How to make money from trees without cutting them down
Paddy Manning. April 23, 2011
REDD Forests, a little company 20 per cent owned by Kathmandu founder Jan Cameron, is proving that threatened native forest in Tasmania can have more value standing than if it was logged, by generating carbon credits.
Next week, the first 55,549 verified carbon units approved in this country – each representing a tonne of greenhouse gas emissions saved – will pop up on a register maintained by the Washington-based Verified Carbon Standard.
The units would be worth about $700,000 at current market prices of about $15 each, because VCS withholds 15 per cent of the units to cover risks including fire, pest and the chance that some owners will log the forest at the end of the 25-year project.
The units are owned by Peter Downie, a sixth-generation cattle and sheep farmer from the Central Highlands, who for the past 40 years has also logged his private native forest for sawlogs and woodchip – much of it sold to forestry giant Gunns.
Downie paid $130,000 to REDD Forests to generate the VCUs by analysing and monitoring the carbon to be stored on 7666 hectares of his own land, which otherwise would have been selectively logged or converted to pasture.
It’s not the highest conservation value forest on his property – that’s already protected by a voluntary covenant, part-funded by the federal government. But the forest stores carbon nonetheless and, purely by fluke, the value of a tonne of carbon is about the same as the price of a tonne of woodchips.
“It’s pretty much line ball,” Downie told GBiz, but that’s for now. He reckons the value of a tonne of carbon is going to rise significantly, unlike a tonne of woodchips.
For the first few years Downie will sit tight as he collects his VCUs – they will roll in each year, after a validator checks that his forest is standing.
At the end of 25 years, he could choose to log his forest completely – even after pocketing the VCUs generated over that period – and get a premium for the mature eucalypt timber (he’s got Forest Stewardship Council certification for that). But for now his plan is only to harvest the forest growth that occurs after the project finishes.
You would expect Downie to be enthusiastic about REDD Forests – he was impressed enough with the business model to buy into the company and is now on the board.
But, with the federal government’s Carbon Farming Initiative starting in July and VCUs likely to be saleable under the National Carbon Offset Standard, it is easy to see the potential contribution such carbon credits could make to tackling climate change.
REDD Forests managing director Stephen Dickey believes the model could be rolled out nationally – even to include public land. VCUs generated here should attract a market premium, he says, because they are “risk-free … this is Australia doing it, not the Congo”.
GetUp! campaigns director Paul Oosting, who until recently was closely involved in Tasmania’s forest negotiations and helped steer the Gunns campaign for the Wilderness Society, says carbon credits could help save much of the private native forest around Australia.
The threshold for proving that the forest is threatened, he says, is not onerous. Inclusion of land in a regional forest agreement, for example, would be enough: “You just need to demonstrate the possibility of logging.” Oosting says conservation of private native forest is often neglected. “Typically it’s much more difficult because obviously the government isn’t going to wade in and stop farmers and landholders doing what they want on their land.
“Money has been available to put covenants on property but that doesn’t really appeal to farmers and landholders whereas this approach provides another income stream.”
Over the past two years Stephen Dickey has brokered six similar deals in Tasmania covering 22,000 hectares. This week he was close to inking a seventh, taking the total to 25,000 hectares.
His aim is to get 150,000 hectares of native forest under management by the end of 2012. That will save an estimated 1 million tonnes of greenhouse gas a year, roughly equivalent to the annual emissions of more than 75,000 homes. After almost four years slogging away, it’s only in the past month that Dickey and his team have been able to start selling VCUs, and earning commission.
“It’s an arbitrage between the price of pulp and the price of carbon,” he says. “All we ever do is take the merchantable volume of timber they would take off their land, based on historical logging patterns, and we generate the equivalent carbon credits for that.
“You can manage it, you can thin it. The only thing you can’t do is log it. We can say to the farmer, ‘hold on to your asset, let it grow into a really valuable hardwood timber’.”
Downie sees carbon credits ushering in a new phase of the forests debate – which has shifted from rampant exploitation to locking forest up.
Next up, he says, we’ll see a shift from green to ”orange … you harvest from natural resources but ensure your productive base and ecological base is maintained or improved.
“The green agenda has been presented as the be-all and end-all but it’s just a stepping stone.
“Forests can create enormous wealth. The argument should be not whether you harvest native forest or not but how you do it. A well-harvested native forest is superior to a plantation.”