Carbon Credits, Offsets, and Sequestration: Four things to know.

• Author: Slottee, Chris

Boasting no fewer than 125 million forested acres (approximately 35 percent of the state's territory), Alaska has supported a robust timber industry for more than 100 years. The forests are concentrated primarily in Southeast, home to the Tongass rainforest. However, since the '90s, the timber harvest volume in Alaska has dropped, challenged by volatile global markets, logistical challenges, and lack of producible timber. Now, landowners across the state, particularly Alaska Native corporations (ANCs), have identified a new means of using timber resources for economic benefit.

With renewed focus on combatting climate change with new technology, Southeast is favorably positioned to reap the benefits of carbon programs and initiatives. Here are four things that Southeast ANCs and landowners need to know.

Carbon Credit Economy

One area of focus has been investment in the development of carbon credits and sale to competitive markets, most notably the state of California. California implemented a mandatory carbon credit program in 2006 targeting power plants, natural gas utilities, and other large industrial facilities or production sites. As of 2019, approximately $370 million worth of carbon credits have been sold by Alaska landowners or ANCs into the California market. For example, Sealaska, Ahtna, and Chugach Alaska Corporation have piloted successful carbon credit programs since 2016.

However, the mandatory carbon credit economy is not a panacea for Alaska landowners or ANCs. There are limits on the generation of carbon credits and their sale, and the number of mandatory regulatory systems that Alaska carbon credits can be sold to is finite. Similarly, there is risk and substantial financial commitment. As a condition of creating the carbon credits, the landowner must agree to largely preserve their timber resources for up to 100 years and must conduct expensive timber surveys. Moreover, some carbon markets require participants to contribute "buffer credits" to a self-insurance pool designed to insure against loss of forest resources. Due to the marked increase in the number of forest fires in the past years, some studies have identified a risk. For example, the self-insurance pool for the California carbon credit program is depleted and may not have enough credits to cover future losses. If a landowner sells carbon credits and then loses all or part of their forestry resources, the landowner may be required to obtain new carbon credits to...