Green Horizons

Editors’ Note: Since our first article on carbon credits, we have come to realize that this is a rapidly evolving and ever-changing opportunity for forestland owners. While we realize that some question the ecological value of carbon trading, our intent is one of providing the latest information so our readers can make informed decisions. With this in mind, the "Carbon Corner" has become a regular feature. We welcome specific questions from landowners wishing to learn more about becoming players in this emerging market.

This past December, the Chicago Climate Exchange (CCX) formally released procedures for enrolling managed forests in the Exchange’s "Managed Forest Carbon Project." As with any new program, while “formal” procedures have been established, the interpretation of those procedures remains a work in progress. Also, anyone who has ever written rules for anything knows that exceptions and special cases invariably crop up, sometimes even before the ink dries! This is especially true with managed forest carbon projects.

So why bother GH readers at this point in time with something that is still evolving?

Well, because these projects are signed contracts and aggregators are beginning to solicit participation in this carbon offset, we want to make sure that forest landowners (1) are aware of the opportunity, (2) knowledgeable of the procedures, and (3) understand the responsibilities of all parties before they sign on the dotted line.

So, not to favor any one aggregator, here is some information straight from the CCX Web site (see link at end of article) regarding managed forest carbon projects. As the dust settles, we will provide GH readers with procedural clarifications, examples of approved projects and any payouts to landowners as they become available.

What is a CCX Managed Forest Carbon Project?

This project type employs active forest management including silvicultural treatments, thinning and harvesting. Under the managed forest offsets program, eligible projects may earn offsets for the net annual carbon sequestered from growth in registered forest stocks.

What forest carbon pools are eligible for crediting under the managed forest program and how are forest carbon stocks quantified?

The protocol allows offset issuance for above ground biomass and below ground biomass portions of the registered forest carbon pool. In order for offsets to be issued, net growth in forest carbon stocks must be quantified using a CCX approved quantification technique. These techniques include use of approved biophysical growth and yield modeling techniques.

What is the role of the CCX Committee on Forestry?

The CCX Forestry Committee, comprised of forestry experts from the CCX Membership, is responsible for reviewing forest offset project proposals and recommending approval. The Committee is also responsible for recommending interpretations of rules relating to quantification of forest carbon stocks, as well as recommending additional methods to be employed to quantify and verify changes in forest carbon stocks. All managed forest project proposals must be submitted to the CCX Forestry Committee for approval. Project proposals should provide pertinent information regarding project design and inventory, sampling, forest management and quantification techniques.

How do project participants demonstrate long-term commitment to maintain enrolled land under forestry?

Project participants must sign a contract attesting that the land will be maintained as forest for at least 15 years from the date of enrollment in CCX. In addition, all participants are required to sign a letter of good faith stating that they will maintain enrolled land in forest beyond the 15 year contract period required by the program. A sample copy of this letter may be requested from CCX.

What evidence of sustainable forest management is required?

Project participants must provide evidence that all of the registered forest land is sustainably managed through certification from agencies or schemes endorsed by the Programme for the Endorsement of Forest Certification schemes (PEFC) Council or through other certification schemes that have been approved by the CCX. Approved certification schemes for the United States include Forest Stewardship Council (FSC), Sustainable Forestry Initiative (SFI) and American Tree Farm System Group Certification.

How do CCX rules address the loss of carbon due to catastrophic events such as hurricanes or forest?

All CCX eligible soil and forestry offset projects are required to maintain a carbon reserve pool to manage risks including losses from catastrophic events. Twenty percent of the CCX CFI contracts generated annually by the project will be placed in the reserve pool. A forest carbon reserve pool is established for each pool registered by an aggregator or individual projects from offset providers. At the end of the CCX market period, CCX CFI contracts remaining in the forest reserve pool will be released back to the participants. The maximum catastrophic loss recognized by CCX will be no greater than the amount of offsets in the reserve pool at the time of annual environmental compliance.

Can I acquire and enroll new forest land in the project or dispose of enrolled land from the project?

CCX forestry program rules are structured so as not to restrict participants from land acquisition or disposition. On an annual basis, the quantification of changes in forest carbon stocks will be adjusted to reflect acquisitions or dispositions. When eligible new land is acquired, the project owner may be eligible for issuance of CCX CFI contracts corresponding to sequestration in the new enrolled acres. When enrolled land is disposed, the total CCX CFI contracts issued from that parcel of land has to be surrendered back to CCX. Under certain circumstances when land disposed by one project participant continues to remain enrolled in the CCX program, surrender of CCX CFI contracts from previous years may be warranted.

What is an Offset Aggregator?

An Offset Aggregator is a CCX-registered entity that serves as an administrative and trading representative on behalf of multiple project owners. Individual projects which may not generate enough offsets to overcome administrative costs may find it advantageous to work with an Aggregator in bringing a project to CCX. Aggregators are responsible for interacting with CCX, explaining CCX rules and requirements to project owners and coordinating with CCX approved verifiers. In addition, Aggregators are responsible for trading activities and the maintenance of the Registry Account. Individual landowners are encouraged to contact Aggregators directly, as the contracts are signed directly between those parties. Aggregators, with links to their respective Web sites, are listed on the CCX Web site at: www.theccx.com/content. jsf?id=64

What are the verification requirements?

Managed forest projects require an annual verification through a CCX-approved forestry verification firm. The annual verification process aims at verifying the validity of the forest carbon stock baselines including baseline adjustments, validity of the database, accuracy of data collection, applicability, correct use of forest carbon quantification techniques employed and accuracy of carbon calculations. The costs for the verification are borne by the registered CCX Offset Provider or Aggregator. A complete list of approved veri?ers is available on the web at: http://www.chicagoclimateexchange.com/content. jsf?id=102

Tatanka Resources, LLC (a registered CCX aggregator) has finalized composition of their pool of aggregated small forestry project landowners. Winrock International (an approved CCX verifier) is currently finishing the stratification and sampling design and they will be sampling 10 percent of all acres in the pool, including taking samples to estimate soil carbon sequestration. It is expected that Winrock will be taking field samples in May and the sale of credits will occur shortly thereafter.