Bill 2815 (2008)
• GHG Emission Reduction Targets
• 1990 GHG emissions levels by 2020
• 80 reduction from 1990 levels by 2050
• Directs the Department of Ecology to develop and
  implement a program to limit statewide greenhouse
  gas emissions.
• Authorizes a reporting system to monitor
  greenhouse gas emissions.
• Directs the Department of Ecology to develop a
  design for a regional multisector market-based
  system to limit and reduce greenhouse gas
  emissions, in coordination with WCI.
• Climate Advisory Team to provide a report to the
  Legislature by December, 2008

26
Washington

• Forest Sector Workgroup On Climate Change
  Mitigation - HB 2815 (2008)
• Diverse Stakeholder Group, Consensus Process,
  DNR/DOR Report (December
• Priorities
• Conversion
• Active Forest Management/Harvested Wood Products
• Afforestation/Reforestation
• Substitution
• Avoided Emissions
• Biomass Energy

27
Washington

• Report Forest Sector Workgroup On Climate
  Change Mitigation (Dec 2008)
• Avoided Conversion
• Cluster development (w/ permanent easement)
• Transferable Development Rights (TDRs)
• Urban Forests
• Forest Management
• Offsets Beyond BAU
• Include Harvested Wood Products
• Exclude wood in Landfills
• Non-offset Carbon Storage Incentives
• Funded by carbon auction revenues
• Revisit if not created or appropriately funded
• Can recognize co-benefits

28
Washington

• Washington state Governor Chris Gregoire told
  reporters in Washington D.C. on February 23 she
  hopes her state will pass a bill setting a
  mandatory cap on greenhouse gas emissions and
  enabling it to participate in emissions trading
  in the Western Climate Initiative (WCI).
• Gregoire has warned that it would not bode well
  for other WCI states if the Democratic-controlled
  Washington legislature fails to pass the bill.
• If I cant get the job done I fear we will have
  others that cant. Thats why failure is not an
  option for us.

29
Washington

• HB 1819 (2009)
• Authorizes the Department of Ecology to create an
  allowance trading program.
• Creates a cap-and-trade work group.
• Creates criteria for the cap, allowances, and
  offsets.
• Specifies the emissions covered in the allowance
  trading program.
• Requires the Department of Ecology to develop a
  design for the auctioning of the state's
  allowances.
• Sets compliance obligations and penalties.
• Creates the Climate Protection Account.
• Sets reporting requirements for fuels.
• Is Dead

30
SB 5735 (2009)

• Functionally caps emission from the only coal
  plant (Transalta) in Washington
• Allows use of offsets (up to 49) to meet
  emissions reductions requirements
• 14 page bill, 1/3 dealing with forest offset
  language.
• Study and make recommendations

31
Oregon
32
Oregon HB 3543 (2007)Global Warming Strategy

• Carbon emissions reduction goals
• 10 percent below 1990 levels by 2020
• 75 percent below 1990 levels by 2050
• Examine cap and trade systems
• Develop strategy for educating the citizens
• Track economic, environmental, health, and social
  impacts

33
Oregon

• Global Warming Commission
• Natural Resources Committee
• Forestry Subcommittee
• Forest Carbon Stakeholders Group (facilitated)
• Woodlands Carbon Company
• SB 80 (2009) DEQ Cap and Trade
• HB 2186 (2009) DEQ Alternative Measures
• Oregonians for A Balanced Climate Policy
• Balanced Carbon Reduction Act

34
Forest Carbon Stakeholder Group Comments to WCI
July 2008

• Our deliberations have led us to believe that
  a properly structured forest carbon offset
  program can provide significant ecological,
  social, and economic benefits in addition to
  offsetting GHG emissions

American Forest Resource Council Associated
Oregon Loggers Boise Cascade - California
Forestry Association - Defenders of Wildlife -
Ecotrust - Forest Capital Partners - Lone Rock
Timber Company Oregon Forest Industries
Council Oregon Small Woodlands Association -
Oregon Woodland Cooperative - Roseburg Forest
Products Mark Copeland - The Collins Company -
The Conservation Fund The Nature Conservancy
in Oregon Washington Forest Protection
Association Weyerhaeuser Company
35
From Governor Kulongoskis testimony at the
February 5th hearing on SB 80

• Over the last year I have like you
  been listening to those still in denial who argue
  that SB 80 is not the right approach to address
  the issues around CO2 emissions.  Their answer
  to the climate change debate has been to promote
  fear and confusion   They argue against a cap
  and trade and other parts of this proposed
  package by claiming now is not the time to make
  significant changes with a fragile economy, or
  let the federal government deal with this issue.
    You may recall that the same coalition of
  Salem Beltway naysayers made similar arguments
  about the Renewable Portfolio Standard bill in
  the 2007 session

