The earth’s climate is warming and the majority of scientists believe that human-caused emissions of greenhouse gases (GHGs) are contributing significantly to the warming of our atmosphere. Mandatory limits of GHG emissions now exist in most industrialized nations and are being developed in individual states and regions within the United States. It appears increasingly likely that a national mandatory program to limit GHG emissions could be implemented in the U.S. sometime in the next few years.
Forest carbon sequestration can provide electric companies and other entities that emit GHGs with desirable opportunities for GHG emissions mitigation for a variety of reasons. These include:
(i) GHG offsets derived from forest carbon sequestration (FCS) projects can be achieved for a relatively low financial cost per ton of carbon dioxide equivalent(CO2e) as compared to many other GHG abatement options available to electric companies and other industrial entities;
(ii) FCS projects can generate GHG emission offsets without development of new technology;
(iii) FCS projects offer geographic flexibility in where mitigation can be achieved;
(iv) FCS projects can help to improve a company’s public image as the public generally has positive perceptions about forests and forest restoration;
(v) FCS projects can provide a way for companies to diversify their asset portfolio and hedge financial risk; and
(vi) FCS projects, in some cases, may complement other company goals.
Electric companies may use a variety of different organizational approaches to create or acquire GHG emission offsets derived from forest carbon sequestration, including:
• Implementing FCS projects on company-owned lands;
• Joining a consortium of entities that jointly implement FCS projects to create GHG offsets;
• Engaging a third-party contractor to develop an FCS project on behalf of the company; and
• Purchasing FCS-based GHG offsets in the marketplace.
Companies that are considering creating or purchasing FCS-based GHG offsets should try to anticipate how they intend to use the resulting GHG offsets and try to ensure that the GHG offsets are likely to eligible to be used for compliance purposes in whatever mandatory or voluntary GHG emissions mitigation scheme they are involved in. Financial analysis of proposed offset projects should explicitly account for the time value of money and risks. Promising methods for creating GHG emission offsets using forest carbon sequestration include afforestation or reforestation, joint creation of wood products and GHG emissions offsets, and FCS projects that use very fast growing tree species. Preserving forests to avoid future GHG emissions is often a very expensive way to generate FCS-based GHG offsets. Finally, this report provides economic analyses of a variety of FCS projects that could be implemented to create GHG emission offsets.