Carbon Credits from Forestry Initiative

Congratulations to the Nature Conservancy of Canada on its deal to sell carbon credits in return for preserving a 55,000 hectare tract of forest in southern British Columbia. Initiatives like this will probably do more to advance carbon trading in Canada than all the jawboning of all governments combined.

Gallon Letter has just one concern and that is that NCC may have sold the carbon credits too cheaply. According to a report in the BC edition of the Globe and Mail newspaper, and at least partially confirmed by NCC’s own press releases, NCC sold the credits associated with 700,000 tonnes of carbon on 55,000 hectares for more than $4 million (let’s assume USD).

The $5.71 per tonne, or a little more, is not a bad price for a wholesale deal in which the brokers have most likely paid for the verification, but Gallon Letter is somewhat concerned about the 12 tonnes per hectare which is an extremely low carbon intensity for forested land. Even if NCC were seeking the highest quality carbon credits, as they have said they did, there is a significant risk to the future of carbon credit trading from setting the generation of credits and the price of credits too low. If our analysis is correct, NCC has given up the rights to harvest the trees on this land for 100 years for the princely sum of $72 per hectare, give or take.

If, as the NCC states, this land would have been subject to aggressive logging by industry had NCC not purchased and preserved it, then industry would have been earning many hundreds, if not thousands, of dollars per hectare, far more than a paltry $72.

There is a major risk in making carbon credits available at too low a price, as many airlines are doing for their ticket buyers. The risk is that society becomes used to cheap carbon credits and easy availability of credits, undervaluing the real value of sequestered carbon to humans and to the ecosystem. Just as government provides subsidies to the oil and gas industry, so it appears that the Nature Conservancy of Canada has, perhaps inadvertently, provided the market with subsidized carbon credits from Canadian forests.

Gallon Daily invites responses.

The NCC announcement of its Darkwoods Forest Carbon Pilot Project can be viewed at http://www.natureconservancy.ca/site/PageServer?pagename=bc_ncc_projects_dw_carbon

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