If you would like addition information about
Carbon Sequestration contact your local
Alabama Forestry
Commission office.
Why is
it important to store Carbon?
The amount of carbon dioxide (CO2)
in the air had been relatively constant for
ten thousand years until the Industrial
Revolution in the 1800s. Since then, the
world’s population has grown tremendously,
as has the use of coal, oil, and natural
gas.
Because CO2
is a primary product of combustion, the
atmospheric concentration of CO2
has been on the rise. At the same time,
average temperatures throughout much of the
world have inched up and other climatic
changes have been documented, indicating a
connection between our use of fossil fuels
and climatic effects.
Although total implications are not known,
the majority of the scientific community
feels strongly that continued unchecked
growth of CO2
releases into the atmosphere will have very
negative effects on our environment. To
effectively reduce CO2
emissions, we must find alternative clean
sources of energy as well as encourage the
development of “carbon sinks” where
atmospheric carbon is removed from the air
and stored such that it will not negatively
affect our environment.
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What
is Carbon Sequestration?
The removal of carbon from the atmosphere is
the process of carbon sequestration. This
can be accomplished by storing atmospheric
carbon into the ground, water, or into
vegetation.
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How do
trees play a role in Carbon Sequestration?
Trees take in CO2
from the air in the process called
photosynthesis. The tree effectively breaks
down the CO2,
stores the carbon in all parts of the tree,
and releases the oxygen back into the
atmosphere. Fast growing trees are, in fact,
the most efficient way to sequester
atmospheric carbon.
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What
are Carbon Credits and how are they
determined?
A “carbon credit” is a market term. Carbon
storage in trees is usually measured in
carbon dioxide equivalent (CO2e).
Trees are roughly 50% carbon, based on dry
weight. A carbon credit is equal to one
metric ton of CO2e.
Therefore, the amount of carbon credits on
your property can be computed based on a
forest inventory cruise of your property to
determine the timber volume by weight. Some
factors that will affect the amount of
carbon sequestered in your forest will be
the age of the trees, stocking levels,
species, and site index of the soil.
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What
things should I consider before signing up?
How do I decide if I should participate?
The carbon market has been established in
the U.S. but it is in its infancy. There are
still many unknowns. Forest landowners
should be able to benefit from the increased
interest in carbon trading either through
direct sequestration or revenue sharing with
power generation facilities. The decision to
participate in the carbon market will be
heavily influenced by factors such as the
commitment period required, associated fees,
market access, inventory methods, and
silvicultural treatments.
Only after careful consideration and
consultation with professionals experienced
in this subject matter, should a decision to
participate be made. You should also fully
consider how your short- and long-term
management objectives will be impacted from
participating.
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Who
buys Carbon Credits?
Currently in the U.S., the Chicago Climate
Exchange (CCX) is the only recognized
commodity based trading market for carbon
credits. The commodity traded on the CCX is
a Carbon Financial Instrument (CFI) contract
which represents 100 metric tons of CO2e.
Smaller landowners do not sequester enough
carbon on their land to meet this minimum
requirement. Therefore, they must sell
through an aggregator.
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How do
I choose an Aggregator?
The entire process of finding and signing up
forest carbon stocks has taken on a “land
rush” mentality. Since the markets are still
being developed, every landowner wanting to
explore selling their carbon offsets should
always remember, “SELLER BEWARE.”
If you are looking for an aggregator, or an
aggregator contacts you, first and foremost
make sure they are registered with the CCX.
If they are not, STOP! Do not pass “Go”
because you could be entering into a
legally-binding agreement with someone who
has no access to an operating carbon
exchange in the U.S.
Once you have verified that you are working
with an actual approved aggregator, then
read the contract carefully and make sure
you feel comfortable with the aggregator.
Ask about carbon pool amounts, verification
fees, and aggregator fees.
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What
is the value of a Carbon Credit?
Because this market is voluntary, the value
of a carbon credit remains relatively low.
If congress passes cap and trade legislation
requiring reduced emissions, the value of a
carbon credit is expected to increase
significantly.
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What
are the requirements? Is there a minimum
land ownership requirement?
-
A forest
landowner must manage his forest under a
certified sustainable forest program and
sign a commitment form to do so for the
length of the contract.
-
Approved
certification systems include Forest
Stewardship Council (FSC), American Tree
Farm Systems (ATFS), the Sustainable
Forest Initiative (SFI), and any other
CCX-approved certification system. Most
landowners in Alabama can accomplish
this by being certified as an American
Tree Farm.
