WVFA Mountain State Forestry Summer 2020

I N D U S T R Y N E W S www.wvfa.org Summer 2020 | West Virginia Forestry Association Mountain State Forestry 7 Carbon Markets for West Virginia Forests WHEN FORESTS PROVIDE ECOSYSTEM SERVICES, landowners should get paid. Forests provide so much more than sawlogs and pulpwood— including clean water, clean air, wildlife habitat, and carbon storage. Unfortunately, landowners are rarely compensated for providing these benefits. That’s beginning to change. Innovative Natural Resource Solutions LLC, and others recently started doing some work with a group creating voluntary carbon market deals for forest landowners. While there are (of course) restrictions, these voluntary deals have a lot of flexibility and opportunity for continued forest management while the landowner gets paid for the carbon benefits their forest provide. These voluntary carbon deals are for 40 years. There are multiple ways to structure them, but generally we’ve seen landowners get paid for standing inventory and then they are free to harvest growth above that level. So, on properties where the long-term strategy is to harvest only growth, this is an opportunity for landowners to get paid for following their management plan. If you plan to harvest below net growth over time, you can get paid in addition to standing inventory carbon. Some quick points: Landowners can select what property is—and is not— included in the carbon deal, so for larger holdings there may be some areas to have in or out, depending upon future plans. As a rough rule, you need about 3,000 acres or more to make the economics of a deal work. If it’s a well-stocked holding that is a little smaller, there may be an opportunity. In the event of some sort of natural loss (fire, insect, and disease outbreak, etc.) the landowner isn’t responsible for the loss—a small percentage of credits from every deal gets put into an insurance pool to cover this. There aren’t a lot of transactions to confirm this, but it’s probably a good assumption that a carbon deal impacts sale price—for that reason the best projects are those where landowners don’t plan on selling for the next 40 years. This is certainly the case for many family forests. That noted, people use this as a form of temporary estate planning—basically entering a carbon deal now, before handing land to a younger generation, so they’ll be less inclined to sell (and will be older and maybe wiser when their options change). Sometimes properties where the terms of the carbon deal and the management are already aligned—these can include properties where harvest is less than or equal to growth and areas that are hard-to-harvest (but can be legally harvested). If you have property that might be a good fit for the voluntary carbon market, there’s no cost to get an assessment of what the opportunity might look like for your property. If you manage your forest in a way that cuts only growth (or adds to the inventory every year), and plan on holding it for decades (or generations), this is a fantastic opportunity to get rewarded for carbon storage while you go about your regular forest management business. If you want to learn more, email kingsley@inrsllc.com, or give a call at 207-233-9910. Eric Kingsley is partner in Innovative Natural Resource Solutions, LLC a consulting firm that has been working in the forestry, forest products industry and renewable energy sectors for over 26 years. www.inrsllc.com landowners that have a long-term plan to harvest at or below the level of growth, this can make carbon projects a good with fit existing forest management plans. It takes about a year from the start of a forest carbon project to the time when a landowner enters into a long-term contract and starts getting carbon revenue. After this, there are periodic inventories to confirm carbon levels. For forests that will have ongoing timber harvests, certification is required—Tree Farm, the Sustainable Forestry Initiative, or the Forest Stewardship Council. Forest carbon transactions are another way for landowners to get revenue from their land. It’s not right for everyone—and many holdings are too small to justify in today’s systems (though that is changing)—but for landowners with a long-term vision to harvest sustainably, this may present an opportunity for additional revenue.