Carbon revenue opportunities are growing for forest landowners. What is the current market, and how is it evolving?

1. Carbon Markets
Emerging Opportunities for Forest Landowners
Massachusetts Forest Alliance
October 2021
Eric Kingsley
Innovative Natural Resource Solutions LLC
kingsley@inrsllc.com
Phone 207-233-9910

2. Innovative Natural Resource Solutions LLC
• Founded in 1994
• Offices in New Hampshire and Maine
• Focus at the intersection of forest industry, energy and economic
development
• Services include:
- consulting in renewable energy
- advocacy
- forest management and protection
- forest certification and sustainability
- forest carbon projects
• Clients from the private, non-profit and government sectors
• Conducted work in all regions of North America
• www.inrsllc.com

3. Climate Change is the Greatest
Challenge to Face Humanity

4. Climate Change is the Greatest
Challenge to Face Humanity
The Forest Products Industry Is
Part of the Solution

5. Forest Are Carbon Capture

6. 0
10,000,000
20,000,000
30,000,000
40,000,000
50,000,000
60,000,000
70,000,000
80,000,000
90,000,000
100,000,000
2003-2007 2008-2012 2013-2019
Above and Below Ground Carbon in Live Trees
Private Timberland in Massachusetts

7. 80,000,000
81,000,000
82,000,000
83,000,000
84,000,000
85,000,000
86,000,000
87,000,000
88,000,000
89,000,000
90,000,000
2003-2007 2008-2012 2013-2019
Above and Below Ground Carbon in Live Trees
Private Timberland in Massachusetts

8. What Are Forests Carbon Offsets?
• Trees sequester carbon – about 50% of dry weight is carbon
• Companies (and others) pay forest landowners to capture that
carbon, then make claims regarding offsetting emissions
Money $$$
Offsets

10. Forest Carbon Markets
Compliance Market
• Companies purchase offsets to
help meet their legally
mandated emissions targets
• California, EU
• More consistent pricing
• Built in demand through 2030
• Unless regulatory changes occur
• 100 years
Voluntary Market
• Companies (or individuals)
voluntarily choose to purchase
offsets to reduce net emissions
• Greater variation in price
• Premium value attributed to
“charismatic” projects
• Uncertain demand
• 40 Years

11. Compliance Market Mechanics
• The landowner receives a large
credit issuance after the
project’s first year equal to the
distance between the property’s
stocking and the average
stocking within that same forest
type / ecoregion
• After Y1, the landowner receives
credits equal to the growth net
of harvest.
• If a landowner harvests 100% of
growth, there are no new credits
100

12. Voluntary Market Mechanics
• Under voluntary market protocols, the
landowner receives credits equal to
the difference between their stocking,
and the stocking that would exist
under short-term profit maximization
• “Short-term profit maximization” is
generally liquidation of merchantable
volume, subject to state law
• Bulk of credits are issued in the first
several years
• After that, the landowner receives
credits equal to the growth net of
harvest.
• If a landowner harvests 100% of growth,
there are no new credits

13. What Makes A “Good” Carbon Project?
• Specific to Voluntary and Compliance Markets
• Need ~5k acres (region specific) to make it work financially
• Plan (and practice) to harvest less than growth for the long-term
• Sustainable forest management (incl. 3rd party certification – FSC/SFI/ATFS)
• No expectation of a sale of land
• Have seen carbon used as a form of estate planning
• You can sell land with a carbon encumbrance, but will certainly impact the
sale price
• Suppressed timber markets / mill closures
• Compatible with easements

14. There are Other Markets (and More Coming…)
• Family Forest Carbon Program (AFF and TNC)
• NCX (formerly SilviaTerra)
• Many states pursuing their own markets (or market
bundling)
• Federal efforts – with a focus on smaller forest and
farm landowners
• This will be a rapidly and wildly evolving space

15. Securing Northeast Forest Carbon Program
• New England and New York
• Provide state outreach foresters
and private sector foresters and
landowners with the latest
information about opportunities
for forest carbon markets and
carbon friendly forest practices
• Focused on family forest owners
• Newsletter coming soon – email
levesque@inrsllc.com

16. It’s Not Just Forests….
• European Markets Rewarding Mass Timber and Biochar
• U.S. projects potentially eligible
• I am involved in a project where the largest revenue source is
carbon credits, not the finished product
• Possibility that lumber and panel products, perhaps even long-
lived paper, receive similar treatment
• Might be a carrot (incentives) or a stick (tax on competing
products), but expect carbon to be a factor in many purchasing
decisions
• If / when this occurs, it will impact our transportation costs (as
well as everyone else’s)

17. Implications for the Forest Industry…
• New revenue opportunities for landowners
• May constrain supply for some products
• Loggers impacted by change in harvesting
• If we are deferring harvests and growing more big sawlogs, what does that
mean for wood flow? For pulpwood and other small diameter?
• What does this mean for investment in manufacturing?
• If carbon offset prices rise, how does the equation change?
• #forestproud recently shared an article predicting a 10x increase in the price
of carbon

18. Evaluating Opportunities
• INRS helps landowners consider whether a carbon project
is right for their situation
• Also help industries evaluate what impact might be on them –
both opportunities and challenges
• We have a non-exclusive relationship with carbon project
developer Blue Source, but have worked with a number of
programs and developers
• This isn’t a good fit for many landowners right now, but
markets are constantly changing and evolving (and will for
a while)

20. Eric Kingsley
Innovative Natural Resource Solutions LLC
Phone 207-233-9910
Email kingsley@inrsllc.com