A market for forest carbon credits is beginning to congeal, but it's still far from solid.
That's the message hammered home by carbon market experts at a recent workshop organized by the Western Forestry and Conservation Association.
Trees are known to provide environmental benefits by sequestering carbon, but forestland owners hoping to profit from the services they provide face a multitude of uncertainties, according to speakers at the workshop.
Across North America, there's a patchwork of different initiatives aimed at reducing climate change, and each region has addressed forestry's role in a different way, said Wolfgang Ortloff of Equator LLC, an environmentally focused investment fund.
"There's a lot of different standards," said Ortloff. "It's not a unified picture."
Under some systems, forestland owners can sell carbon credits - units that correspond with the amount of carbon sequestered by their trees - on the voluntary market, he said.
Currently, companies in the U.S. that emit carbon do not have to buy credits to offset their emissions, but some chose to voluntarily do so anyway, Ortloff said.
If the U.S. adopts a mandatory cap-and-trade system, which would require companies to offset emissions beyond a certain benchmark, the voluntary market for carbon credits would likely be marginalized, he said.
President Barack Obama has proposed a budget that includes $645 billion generated by fees from a cap-and-trade-system, but the legislation doesn't actually mandate such a system, said Linc Cannon, director of forest resources for the Oregon Forest Industries Council.
"It's a presumption there will be a cap-and-trade system by 2012. It doesn't create it," he said. "It clearly signals to Congress what his intention is."
The role forestry would play under such a mandatory system is currently anybody's guess, since there's so much disagreement about how to calculate the amount of carbon sequestered by trees, said Adrian Miller, director of forest management for the Washington Forest Protection Association, a timber industry group.
"The details really, really, really matter in this case," said Miller.
One of the central questions is that of "additionality," he said.
Forests undoubtedly fix carbon, but people are divided over how to reward the landowners, he said.
Since many landowners would likely produce trees regardless of a cap-and-trade system, it's difficult to determine how much added carbon they're sequestering once the system is established, Miller said.
"Where do you start measuring from?" he said.
A particularly controversial point is whether or not carbon captured in harvested wood, such as lumber, should be credited, said Miller.
"The wood products industry has a credibility issue with harvested wood products," he said.
Another tricky issue is the "substitution" benefit that wood products provide by displacing concrete and steel, both of which contribute to carbon emissions, said Cannon.
The substitution effect is often left out of the carbon credit discussion because it's complicated, Cannon said.
"People ignore it because it's hard," he said.
The most contentious aspects of the forest carbon debate aren't based on science, but policy agendas, said Jim Cathcart, forest resource trust manager for the Oregon Department of Forestry.
Talking about carbon credit projects is similar to discussing religion, said Alex Schay of Carbon Solutions Northwest, a renewable-energy and carbon-sequestration firm.
"People diverge based on their interests," he said.
Since a cap-and-trade system will likely reward forestland owners who provide "additional" carbon-storage benefits, those who have already been extending rotations and sequestering carbon voluntarily may actually receive the least benefit, said forest economist Mark Rasmussen.
That's because they've set such a high "baseline" for themselves, he said.
"We're seeing people create and define market," said Rasmussen. "No matter how it comes out, I'm sure it won't be fair."
Apart from the political ambiguities surrounding forest carbon credits, the emerging market faces substantial legal challenges as well, said attorney Greg Fullem.
Contracts between buyers and sellers are bound to come under legal scrutiny, he said. As disputes over carbon credits arise, there's no guidance as to how such conflicts should be settled, Fullem said.
"We don't have case law to see where parties fell into traps and couldn't get themselves out," said Fullem.
In such a brand-new market, the potential for legal mayhem is ripe: In New Zealand, for example, "carbon cowboys" have been accused of selling credits but not actually planting any trees, he said.
"The system is going to get gamed no matter how transparent and tight it is," said Fullem.The Daily Astorian
