CARBON OFFSET
Introduction
Managing forests for carbon sequestration offers the opportunity to reverse or stabilize human and societal emissions from fossil fuels and land use. The total amount of global greenhouse gas (GHG) is increasing rapidly; about the half of GHG emissions have occurred in the last 40 years . Current climate models predict rises in global temperatures, sea-levels, and climatic shifts. Climatic shifts result in intensive droughts and flood events, and sea level rises intrude on fresh water aquifers - putting drinking water reserves at risk. Evidence suggests that a warming global climate will disproportionally affect local communities that depend on agriculture or coastal livelihoods.
Understanding Carbon Offset Credits
To understand forest carbon markets, one needs to know how CO2 is measured and traded. The standardized carbon unit is “metric tons of carbon-dioxide equivalent” often written as MtCO2e, or an “offset”. CO2 is one of the most common GHGs in the atmosphere contributing to global warming. All other gases are compared to CO2 for simplicity. Therefore, the CO2 equivalent has become the standard unit for describing different greenhouse gases. The US Environmental Protection Agency (EPA) defines it as the number of metric tons of CO2 emissions with the same global warming potential as one metric ton of another greenhouse gas. As an example, methane has a warming potential 25 times greater than CO2, which implies that 1 ton of methane is equivalent to 25 tons of CO2. A key component of carbon markets is the ability of regulators, buyers, brokers, and sellers to have a commodity that is measurable, quantifiable, verifiable, and trackable. Currently, sellers of forest carbon are large forestland owners looking to diversify their forest-based revenue streams.
Income Source for Forest Landowners
With well-established carbon offset markets over the years, forest landowners can monetize carbon sequestration services that their forests provide. Participating landowners must enter into a supply agreement with the purchasers of the carbon credits. The supply agreement (contract) ensures that a landowner will provide a certain amount of carbon storage for an extended period of time, often up to 100 years. Payments for carbon sequestration diversify revenue streams from their land.
Currently, many challenges exist to access carbon markets especially for small landowners. Upfront project development costs are substantially high, usually over $100,000, which vary by project size and standards. Also, long-term agreements (100 years) can make some landowners wary. Similarly, some of the other challenges include overly complex and dynamic project standards, and increasing verification and regulatory review periods, and long-term monitoring obligations. Legislative uncertainty under California’s action plan/ program are other limitations that can shape the future development of the carbon markets. However, for the right landowner access to this new revenue-generating forest product can be a great way to diversify their income stream.