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Forestry Takes the Lead in California Carbon Offset Market

Published: June 25, 2014 by Christine Yankel, The Climate Trust

With California Air Resources Board’s June issuance of 2.43 million offsets to two new improved forest management projects (2.16 million offsets to Blue Source and Heartwood Forestland Fund’s Bishop Improved Forest Management Project; 270,000 offsets to the Miller Forest Improved Forest Management Project), forestry projects officially became the largest source of offsets for California’s Cap-and-Trade program, surpassing offsets produced by Ozone Depleting Substances (ODS) projects. Though only eight forestry projects have been issued California Air Resources Board offset credits—compared to 34 ODS projects and 15 Livestock projects—the 5,890,103 offsets issued in total to these forestry projects now make up over 52% of the 11.2 million offsets issued to date by the system. With more projects working their way through the carbon market process, it is encouraging to see forestry rewarded through this market-based mechanism for the climate benefits of improved management of these vital resources.

Market-based support for forestry wasn’t limited to the California compliance offset market in recent months, which is good news for the forestry sector. Secretary of State, John Kerry, announced at May’s Carbon Expo that the U.S. Agency for International Development (USAID) will lend up to $133.8 million to the Althelia Climate Fund for REDD+ carbon conservation projects and sustainable land use initiatives like ecotourism and agroforestry. The funding helps mitigate the risk of backing such projects while the market for offsets from this sector matures. A USAID statement celebrated this announcement and the work this can support.

“The income and employment generated from financed businesses will discourage further deforestation while encouraging forest maintenance and rehabilitation. Such businesses will earn income from their operations, and will be eligible to earn carbon credits that can be sold on the voluntary carbon credit market under Reducing Emissions from Deforestation and Forest Degradation (REDD+) methodologies. A variety of corporations and nonprofits buy the credits to compensate for their own carbon emissions, to support philanthropy, and/or to invest in greener supply chains.”

Ecosystem Marketplace’s annual analysis of the voluntary carbon offset market showed the number of REDD+ offsets transacted in 2013 more than doubled, to 22.6 MtCO2, with market value growing to $94 million. Carbon markets, with support from governments, businesses, NGOs, and others, are showing how they can make forests greener and air cleaner.

Markets are working, but challenges remain. Ecosystem Marketplace’s report also showed that average offset prices in voluntary markets dropped slightly in 2013. EPA’s Clean Power Plan, while admirable, does not provide a clear path for support of forest carbon offset projects at national scale. Given the tremendous range of products and services we enjoy from healthy, functional forest systems, ensuring that these benefits to climate, water, and life are supported by all means available benefits us all.