Forest carbon projects represent a fresh way for forest managers to extract value from their lands. The Pacific Carbon Trust (PCT) offers a central market for the sale of carbon offset credits in British Columbia. However, managers should do some preliminary planning before embarking on a forest carbon offset project. Accessing this market requires some work and it is not costless.
The tool provided is only intended to give users a frame of reference. This tool will calculate approximate income streams from the carbon value of your project. This tool will NOT include income streams from other values created by your project (such as timber value, development income etc.).
This tool is designed to consider approximates of the administrative costs of a carbon project, under a limited number of timing streams.
The default cost values we have included with the tool do NOT include any expenses associated with operational activities (such as planting, silvicultural activities etc.). Further, these cost estimates are rough. There is little public information available on these costs. If you have more accurate figures, you can use them in this tool.
One of the rules affecting carbon offset projects is the need for projects to be "additional" to what would be done under a "base-line" scenario. In other words, you cannot get offset credits for something you would do anyway. Or, you must demonstrate that your "carbon" values will push the project into profitability. This tool indicates whether you will have positive carbon income streams over the life of your project. These are the income streams that would be added to the income streams from the project itself, which you would calculate according to your own methods.
You are a forest manager for a private company. You have 1000 ha that is located such that bringing in trucks for liquefied waste application, as fertilizer, is possible. Your estimates indicate that applying this fertilizer will increase the average growth rate of your stand by 2 m3/ha/yr. You plan on harvesting this stand in 50 – 80 years.
Because you work for a private company, your decision to allocate resources to this project must be evaluated against the next best alternative use of those resources. Your company has targeted 8% as a desirable return on investment (ROI). This will be the rate at which you discount future income and expense streams.
You will be using these offsets to pay for the work done on this piece of property. So, you would like the income stream to start as soon as possible. Because there are no binding climate change policies in Canada, carbon offsets are only selling for the going rate, $5/tonne CO2e.
In order to get your income stream started, you must accept this price (rather than wait for a better one).
Since this is your first forest offset project, you will have to pay the full costs associate with project planning, validation, monitoring and verification.
Note that this analysis does not include any income from the sale of the wood fibre at the end of the project, nor does it include any costs associated with the application of the fertilizer, land rental or other forest management activities.
We can see that the actual income stream from the Carbon will pay for any expenses specifically associated with the project. So, adding carbon management to this project will add value. To prove that this will be additional, the proponent will now have to demonstrate that the project would not make money without this additional income stream.
You are a manager for a small environmental NGO. You have recently been offered a partnership opportunity to plant 200 ha of private land. The land is currently barren. Your estimates indicate that planting a high-yield hardwood plantation will yield 8 m3/ha/yr. Under the partnership agreement, the NGO receives the income from the carbon and the landowner keeps the trees. There is a covenant in place protecting the trees for 50 years.
Because you are an NGO, your activities are not directed at making profits. As a group that is more interested in the environmental impacts and impacts on future generations, you give more weight to values that accrue in the future. As a result, your NGO has targeted 4% as a reasonable discount rate. This will be the rate at which you discount future income and expense streams.
As an NGO, you will be using volunteer labour for the project. Your need for the income stream is limited, so you decide to wait the project out before selling the offsets.
By waiting, the chances of Canadian carbon policies tightening increase. It may be reasonable to expect prices of $15/tonne CO2e by the time you cash in your offsets.
Since this is your first forest offset project, you will have to pay the full costs associate with project planning, validation, monitoring and verification.
Note that this analysis does not include any income from the sale of the wood fibre at the end of the project, nor does it include any costs associated with silviculture, land rental or other forest management activities.
We can see that the actual income stream from the Carbon will pay for any expenses associated with the project. So, adding carbon management to this project will add value. To prove that this will be additional, the proponent will now have to demonstrate that the project would not make money without this additional income stream.
You are a property developer in the chic suburb of West Ymir. You have a condominium project that is ready to break ground. The land you originally set aside is 20 ha of immature forest land, but there is another option. Across the road is another 20 ha of cleared land (from when crazy old-man Thompson was preparing for Ymir’s first Walmart). Your estimates indicate that moving your development will preserve a forest that sequesters 4 m3/ha/yr. If moving this project will make you money, you are willing to write a covenant protecting the old forest for 100 years.
You are evaluating a commercial project. However, you are interested in comparing with government figures and you know that the government uses a 5% discount rate. This will be the rate at which you discount future income and expense streams.
You will be using these offsets to pay for the costs associated with changing property. So, you would like the income stream to start as soon as possible.
Because there are no binding climate change policies in Canada, carbon offsets are only selling for the going rate, $5/tonne CO2e. In order to get your income stream started, you must accept this price (rather than wait for a better one).
Since this is your first forest offset project, you will have to pay the full costs associate with project planning, validation, monitoring and verification.
Note that this analysis does not include any income from the development project, nor does it include any costs associated with building, land rental or any forest management activities.
We can see that the actual income stream from the Carbon will NOT pay for any expenses associated with the project. So, a carbon project here is a losing venture. Note that this makes NO statement whatsoever regarding the profitability of the project without the carbon management element.