-
The
American Tree Farm system requires that
you own at least 10 acres, have
accomplishments in sustainable forest
management, be inspected by a registered
forester, and are recommended for
certification.
-
Further,
the amount of credit and contract length
will be determined by the type of forest
project, and therefore the way carbon is
being stored. Those types are:
Afforestation is
the planting of new forests on lands which
have not contained forests. Landowners are
eligible for the Afforestation program if
they planted trees after January 1, 1990, on
land that did not previously have trees.
Under Afforestation, the landowner cannot
thin or harvest trees on enrolled land.
Managed Forest Projects
are sustainably managed forests such that
their growth in carbon stocks exceeds their
harvest. Landowners are eligible for the
Sustainably Managed Forest program if they
follow a certified forest management
program. Thinning and harvesting is allowed
under the Sustainably Managed Forest, but
the landowner must have a net increase of
the carbon stored or will be out of
compliance with the XFO contract.
Long-Lived Wood is
harvested wood that has existed for a long
period of time and served as a carbon sink.
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Are
there restrictions on my property? Will it
affect my management scheme?
The landowner agrees to store carbon in his
trees for the period of the contract. That
in turn restricts his ability to harvest
timber or clear timber land for any other
purpose. He can still prescribe burn and
conduct other forest management activities
during the contract period. After the
contract period, he is free to harvest his
trees when he chooses. Planning for future
needs such as food plots and roads becomes
very important.
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How
much will I get paid?
The exact amount depends on market
conditions at the time of the sale. In
December of 2007, prices traded under
$2.00/credit. Recently, in April of 2008,
prices were trading over $6.00/credit. In
September of ’08 they were back under
$2.00/credit. As with most transactions, the
seller will have to deduct the transaction
fees to arrive at the true net income.
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Is
there a “hardship rule” for cutting timber
or selling the property?
No. This is seen as a voluntary act and
could cause the contract to go out of
compliance.
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Do I
get paid for my entire acreage? Do I have to
deduct for roads, food plots, and streams?
Who certifies the acreage?
Only forested acres are included in the
calculations of carbon credits. The forester
making the initial evaluation of the
property will certify the acreage along with
the data taken to determine the carbon
credits. Then a third party verifier will
sample 10% of the pool to check the accuracy
of the initial evaluation.
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What
happens if some or all of my enrolled trees
are destroyed by fire, insects, or some
other natural disaster out of my control?
In case of a natural disaster that destroys
all or part of your enrolled trees, your
risk is limited to the credits that you have
held in reserve. When selling through CCX,
they require that 20% of your earned credits
by held in reserve. Credits remain in
reserve for 5 years after which they are
released into the sellable pool of credits.
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What
if I am forced to sell a right-of-way
through a stand of trees? What if part or
all of the property is condemned by the
government for a road, etc.? What if the
mineral rights are executed and the timber
is removed?
It would depend on your contract. In most
cases, all of these acts would be viewed as
voluntary acts and could cause the contract
to go out of compliance. The landowner would
need to include the cost of satisfying the
carbon credits contract in any negotiations
involved in the situations mentioned.
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Is the
contract “legally binding”?
Yes. The contract is legally binding and
follows the landowner that signed the
contract.
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What
happens if I go out of compliance with my
XFO contract?
A credit recovery process is required. You
will be required to replace all credits
earned to-date under the contract. Depending
on the reason you are out of compliance, you
may use you reserve credits or you may be
required to buy credits to replace the
shortage.
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How do
I start the process of enrollment?
Most landowners wanting to enroll will need
to work with an aggregator. The landowner
and aggregator will enter into an XFO
contract that specifies all eligibility
requirements and terms and conditions for
participation.
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What
is the length of time of the XFO contract?
This depends on the aggregator. If trading
with CCX, the XFO contract generally has a
term length of 15 years.
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Can I
sell land that I have enrolled in the XFO
program?
Under CCX rules, if XFO-enrolled land is
sold to another party, the XFO contract can
be transferred to the new land owner. If the
new land owner refuses to enter into an XFO
contract, the contract will be considered
out of compliance.
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Will
my enrolled land be subject to an audit?
Once per year, 10 percent of all XFO
contracts will be selected for an on-site
verification audit. If you are selected, you
will be contacted and informed when the
on-site verification visit will take place.
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How
does the annual certification work?
Each year, participant land owners will be
sent certification forms to be completed and
returned to their aggregator. Participants
will certify that their enrolled land is
still in compliance. If acreage adjustments
are needed, those adjustments will be
indicated on the certification forms. Also,
the participant will report any harvest
activity on the certification forms.
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