By Joe Rankin
Forests for Maine’s Future writer
Over the centuries the only way to make money if you owned a woodland was cut down the trees so they could be sold and turned into framing timbers, barrel staves, chariots, ship masts, charcoal, furniture, plywood or any of a gazillion and one other things.
Now comes a radical new idea: Make money from your trees by letting them grow. Specifically, letting them grow so they suck carbon dioxide from the air, sequestering the greenhouse gas and then “selling” the stored
Farm Cove (Photo courtesy DLLT) carbon to another party to balance out their carbon dioxide emissions.
This is the carbon offset.
At least two Maine forestland owners, both non-profits, are looking at carbon offsets as a way to make money by growing more timber, not harvesting what they have. And, incidentally, both — the Downeast Lakes Land Trust and the Appalachian Mountain Club — also make money by practicing sustainable timber management.
The Downeast Lakes Land Trust is on the verge of selling carbon offsets on 19,000 acres of its Farm Cove Community Forest; AMC has done the prep work to sell carbon offsets on 10,000 acres in the Katahdin Iron Works tract.
At its simplest, carbon offsets are an economic exchange. You have an industry, say, a coal-fired power plant, that is under an obligation to cut its greenhouse as emissions by 25 percent. The plant employs a variety of solutions, but can only reduce CO2 emissions by 20 percent. To make up the rest it goes shopping for carbon offsets, partnering with someone else who is pledging to sequester more carbon than they would in the normal course of their business.
That’s where forests come in. Forests are natural carbon sinks. Trees breathe in carbon dioxide and exhale oxygen. Fortunate for us, of course. They turn CO2 into wood, and some species live hundreds of years. While individual trees die and release their carbon, the forest as a whole amounts to a huge pool of captured carbon.
For a planet faced with a global heating imbalance, carbon offsets would seem to be one way to dealing with it. For landowners in the heavily forested northeastern U.S. it would seem like a good way to sequester some cash. Maybe. While offset proponents are bullish, skeptics, and there are many, aren’t convinced. They say the 
Measuring tree girth on AMC eco-reserve lands. (Photo courtesy AMC)market hasn’t matured, the time commitments are too long and that the money isn’t there.
The Downeast Lakes Land Trust’s Farm Cove carbon offset project has the distinction of being the first “improved forest management” offset project outside California to be registered with that state’s Climate Action Reserve, a program that aims to reduce greenhouse gas emissions partly through offsets.
Downeast Lakes’ Executive Director Mark Berry said carbon offsets mesh well with the Trust’s forest conservation mission as well as its commitment to long-term stewardship and improvement of the forestland. On practical terms, the Trust is in the middle of a capital campaign to buy an adjacent parcel of forestland known as the West Grand Lake tract. Selling carbon offsets is a way to raise much-needed cash for that project.
“From our perspective we’re a local organization that has a local mandate and a local conservation mission. For us, this market is an opportunity to help us conserve more forest and be compensated for what we’re willing to do on the ground,” said Berry.
The Downeast Lakes project is an “improved forest management project, which means, essentially, that we are committing to managing the forest in a way that stores more carbon than we are otherwise obligated to do. The important thing with any carbon offset project is there has to be something that makes a commitment that is additional, beyond ordinary obligations,” said Berry.
In the case of the 19,000 Farm Cove acres, that means maintaining a stocking rate that is above legal requirements (and the regional average; the property is currently stocked at approximately 19 cords per acre) and keeping it at that higher level for the 100-year duration of the project.
That’s right — 100 years.
Berry said what it comes down to is an opportunity to earn revenue now by giving up revenue the Trust might have earned from cutting the timber in the future. “We certainly looked at the 100-year commitment as a serious aspect of this effort, as a situation where we were limiting our future management flexibility in exchange for a current opportunity.
The Trust worked with offset project developer Finite Carbon on the project. The initial offsets have already been spoken for, said Berry. The Trust and the buyer are simply waiting now on the California Air Resources Board, or ARB, to give final approval. The sale should generate about $1.5 million for the Trust initially. Some will go into a fund to cover long-term costs, with about $1 million going to the purchase of the West Grand Lake Community Forest property.
Meanwhile, the Trust is already pursuing a second carbon offset project on the West Grand Lake property in partnership with current owner Lyme Timber Co. That project will involve sharing some of the revenue with Lyme Timber, but with the Trust’s share going toward purchase of the land, Berry said.
The Appalachian Mountain Club’s carbon offset project is nearing completion as well. It covers 10,000 acres on the AMC’s 37,000-acre Katahdin Iron Works tract. The AMC owns 66,000 acres in Maine. The AMC had already set aside the acreage as an ecological reserve off limits to timber harvesting under the terms of its Forest Legacy conservation easement, though the conservation group does harvest timber commercially from much of its land.
AMC Senior Scientist David Publicover said that today the eco-reserve lands wouldn’t qualify as an offset project since they wouldn’t have the potential to sequester more carbon than what they would otherwise would have under the terms of the easement, thus failing the “additionality” test. But the project qualified because it was 
Map of Downeast Lakes Land Trust’s carbon offset project. (Courtesy DLLT)registered during a six-month “early action” window set out when the California program was opened up to projects outside California. The temporary early action provision allowed projects already under easement to qualify, effectively rewarding landowners who had already made a commitment to carbon sequestration.
AMC worked with a non-profit called the Pacific Forest Trust and Huber Resources Corp., the AMC’s forestry consultants, on the project, though AMC shouldered much of the work itself.
Even with outside assistance “it was a huge challenge, an incredibly complex process,” said Publicover. “It’s far and away the most challenging thing I’ve ever done in my life, more challenging than my doctoral thesis. But it was worth it to learn how it worked.”
