Harvesting Carbon Credits: $370 million in credits registered in Alaska since 2015.

Author:Friedman, Sam
 
FREE EXCERPT

There's money to be made in promising to reduce your company's environmental footprint by cutting down fewer trees. And Alaska's largest landowners are getting behind this new type of business in a big way.

Alaska is now the largest producer of forestry carbon offsets for California's greenhouse gas cap and trade program, despite qualifying to sell the credits years behind the contiguous United States. Thus far, four Alaska Native regional corporations and eight village corporations have received carbon offset credits through the program or have started the process of registering credits.

At current prices of about $13 per offset credit, the carbon offsets registered in Alaska are worth about $370 million. And that's just the initial carbon credits awarded for these projects. As forests continue to grow, they will produce a smaller number of new credits equal to the value of the carbon dioxide stored in the new growth compared to similar forestland outside the project.

The new market created by California's greenhouse gas rules opened to Alaska in 2015. It's scheduled to partially close in 2021, with a new regulatory change that will cut demand for forestry credits produced in Alaska by 75 percent.

Harvesting Timber, Harvesting Credits, or Both

While there's now significant money in carbon credit offsets, the credits are not nearly as lucrative as traditional logging, says Brian Kleinhenz, former natural resources manager for Sealaska Corporation and now a Juneau-based principal at forestry consulting business Terra Verde,

As a rule of thumb, a piece of a forest's value if sold as stumpage is about ten times the value of the carbon credit income, he says.

Why agree to the lower payout offered by carbon credits? There are a multitude of factors, Kleinhenz says. One is that a landowner faces significant costs in a timber sale that don't factor into a carbon offset sale.

"That's a lot of risk associated with going through the whole process of having big industrial equipment running along the landscape, building roads, and harvesting. And then the resource is gone," he says.

Selling carbon credits also gives landowners more latitude with regard to what they can do with their forests. The rules for carbon offset credits are significantly less restrictive than for conservation easements, he says.

The View from Sealaska

At Juneau-based Sealaska Corporation, CEO Anthony Mallott says he's been talking about carbon offsets as an option for corporate lands for about a decade.

The opportunity created by the California market made it economically feasible for Sealaska, he says. Today the land management part of the business includes income from both logging and carbon credit production.

Sealaska makes about 15 percent of its revenue from its logging business Sealaska Timber Company, a smaller part of the corporation's overall revenue than it has been historically. Sealaska also operates in the seafood processing and environmental services industries. The corporation owns more than 360,000 acres of surface land in Southeast Alaska, nearly half of which is included in a recently-registered carbon offset project.

Carbon credits were a good fit for the regional Alaska Native corporation in part because the business has mandates to both generate profits for shareholders and be a good...

To continue reading

FREE SIGN UP