36
(No Transcript)
37
Oregonians for Balanced Climate Policy
American Chemistry Council -- American Forest and
Paper Assn -- Associated Oregon Industries --
Associated Oregon Loggers -- Building Owners and
Managers Association -- IBEW Local 48 --
Industrial Customers of NW Utilities -- Oregon
NFIB -- Northwest Food Processors Assn --
Northwest Industrial Gas Users -- Northwest
Propane Gas Assn -- Northwest Pulp and Paper Assn
-- Oregon Association of Realtors -- Oregon
Cattlemens Association -- Oregon Dairy Farmers
Association -- Oregon Farm Bureau -- Oregon
Forest Industries Council -- Oregon Home Builders
Association -- Oregon Metals Industry Council --
Oregon Refuse and Recycling Assn -- Oregon Rural
Electric Coop. Assn -- Oregon Seed Council --
Oregon State Building Trades Council -- Oregon
Trucking Associations -- Oregon Wheat Growers
League -- Oregonians for Food and Shelter --
Umatilla Electric Cooperative
38
SB 80/HB 2186 Metamorphosis

• Cap and Trade
• Hard Cap (no trade)
• Hard Cap (with offsets)
• Hard Cap (with off ramps)
• Soft Cap??

39

Oregonians for Balanced Climate Policy

• SB 80 Messages- April 21, 2009
• Legislature needs to slow down harmful and costly
  climate change legislation. Oregon cannot solve
  global climate change on its own.
• The U.S. EPA recently classified carbon as a
  harmful pollutant. The federal government is
  taking steps now to press for carbon reductions.
• Utilities estimate that to meet the
  pie-in-the-sky carbon reduction goals in SB 80,
  it would cost nearly 17 billion in higher
  electricity costs--12.5 billion for PGE and 4.5
  billion for PacifiCorp. Oregonians cannot afford
  increased costs, which result in lost jobs and
  higher unemployment.
• Legislators should not leave major climate change
  policies in the hands of state agencies. They
  need to have all the proposals on the table, and
  know all the costs and benefits before making a
  decision. Elected officials should set economic
  policy, not unaccountable bureaucrats.
• We should not fund large, new state programs at
  the expense of existing programs that protect our
  air and water.
• The federal government is moving ahead quickly on
  climate change. Oregon should find out how it can
  benefit from a program like this before jumping
  head first into a duplicative and costly program.
  

40
Oregonians for a Balanced Climate
PolicyAlternative Legislative Proposal

• Balanced Carbon Reduction Plan of 2009
• Electric Sector Alternative (PUC)
• Forest and Agricultural Offsets
• Emissions Performance Standards
• Transportation Sector Alternative
• Alternative Measures

41
Woodland Carbon Company

• An aggregation organization providing access to
  the Chicago Climate Exchange for certified
  members of the American Tree Farm System in
  Oregon.
• One of three National Tree Farm pilot programs
  that will be established in 2008 as models for
  other Tree Farm organizations that wish to enter
  the forest carbon market.
• WCC will operate as a sub-aggregator to the
  National Carbon Offset Coalition (NCOC) that will
  bring aggregated pools of eligible forest
  projects to the Chicago Climate Exchange (CCX).

42
Utah
43
Utah Beltway Naysayers

• HR3, a non-binding resolution urging Gov. Jon
  Huntsman Jr. to withdraw Utah from the multistate
  Western Climate Initiative cleared Utahs House
  on Tuesday, February 24, 51-19.
• Sponsor Rep. Mike Noel, R-Kanab said the measure
  would send a message to Utahs chief executive
  that he overstepped his bounds by participating
  in energy policy that could affect the economic
  health of many of the states businesses.

44
National
45
Chicago Climate Exchange - CCX

• North Americas only greenhouse gas (GHG) trading
  system.
• Launched in 2001. Modern web-based trading
  platform.
• Only Members can buy and sell on CCX.
• Trading launched in 2003 Currently trading
  emissions dated 2003 through 2010.
• Trading rules managed by expert committees drawn
  from CCX members.
• Info at www.chicagoclimatex.com

46
CCX Forest Offset Project Types

• Afforestation Planting trees on land that has
  not been in forest for the previous 10 years or
  more. A land use change that creates new forest
  lands.
• Reforestation Planting trees on forest land
  where the forest was destroyed and is not
  naturally regenerating.
• Sustainable Forest Management Changing forest
  management so as to increase forest biomass and
  retain it for long periods.
• Harvested Wood Products Credit for the amount
  of wood that will remain in use or in landfills
  100 years after it is harvested.

