The “carbon market“, which essentially aims to send price signals to encourage carbon sequestration or avoided emissions, has been promoted as an important instrument for addressing with climate change. The U.S. Government Accountability Office reports that various carbon products are traded in the United States. These products traded include carbon allowances, which entitle the holder to emit a specific amount of a greenhouse gas, and carbon offsets, which are measurable reductions of greenhouse gas emissions from an activity or project in one location that are used to compensate for emissions occurring elsewhere. The development of national and regional carbon markets can play a key role in reducing global greenhouse gas emissions cost-effectively.
In the United States, law and policy changes at state levels have been major drivers of market expansion. For example, in the state of California, the Global Warming Solutions Act of 2006, AB 32, established the California Air Resources Board (ARB) and a Cap-and-Trade Program that took effect in early 2012. The enforceable compliance obligation began on January 1, 2013, for greenhouse gas (GHG) emissions. AB 32 was the first program in the country to take a comprehensive, long-term approach to addressing climate change, and does so in a way that aims to improve the environment and natural resources while maintaining a robust economy. Laws such as AB 32 have enormous potential to support land conservation initiatives.
Moreover, the number of emissions trading systems is increasing worldwide. Besides the EU emissions trading system (EU ETS), national or sub-national systems are already operating or under development in Canada, China, Japan, New Zealand, South Korea, Switzerland and the United States. These markets are being used to fund carbon offset or emissions reduction projects which often closely align to existing management goals of local land trusts.
In the United States, several land trusts are already engaging in the carbon market. For example, in November 2013 the Downeast Lakes Land Trust (DLLT) registered a forest-carbon offset project with the California Air Resources Board (ARB), one of the first two “improved forest management” (IFM) projects in the nation registered for California’s greenhouse gas (GHG) cap-and-trade program. DLLT specializes in working forests, and manages its lands to support biodiversity, recreation opportunities, and a sustainable timber economy. To qualify for offsets, the trust has agreed to follow the ARB’s Compliance Offset Protocol for U.S. Forests, which requires forest-management projects to maintain or increase forest carbon stocks above the expected levels under typical commercial forest management for 100 years – objectives that were compatible with the DLLT’s existing stewardship actions and stocking plans. This carbon project covers more than 19,000 acres of the trust’s 33,700 Farm Cove Community Forest in eastern Maine, and registered nearly 200,000 offsets; each offset is equivalent to one ton of carbon dioxide. Advocacy efforts that support the development of legal frameworks that enable cap and trade or carbon offsets can further expand these programs throughout the United States and connect to international efforts to decrease carbon emissions through market mechanisms.
Although relatively new, especially to the land trust community, the development of “climate bonding” or “green bonds” also presents opportunities to monetize, fund, and insure climate mitigation and adaptation projects. Other developing markets include “re-insurance”, “listed equity solutions”, and “green real-estate”. These “low-carbon” finance policies help send clear market signals and provide funding mechanisms to support the transition to a lower climate impact economy.
As the United Nation’s Environment Programme (UNEP) reports there is a growing community of financial institutions taking action and demonstrating leadership on climate change. Some institutions are allocating capital and steering financial flows towards more low carbon, climate resilient activities. Others are taking steps to change corporate behavior, influence policy outcomes and build the data, tools and transparency required to embed climate change into how the market functions. These carbon finance policies and practices offer tremendous funding potential for land trusts that are already engaged in implementing best management practices that yield forest carbon, blue carbon, and soil carbon benefits.