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Carbon Credit Confusion

Elizabeth Baldwin

Carbon credits, frankly, confuse me. I'm instinctively against them. I don't like the idea that companies who are doing something bad can continue to do something bad by buying "good" credits in another area. Planting some low-grade teak in Costa Rica doesn't seem to be a fair trade off for polluting another country's air. I also see it as another artificially created financial product that no one understands but will still trade enthusiastically-and we all know the risk in those. That said, when I was in South America last year, I saw what appeared to be a good use of the carbon credit concept.

I was touring an FSC forest and discussing the economics of FSC certification with the owners. As we all know, the consumer market rarely pays a significant premium for FSC material, but the program definitely costs participating companies more. Even if the forest management program was the same as in the forest concession next door (and they rarely are), the certified forest must bear the cost of proving their good management-usually having to hire extra staff and certainly excessively document their work, plus pay the costs of the audits, the FSC licensing fees, and so forth. In addition, a certified forest has a responsibility to evenly harvest its material based on the species inventory-taking LKS (Lesser Known Species) as well as the high-valued woods. While a Chain of Custody (CoC) certification can cost a company a few thousand dollars a year and be only a tiny fraction of overhead, a certified forest management program can add 5-30% to the cost of similarly managed, but non-certified forest, depending on the region and the size and species mix.

The company I visited was helping cover the additional costs of certification through the sale of carbon credits. They had a very complicated system of calculating the carbon left in the forest by measuring the volume of the harvested timber as well as the standing trees left in permanent reserve and the rotting vegetation (particularly logging residue like stripped branches) plus the amount of fuel expended by their equipment. They could then sell the credits for the carbon "left" in the remaining forest block after the logging finished.

In one way it seemed to be a game-most of the credits they sold were based on not cutting trees that they wouldn't have cut anyway under their actual forest management plan. They weren't doing anything differently just to sequester carbon. However, in the real world, FSC certification often requires this type of subsidy. The market won't pay the increased costs for certified material, so the companies need to develop alternative income streams for following the process. Carbon credits seem to be one of those alternative streams.

So while I'm still thinking that carbon credits are not a good thing for the world as a whole, they might have some place as a rather roundabout way for the world to support better forest management.

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