47
National

• President Obamas 10-year budget plan includes
  645 billion from 100 auction of GHG allowances
  (2012-2020) in a national cap and trade program.
• Cap and Trade Legislation this year?
• Waxman/Markey is currently in markup
• House Energy Chair Waxman wants a bill out of
  Committee by End of May
• Senate Environment Chair Boxer is drafting bill,
  probably for consideration later this summer

48
Society of American Foresters

• Preferred Forest Offsets Policy Options
• for a national carbon trading program
• Afforestation. Planting trees on suitable land
  that has been in another land use for 10 or more
  years (including riparian forests, windbreaks,
  mined land reclamation, etc.).
• Reforestation. Planting trees on former
  forestland where forests damaged through natural
  events have not begun to regenerate after two
  years.
• Forest management. Managing forests sustainably
  under either a sustainable forest management
  standard or other suitable criteria
• Forest products. Providing credit for the carbon
  that remains out of the atmosphere in harvested
  forest products at the end of 100 years. Carbon
  credit values and their assignment can be
  determined between a landowner and a timber buyer
  via contractual arrangements.
• Forest conservation. Protecting forests from
  land-use change with conservation easements,
  contracts, or other legal instruments

49
American Forest Foundation (AFF)Forest-Climate
Working Group (FCWG)

• Begun in December 2007 to build consensus on
  how forests can play a meaningful role in
  addressing climate change.
• Co-chaired by Drue DeBerry (AFF) and Jad
  Daley (the Trust for Public Land) it has broad
  representation from virtually all sectors of the
  forest communitythe forest products industry,
  conservation and wildlife groups, foresters,
  private forest owners, academics, and carbon
  finance groups.
• In order to build and achieve consensus, the
  organizations engaged in a series of Dialogues on
  forest-climate issues in 2008.
• More info available at http//www.affoundation.org
  /ccs_carbon.html

50
Binational Forest Carbon Standards Committee
(FCSC)

• The Forest Carbon Standards Committee (FCSC)
  was formed by a binational group of stakeholders
  familiar with the suite of forest carbon offset
  protocols and standards that have been developed
  to date and the difficult issues that forest
  managers face in complying with the demands of
  emerging greenhouse gas emission programs.

51
Binational Forest Carbon Standards Committee
(FCSC)

• Their purpose is to develop and maintain
  consensus standards for the measurement,
  reporting, and verification of forest carbon
  emission reduction projects (e.g., offsets) under
  current and emerging greenhouse gas emission
  reduction programs in Canada and the United
  States.

52
Binational Forest Carbon Standards Committee
(FCSC)

• Standards will be developed under American
  National Standards Institute (ANSI) accredited
  standards, efforts to be consistent with
  procedures of the Canadian Standards Association
  (CSA), an accredited standards development
  organization of the Standards Council of Canada
  (SCC)
• ANSI and SCC are the national standards
  accreditation bodies for the United States and
  Canada respectively
• AFPA is the Secretariat for the process. Other
  sponsoring organizations include the Society of
  American Foresters, the Forest Products
  Association of Canada, and the Canadian Institute
  of Forestry

53
Binational Forest Carbon Standards Committee
(FCSC)

• Members are drawn from three Interest categories
• Producers individuals or organizations that
  will use the proposed standard to guide the
  production, measurement, monitoring, and sale of
  forest carbon offsets
• Users individuals or organizations that will
  use the proposed standard to verify, approve,
  register, broker, or purchase forest carbon
  offsets, or to establish public policy or rules
  that may refer to the standard
• General interest individuals or organizations
  that have a direct interest in the environmental
  integrity and/or public interest impact of the
  forest carbon offsets produced under the guidance
  of the standard

Membership in the Committee has been chosen to be
sufficiently diverse to ensure reasonable
stakeholder balance without dominance by a single
interest category
54
Binational Forest Carbon Standards Committee
(FCSC)

• The Committee will produce a standard (or set
  of standards) that will cover the various types
  of forestry projects that will be eligible to
  produce compliance-grade forest carbon offsets.
  Preliminary discussions identify those project
  types as
• Afforestation
• Reforestation
• Forest Management
• Forest Protection
• Urban Forestry

55
Binational Forest Carbon Standards Committee
(FCSC)

• Four technical task committees
• Baselines, additionality
• Permanence, Leakage
• Quantification (Measuring, Monitoring,
  Verification)
• Sustainability, Co-Benefits, and Environmental
  Impacts
• An Integration Task Committee will
• Review Technical Task Committee draft
  recommendations.
• Prepare and integrated draft to be submitted to
  the Committee for consensus consideration.

56
Binational Forest Carbon Standards Committee
(FCSC)

• Anticipated Timelines
• Initial Scoping Meeting Oct 23 24, 2008
• Scope of Work Completed - January 2009
• Task Committees named - February 1, 2009
• Task Committee draft recommendations - April 1,
  2009
• Consensus process completed - July 1, 2009
• Adoption process completed - September 1, 2009

57
Conclusion

• States, regions, and countries are all trying
  to figure out how to reduce atmospheric carbon,
  primarily focusing on cap and trade mechanisms.
  The role forests play in sequestering carbon is
  understood and accepted, but whether or how that
  should be rewarded in a cap and trade program is
  not!
• Its complicated!

58
(No Transcript)
59
Thank You !
Offsetting vehicle emissions with wood products?
Linc Cannon linc_at_ofic.com www.ofic.com