Investors banking on forests' carbon promise

FINN ROCK: Many of today’s McKenzie Valley residents have heard of recent riparian restoration efforts in the “Finn Rock Reach” near Milepost 38 of Hwy. 126. Fewer, though, recall the former Finn Rock Logging Camp which had long roots, stretching back to 1890, and a sawmill in Rosboro, Arkansas built by Thomas “Whit” Whitaker Rosborough.

After Rosborough’s honeymoon itinerary swung through the Pacific Northwest, he’d always had a longing to return. He did in 1939, moving to Springfield, Oregon, and building what a newspaper of the time called the region’s “most modern timber manufacturing plant.”

In the intervening years, other Arkansas loggers followed Ros-borough, working in his mill and woods for decades. That changed in April 2016, when Rosboro announced it had sold approximately 95,000 acres of its high-quality timberland in Western Oregon to Campbell Global of Portland. “We are very pleased that Campbell Global will be managing these timberlands into the future,” said Scott Nelson chief executive officer for Rosboro in a press release. “Campbell Global has an outstanding reputation for its land stewardship and genuine concern for the communities in which it operates.”

In a February 1, 2023 article in Fortune Magazine, Tristan Bove wrote “Investing in woodland conservation isn’t just for wealthy environmentalists anymore. The investment arms of massive banks are getting into the game too, as interest mounts for nature-based solutions to remove greenhouse gasses from the atmosphere.”

He noted that “JP Morgan Chase’s asset management arm has had timber in its portfolio for years, and it now plans to double down.” His observation came in response to the bank’s announcement that it had just bought another 250,000 acres of timberland in the Southeastern U.S. for $500 million.

The earlier 2016 purchase was slated to be managed by Campbell Global, which had bought Rosboro’s lands before being purchased by JP Morgan in 2021.

In related news, the U.S. Department of Agriculture this July announced it was making $190 million available through the U.S. Forest Service (USFS) to “help private forest landowners adapt to and mitigate the impacts of climate change and retain working forestlands.”

“Climate change threatens people, communities, infrastructure, and natural resources across the country,” according to USDA Secretary Tom Vilsack. “Healthy, resilient forests can better withstand climate change impacts, and contribute to climate solutions by storing additional carbon.”

Of the total allocation, $140 million is available to support state-endorsed cost-share programs for landowners. Cost-share payments are aimed at lowering costs property owners face when making forests more resilient to changing climate conditions, and storing more carbon on the landscape, according to the USFS. One option involves removing small-diameter trees that compete for scarce resources, thereby allowing bigger trees to grow larger and sequester more carbon.

Additionally, $50 million is also available to programs that issue payments directly to landowners to adopt practices that increase carbon sequestration and storage.

Last year, Weyerhaeuser announced approval of its first Improved Forest Management (IFM) carbon credit project in Maine. It’s also looking at developing several other IFM projects on select areas within its 11-million-acre land base in the U.S.

Covering approximately 50,000 acres, the Kibby Skinner IFM Project is Weyerhaeuser’s first issuance of credits to the carbon marketplace. The project has an estimated initial credit issuance of nearly 32,000 greenhouse gas equivalents (with one credit equal to one metric ton of carbon dioxide equivalent.) The project is expected to generate 475,000 credits over its lifetime.

“Forests represent one of the largest and most readily available opportunities to remove carbon dioxide from the atmosphere and help address the impacts of climate change,” according to Russell Hagen, senior vice president and chief development officer for Weyerhaeuser. “Since launching our Natural Climate Solutions business, we have been working to develop forest carbon projects that can generate meaningful carbon additionality with measurable climate benefits. This initial project is an important milestone for Weyerhaeuser and demonstrates our commitment to offering only the highest-quality credits to the market.”

Taking a different approach, a Bill Gates-backed startup, Graphyte, is operating the world’s largest carbon removal plant in Arkansas to create “biomass bricks” from papermill waste.

On March 5th, woodworkingnetwork.com reported on Graph-yte‘s “carbon casting” process to store carbon-rich biomass waste underground thereby removing carbon dioxide from the atmosphere.

By November, Graphyte had signed up American Airlines as its first customer, to purchase 10,000 tons of permanent carbon removal to be delivered in early 2025.

The “Carbon Casting” project is projected to permanently remove billions of tons of carbon dioxide (CO2) for 1,000+ years (at a cost of under $100/ton) according to the company.

As Bove has noted, “The growing market for carbon offsets (companies accounting for the emissions they generate by neutralizing emissions elsewhere) is far from perfect, but it does provide a market incentive for conservation and emissions reductions.”

Can carbon sequestering pencil out?

After they’re planted, trees usually experience rapid carbon uptake and storage before leveling out at maturity. When they’re logged, the carbon in the wood is still stored in finished products ranging from lumber or paper to furniture - at an expected rate of decomposition over 100 years.

Factors such as forest management practices, the age and density of the forest, and market conditions impact the value of carbon credits. On average, mature Douglas fir forests can sequester approximately 3 to 5 metric tons of CO2 per acre per year. In recent estimates, carbon credit prices have ranged from around $10 to $50 per metric ton of CO2, depending on the market and type of credit (e.g., voluntary vs. compliance markets).

Based on an average price of $20 per metric ton of CO2, the estimated value of carbon sequestration for a typical acre of Douglas fir forest in the Pacific Northwest is approximately $80 per acre per year. Carbon credits can be sold in a voluntary market where companies or individuals purchase credits to offset their emissions voluntarily. In compliance markets, companies are required by law or regulation to offset their emissions and purchase credits to meet regulatory requirements.