House Bill 49 and its companion bill in the Senate, Senate Bill 48, propose to create a carbon offset credit program within the State of Alaska Department of Natural Resources to raise revenue by selling carbon credits on the voluntary market.
A carbon offset credit is a financial instrument issued in exchange for one ton of carbon dioxide (or its equivalent in greenhouse gasses), that is permanently pulled out of the atmosphere, that would not have been stored without the financial incentive of the credit. Buyers purchase credits to “offset” otherwise unavoidable emissions.
At first, there was a reason for cautious optimism about the potential for carbon offset credits to move state policy in the right direction, because forests have always been worth more standing in terms of fisheries, wildlife, and culture, and now with the additional financial benefits from carbon storage as well.
Unfortunately, the ANEW report that Gov. Mike Dunleavy commissioned on this topic, indicates serious flaws in the Governor’s proposed program. The report claims that Alaska could sell carbon credits from its public lands, but paradoxically claims Alaska could also increase the harvest of timber from those same lands at the same time.
This raises several fundamental questions about the whole program because harvesting timber emits CO2 into the atmosphere and oceans through soil erosion and loss of standing biomass, which is counter to the entire concept of selling carbon offset credits for stored carbon. To understand these questions, we have to understand several concepts in carbon markets; additionality, leakage, and permanence.
Additionality is the requirement that the greenhouse gas (GHG) reducing activity of a carbon credit project would NOT have occurred without the incentive provided by the credits. People buy carbon credits so that more carbon is stored than would have happened otherwise, and substantial verification goes into establishing baselines. There is no value in a carbon credit that fraudulently claims a ton of carbon was stored that would have been stored anyway because it does not meet the additionality requirement.
Leakage refers to the effect of a carbon-storing activity in one place simply resulting in a carbon-emitting activity occurring in another place. A perfect example that is proposed in the ANEW report is that state lands in Haines be put into the carbon credit market. Putting state lands that would otherwise have been cut into the carbon market meets the additionality standard. But if the state simply cuts more trees elsewhere on public lands to meet pre-existing harvest goals, that is a direct example of leakage. Leakage reduces or eliminates the value of carbon credits.
Permanence is the requirement that the GHG-reducing activity of a carbon credit project is durable and long-lasting. CO2 and other greenhouse gasses have long-lasting impacts, therefore people buying carbon credits are buying them so that the GHGs are stored for a very long time. Ninety-nine years is a common permanence benchmark, the 55 years proposed in the ANEW report is completely inadequate.
Carbon offset credit programs that do not meet these three criteria face several risks.
- The first risk is that buyers will simply not be interested in credits that do not represent real, additional, and permanent offsets across Alaska’s public lands.
- Even if there are buyers, a program that is weaker in the areas of additionality, leakage, and permanence will not bring the financial benefits that a stronger program would, not to mention the fish, wildlife, scenic, and climate benefits to the state that carbon offset programs provide.
- There is real value in storing carbon in natural landscapes rather than allowing it to be emitted into the atmosphere. The EPA conservatively estimates that each ton of carbon emitted into the atmosphere will cost society $51 in climate change-related damages and lost opportunities in the next century. In Alaska, these costs manifest in ways such as declining fisheries, extreme weather events, or coastal erosion and village relocation. Each ton of carbon stored avoids these costs, so stronger carbon offset programs represent real long-term savings to the state of Alaska.
- Finally, there is the risk of litigation and liability. The voluntary carbon credit market is often described as a “wild west,” with no governing regulations. A weak program is vulnerable to several kinds of litigation and liability.
- Buyers of weak carbon credits have been the subject of consumer lawsuits alleging “greenwashing”.
- Administrators of carbon credit programs may be liable to buyers if the program does not meet their requirements. This is not limited to just natural disasters, examples of scenarios that could create liability include timber overharvest, slower carbon storage rates than expected, or excessive leakage.
- Land managers may be liable if they do not adequately consider the benefits of strong carbon credit programs in Forest Plans in the best interest findings. For example, in comparison to a weak carbon program, a certain harvest level or competing use may appear to be in the best interest, whereas if a stronger carbon program were considered it may clearly be in the best interest.
To avoid these risks, we encourage the legislature to consider the following issues.
- Additionality and leakage must be addressed by requiring that carbon offset credit sales do not simply transfer carbon-emitting activities to other state lands. If the proposed program is to become law, Sec. 38.95.410.a must be amended to reflect this such as by inserting language to the effect of “projects shall not create conditions for carbon leakage elsewhere in state lands” with leakage defined in Sec. 38.95.499. as “Increases in emissions levels on lands outside the project area due to shifts in the supply of and demand for emission causing products.”
- Permanence must be addressed by amending Sec. 38.95.410.e to read “A carbon offset project term must not be less than 55 years or exceed 99 years.” This addresses buyers’ and the public’s interest in long-lasting carbon storage benefits.
- The Commissioner must be directed to consider the strongest possible carbon offset program during the preparation of a forest land management plan.
- Carbon project leases must be subject to public notice and comment requirements similar to those required for other land management activities, such as timber sales.