Green Horizons

In this installment of ‘The Carbon Corner,’ I will share an electronic conversation I had recently with Jon Pomp of FORECON EcoMarket Solutions (EMS), LLC. EMS is a subsidiary of FORECON, Inc., headquartered in Falconer, N.Y. You might recall back in August of this year, a press release from EMS said they successfully marketed the managed forest carbon credits for one of its long-time TIMO (Timber Investment Management Organization) clients, Forest Investment Associates.

You might also recall in the last CC, we said the Delta Institute’s managed forest pool was the first pool ‘sold’ on the CCX. So, being a little confused (as some GH readers will readily agree), I contacted Jon Pomp, EMS Ecosystem Services Analyst, and asked him to clarify what ‘the successful marketing’ of their pool meant. And while I had him, I also asked some other questions regarding EMS’s managed forest offset projects that he graciously answered.

GH: Did the TIMO offset ever sell or was it held back because the market crashed before reaching your client’s trigger point?

EMS: For large stand-alone projects like the TIMO managed forest project you have read about, we provide personalized services like market timing, strike prices, banking strategies, etc. You hit the nail on the head with regards to the market: we have not sold any of the credits from the project because of the bearish state of the CCX market. Basically, the credits are sitting in our account waiting to be sold when the market rebounds. We expect to sell a majority of the accrued credits the early part of 2009.

GH: Can a Missouri landowner sign-up for one of your managed forest pools? If so, how does he/she go about it?

EMS: They most certainly can and I encourage them to do so. Potential income streams from the sale of sequestered carbon credits can be very beneficial to Non-Industrial Private Forestland (NIPF) owners, especially considering the current state of the timber market and increased land taxation throughout the U.S. Any landowner owning 250 forested acres or more has the opportunity to enroll in our Pooled Private Landowner Forest Carbon Project. Landowners having forested lands that are already inventoried and certified as sustainable under SFI, FSC, or ATFS represent ideal candidates because of significant reductions in associated participation costs. The first step for enrollment into our pooled project is to fill out our enrollment questionnaire (available via http://www.foreconinc.com/ecomarket/docs/PrivateLandownerEnrollmentPackage.pdf.) We will then review the questionnaire and identify any needs (additional inventory, harvest data, mill/scale tickets, etc.). Pending approval to enroll, the landowner would then be provided with two contracts: one agreeing to maintain positive sequestration (growth) through 2010 and one committing to maintain sustainability certification for 15 years past enrollment date.

GH: How is the initial baseline inventory conducted? Who does it? When? How much?

EMS: Only one inventory (up-front) is required when using the “model based accounting approach” (growth and yield models for sequestration quantification). If the lands already have an inventory that meets the statistical requirements (+/- 10% @ 90% confidence interval on total volume) and records pertaining to losses from harvesting and natural disasters have been kept since the inventory, a new inventory is not required. Landowners can capitalize on sequestration back to 2003 in this case. We highly recommend that the inventory be completed by a Society of American Foresters-certified forester or a current member of the Association of Consulting Foresters. With respect to an inventory cost estimate: it is going to vary depending on forester/consultant conducting the inventory, number of plots required, travel time, etc. Although we offer high quality inventory services, Missouri is really out of reach for our field staff, so a consultant in your region would be recommended. Off the top of my head: inventory costs could range anywhere from $5 to $25 per acre.

GH: Are annual forest inventories needed? How is the annual inventory conducted?

EMS: Again, only an up-front inventory is required when using growth and yield models for quantification. A landowner could, however, choose to do annual inventories in lieu of using growth and yield models, but it really doesn’t make sense financially. That is, an inventory every year is going to be much more costly than one single inventory up-front. The inventory can be either a 100% tally, or statistical using fixed area or point sampling laid out on a random sample grid covering all forested lands the landowner owns. All trees 2” diameter class and greater should be measured and recorded.

GH: Have you selected a verifier for your managed forest pool?

EMS: We have selected Environmental Services, Inc (ESI) as the verifier for the pooled project. ESI is a full-service environmental consulting firm based out of Jacksonville, Fla. ESI has verified projects for us in the past and we feel that they provide high quality, cost effective, ethically sound third party verification services.

GH: When does the pool sell? How? Is the sale based upon some trigger price?

EMS: After successful verification, the pool’s credits are registered on the exchange. The first verification is scheduled to take place in March 2009; occurring annually thereafter. The credits also will be sold annually, with net proceeds distributed to the landowner immediately thereafter. Although we will time the market during a given year to maximize revenue, banking strategies and strike prices cannot really be established by an individual because there will be multiple landowners with differing views, opinions and objectives.

GH: In addition to the 20-percent reserve pool and CCX trading fee, what other costs are deducted from a landowner’s payment? (aggregator fee, verifier fee, other?)

EMS: First, the reserve pool should not be viewed as a cost. It is an insurance to cover catastrophic losses. If there are no losses at the end of the commitment period (2010), the reserve pool can be released and marketed. Keep in mind that net sequestration must also be discounted by 2*InventorySamplingError @ 90% CI to account for sampling uncertainties.

In addition to the CCX registration and trading fees ($.20/MtCO2e), associated costs include:

• Inventory (if needed) (up-front)
• Sustainable certification (if needed) (up-front)
• Aggregation fees (10% of gross revenue from sale ofcredits)

With regards to the pooled project, FORECON EMS is absorbing the project development, reporting and verification fees on behalf of the landowner.