12 February 2008

Global Climate Change: Natsource Buys First California Carbon Credits

Reuters reports that US carbon asset manager Natsource LLC has invested in the first forest-based greenhouse gas emissions reductions under California rules.

Natsource paid a private owner of a redwood forest, the Van Eck Forest Project, in Humboldt County, California, represented by the nonprofit Pacific Forest Trust (PFT) for credits representing 60,000 tonnes of carbon emissions.

The company declined to say how much it paid for the credits, but a source familiar with the deal said Natsource bought the credits for "well below" $10 per tonne.

"The deal illustrates the significant role that management of existing forests can play in addressing climate change," according to a press release from PFT. "The transaction is the first commercial delivery of certified emissions reductions under the Forest Protocols adopted last fall by the California Air Resources Board (CARB).

The Protocols represent the only rigorous governmental accounting standards in the US for climate projects embracing forest management and avoided deforestation, while ensuring emissions reductions are real, permanent, additional and verifiable.

"Today marks a significant milestone for the recognition of the real benefits of conserving and managing U.S. forests to enhance their climate contributions," PFT president Laurie Wayburn said in a statement. "Investing in the power of forests to protect our climate is a practical action that can and should be taken now to reduce CO2 in our atmosphere. We are hoping that deals like this will provide policymakers around the world with the confidence they need to ensure that forestry becomes part of the solution to address climate change."

CARB’s leadership in adopting the Forest Protocols is helping to stimulate a new asset class in global Green House Gas (GHG) emissions markets, validating forests as a cost-effective means to achieve real GHG reductions.

The Forest Protocols, which are administered by the non-profit California Climate Action Registry (CCAR), can be
used as a model to ensure that forests be used to achieve enduring benefits and become a solution in the fight against climate change.

"Until now, forest sequestration has been an untapped asset in the effort to address climate change," said Jack Cogen, Chief Executive Officer of Natsource. "Forestry can and should be an important part of the portfolio of climate change solutions moving forward. This deal illustrates that when rigorous, clear rules are adopted, these investments can reduce costs for our compliance customers and provide what we believe are attractive investment opportunities.

In voluntary carbon deals, such as this one, payments are made for carbon credits, which investors "store" for the day when US government regulates GHG. That will, in theory, drive up prices for the credits.

Deals like this one are risky, however, as there is no guarantee the US will adopt a GHG regulatory scheme or whether they will recognize early actions.

Critics of so-called "avoided deforestation" argue that it is difficult to prove whether landowners would have protected the forest or slowed its harvest without an incentive. Others argue that it is difficult to measure the CO2 sequestered by a standing forest, with trees at varying levels of maturity, compared to a newly forested area with faster growing younger tree species.

Wayburn argues that paying the land owners to let the forest grow back more fully from the last time it was harvested is a valid option and will conform to the state's rules to ensure the reductions are verified.

Meanwhile, Wayburn told Reuters, "The additional revenue stream allows forest owners to take a long-term harvesting strategy rather than a short-term strategy."

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