Companies could earn tens of millions selling carbon credits if plan approved


The Press Democrat

By Mark Schapiro and Sarah Terry-Coho

California Watch



Mendocino Redwood Company land shown in 2001; PD FILE, 2001


California timber firms, including a leading North Coast company, could emerge as big winners in the state's fight against global warming, earning tens of millions of dollars through the sale of carbon credits if a new set of rules is approved today by the state Air Resources Board.

The plan has stoked controversy among environmentalists who assert it gives the timber industry too good a deal, enabling them to clear cut at the expense of the overall vitality of the forests. Timber representatives, however, say it will help promote the storage of carbon dioxide, a greenhouse gas, in the trees on their land.

The state board has responsibility for implementing AB 32, California's landmark effort to limit greenhouse gas emissions. The board is scheduled to vote on a new cap-and-trade system aimed at bringing emissions to 1990 levels by the year 2020. It will allow companies to cancel out their emissions by buying carbon emission reductions somewhere else. A significant portion of those credits, or offsets, is expected to come from the carbon-storing capacity of forests.

One of the most controversial provisions would allow timber companies to obtain credits by replanting trees in clear-cut areas of the forest. The protocol would make California the first in the world to assign carbon credits to wood products created from the trees themselves.

For those credits, the state relies on a U.S. Energy Department registry that estimates the carbon in everything from wooden chairs and bed frames to two-by-fours made from fir, pine, cedar and hemlock trees harvested in California.

Timber companies would then be free to sell their pool of credits to utility companies, refineries and major industrial enterprises that need them to meet their emission limits.

Mike Jani, chief forester for Mendocino Redwood Co., said his firm is considering carbon credit pooling over most of the 228,000 acres of forestland it owns in Mendocino and Sonoma counties.

“Depending on the marketability of carbon credits, we could take action,” Jani said.

The protocol is essentially an “accounting rule” to determine whether a landowner is sequestering more carbon in a forest than it is removing by cutting trees, he said.

“They got it right,” he said of the plan, noting it could be amended as the science of carbon pooling improves.

Approval by the air board would be “an important signal to everybody who is looking at California for leadership on this issue,” Jani said.

If carbon pooling works out well, Jani said, Humboldt Redwood Co., sister company to Mendocino Redwood, may apply it to the firm's 209,300 acres in Humboldt County.

The two companies, the dominant redwood producers from Ukiah to Eureka, do not conduct clear-cutting, and Jani said their practices will not change regardless of the air board's decision.

The state has proposed a minimum price of $10 a ton and estimates 20 million tons will be needed over the first decade. The total offset market likely will reach $200 million by 2020, according to Point Carbon, a news service offered by Thompson Reuters.

David Bischel, president of the California Forestry Association, representing timber harvesters and processors, said the new rules, known as the Forest Protocol, “help to monetize an important environmental benefit by encouraging more standing timber in the forests and more wood products used by society.”

Early drafts of the protocol, dating back to 2007, did not permit clear cutting, said Jeff Shellito, an environmental consultant and former aide to state Sen. Byron Sher of Palo Alto, now retired.

In 2002, Sher authored legislation that established forest-preservation standards for California's then-voluntary carbon market.

“We went to great pains to ensure you couldn't get carbon credits from clear cutting," Shellito said.

But five years later, the timber industry began lobbying to alter the protocol in its favor. A nonprofit organization, the Climate Action Reserve, which was created to establish standards for the verification of greenhouse gas emissions and reductions, is the primary author of the new rules.

The biggest timber company and landowner in California, Sierra Pacific Industries, with about 1.9 million acres across the state, was the most aggressive individual timber company lobbying on the regulations. Over the course of 2007 and 2008, Redding-based Sierra Pacific paid $37,500 to California Strategies, a Sacramento lobbying firm, to present its case.

The company also nurtured a relationship with Gov. Arnold Schwarzenegger. Sierra Pacific has donated $29,600 to the governor's campaign committees, and its billionaire owner, Archie Aldis "Red" Emmerson, hosted a $250 a plate fundraising lunch for the governor's re-election campaign at his estate outside of Redding. Emmerson is listed by Forbes as one of the world's 500 wealthiest people.

Altogether, according to state campaign contribution records, the company has donated about $890,000 to political candidates and ballot measures in California in the past five years.

The California Forestry Association, a frequent donor to political causes and candidates, also reported spending $245,000 lobbying state agencies on a variety of issues in 2007 and 2008, including climate legislation and the Air Resources Board policy on greenhouse gas emissions.

Sierra Pacific officials declined comment, referring calls to the forestry association.

Earlier this month, 47 environmental and conservation groups, including the Sierra Club California and the Center for Biological Diversity, protested to the Air Resources Board.

“The protocol subsidizes the current business as usual: aggressive timber management,” said Brian Nowicki, a policy analyst with the Center for Biological Diversity, a group that has sued the state over Sierra Pacific's logging practices.

Nowicki questioned whether the rules encourage companies to do any more than they're doing already.

Mary Nichols, chairwoman of the Air Resources Board, said California already has the strictest timber standards in the nation and is considering adding provisions to explicitly discourage clear-cut practices from obtaining carbon credits.

Press Democrat Staff Writer Guy Kovner contributed to this report. California Watch is a project of the nonprofit, independent Center for Investigative Reporting.

© 2010 The Press Democrat