The AMC project will initially get credit for sequestering about 100,000 tons of carbon above the baseline year of 2007, with future credits of 10,000 to 15,000 tons a year. What the project’s offsets will sell for no one knows yet. Publicover said prices on the voluntary market run $2 to $5 a metric ton and those on the California compliance market $10 a metric ton of carbon dioxide sequestered.
Like Downeast Lakes Land Trust, the sale will mean a 100-year commitment. And, like Downeast Lakes, some of the credits will be put into what amounts to an insurance pool in case a natural disaster — hurricane, fire, spruce budworm epidemic — wipes out the forest’s sequestered carbon.
Publicover said AMC chose to develop its first carbon offset project around an ecological reserve “because it was relatively straightforward and less complicated.” But he said the organization would be open to doing them on 
Farm Cove and West Grand Lake from the air (Photo: Courtesy DLLT and Lighthawk)managed lands. “We want to see how this one shakes out. But we’d certainly be open to considering it in the future. In any case we do plan on increasing the carbon stocking on our managed lands.”
Both Berry and Publicover say it’s no coincidence that many of the forestland carbon offset projects in the U.S. so far have involved non-profits such as their organizations. Conservation is a bedrock value for these groups, and they tend to have a long-term outlook when it comes to land. For some, combatting climate change is also a priority. Other organizations developing carbon offset projects in other areas include The Nature Conservancy, the National Audubon Society and The Conservation Fund.
For AMC “it was a way for us to help demonstrate that this type of project is viable in this region and perhaps encourage other landowners to pursue them,” said Publicover. “These projects have potential benefits for both regional conservation and global climate stabilization. Certainly there was a financial aspect to it. We weren’t going to do it if we couldn’t make money, but it did allow us to get out on the cutting edge” of carbon offsets.
Offset programs have negatives, however. One is how insanely complex they can be to put together.
Another is the expense. Publicover said initial project development costs can run $100,000 or more. Then there’s the need to set aside money for a stewardship fund to pay for things like periodic inventories of the forest. If you’re starting with land that’s been heavily cut over you might not even realize anything from the initial registration of your credits, only getting payments as the forest grows back. Meanwhile, the initial expenses must be paid.
That means it’s going to be primarily large landowners participating in the carbon offset market, though 
Map of AMC’s carbon project (Courtesy AMC)California’s offset registry, the Climate Action Reserve, has worked to develop rules so smaller landowners can pool their holdings for purposes of the program, with the idea of lowering costs. But it remains to be seen how that works.
Then there is the question of the future of the carbon offset market.
Lloyd Irland, a Maine-based forest economist and president of The Irland Group, has studied the forest carbon market since 2006. He is highly skeptical.
At one time there were bills proposing a national cap and trade system to reduce greenhouse gas emissions and even talk of a carbon tax, he said. They generated a lot of interest from Wall Street types trying to figure how to make money trading in carbon. But years have gone by and there’s no national system in place, Irland added.
There are two so-called “compliance” markets, or regional cap and trade systems — the one in California and one, the Regional Greenhouse Gas Emissions Initiative known as REGGI, in the northeast and mid-Atlantic states. REGGI does not allow improved forest management offset projects. The Chicago Climate Exchange, a significant early example of the unregulated “voluntary” market with some 400 participants, collapsed in 2010.
Irland says bluntly that the carbon market as it exists in the U.S. isn’t even a real market because the products can’t be freely traded. “You can’t sell one of these forest carbon credits. They’re bilateral. They’re individualized custom transactions. It’s very, very hard to turn those into instruments that could be traded to someone else,” he said.
Irland said there needs to be a legislated system that provides for public trades, transparency and predictability. But even if the U.S. Congress were to enact a cap and trade system today — by no means a given in today’s contentious political climate — writing the regulations and sorting through legal challenges would take years, bathing the whole in uncertainty. And uncertainty makes investors very nervous.
Then there is the return. At present carbon offset prices are too low to be attractive to for-profit companies with any amount of capital tied up in the land, Irland said. And a forestland owner would see the value of the standing timber grow over the decades while their carbon sequestration rate slows and they are generate less return as offsets.
The offset market as it exists now is “just not going to draw private ownership into these type of 100-year deals when the financial rewards are so nominal and the uncertainties are so great,” said Irland. “When those things change then it will be a new game. But it will still be difficult to design this so it will be workable and protect all of the legitimate policy and environmental concerns involved in it.”
View of AMC eco-reserve from Laurie’s Ledge. (Photo Courtesy AMC)Publicover acknowledges the skepticism. But he maintains the early “wild west” days of carbon offsets are history. Now there is “broad agreement” on the principles needed to ensure a credible project and there are widely used standardized methods for quantifying and verifying an offset.
Both Publicover and Berry defend the California offset market as legitimate and a good opportunity, with Publicover describing it as a “pretty significant compliance market.”
And they say that conservation organizations and land trusts have an important role to play in leading the way on offsets.
“It’s an opportunity to test the concept,” said Berry. “Given the diversity among Maine and U.S. forest owners, and their varied motivations, some will find carbon offset prices – currently above $10 per ton – a worthwhile opportunity to bring additional financial value from their forestlands.”
“I’m receiving calls from other forestland owners that are considering whether a carbon offset project would be a good fit for them,” Berry said. “Conservation-oriented forestland owners, who may already be motivated to maintain higher levels of timber stocking, now have a financial incentive to do so.”
Joe Rankin is a forestry writer and beekeeper. He lives in New Sharon.
