Despite challenges, carbon markets see big potential in small landowners

A small statue of St. Francis sits on a stump holding court in Julie and John Christensen’s forest in Corbett.

The patron saint of animals and ecology is at home among the couple’s 70-acres of Douglas firs, cedars and hemlocks near the Columbia River. The Christensens moved to Corbett, a small, unincorporated town 30 miles outside of Portland, in 1984, intending to make it a communal home for themselves and friends they’d met through Julie’s work as a Catholic campus minister at Western Washington University. Much of the forest had been clear-cut for logging and for animal grazing before they moved in, so they set out planting over 5,000 trees in their first few years on the land, and many more over the next 40, making it a sanctuary to the bears, cougars and deer navigating a broader landscape taxed by growing logging and development.

Hoping to preserve their reforestation efforts, they signed a contract in 2023 with the company Forest Carbon Works that binds the future of their forest to a voluntary carbon crediting market. The contract ensures their forest, regardless of ownership, is managed for 125 years primarily for conservation so it can capture and store as much carbon dioxide as possible, generating credits that can be sold to polluting companies hoping to offset their own pollution.

A formerly logged forest being restored and replanted would be a shiny acquisition to most companies operating in carbon markets, where carbon credits can only be generated and sold if project owners can prove the forest is being managed to store more carbon dioxide through less intensive logging or no logging. But the Christensen’s forest is an unusual player in the markets because of its size. It is among the smallest forests in the nation that is generating carbon credits today.

The Christensens, however, are not a rare kind as aging owners of a forest who are concerned about its legacy. The average age of a small forest owner in the U.S. and in Oregon is about 65, according to the U.S. Department of Agriculture, and carbon crediting companies are beginning to appeal to these owners with an offer they’ve long been left out of due to the high costs and risks – lock up your forest in carbon markets to generate some cash and to keep it from being sold to developers and industrial timber companies.

About 270 million acres of privately owned forests in the U.S. are small and family-owned, according to the U.S. Forest Service. That’s an area about the size of California and Texas combined. But it’s declined in recent years. Between 2007 and 2017, the total share of family-owned forests in the U.S. declined by 11 million acres, while the share of acres owned by industrial timber companies rose by more than 11 million acres.

Over the past 40 years, more than 750,000 acres of Oregon’s family-owned, non-industrial forests have transferred to forest industry-ownership through buyouts and mergers, according to the nonprofit Coast Range Association. As of 2020, at least 40% of private forests in Oregon are owned by investment companies, according to an analysis from ProPublica, Oregon Public Broadcasting and The Oregonian/OregonLive.

If even 20% of existing family-owned, private forest acreage in the U.S. – about 50 million acres – was enrolled in carbon markets that necessitate better management and lighter logging, family forests could trap up to 1 billion additional tons of planet-warming carbon dioxide in the next 30 years, according to an analysis from the nonprofits American Forests Forever and The Nature Conservancy. That’s about equal to taking all cars off of U.S. roads for one year.

Oregon could be a major player in this equation. About 4.3 million acres of Oregon forests – nearly 15% of the state’s total forested acres – are owned by 62,000 families who oversee non-industrial forest parcels of less than 5,000 acres each. These forests, collectively, are about the size of Connecticut and Delaware combined.

For now, Minneapolis-based Forest Carbon Works is the only company currently operating in the state that is willing to work with forest owners as small as the Christensens, and it is today managing the greatest number of forest carbon projects in Oregon. For years, it’s been prohibitively expensive to get small forests into carbon crediting markets, and the risks have far exceeded the rewards. But more companies and nonprofits are experimenting with a new model that could make the scheme more lucrative for small forest owners and perhaps for the planet.

The Challenges

U.S. carbon markets have, for most of their short history, been accessible only to large forest landowners with 5,000 or more acres. The upfront and long-term monitoring and maintenance costs on projects are high, and can quickly get into the hundreds of thousands of dollars depending on the size of the forest. Companies that help manage projects and broker credits depend on big acreage generating large quantities of credits, and collecting a portion of those carbon credit sales to make up for the costs.

A small forest also comes with greater risks. A fire that wipes out 20,000 acres of a 250,000-acre forest carbon project is not a total loss. If a fire burned down the Christensen’s 70 acre-forest, it’s likely the project would have to be canceled and the credits “reversed” or rendered moot.

So far, small forests have also not generated piles of money for the small forest landowners. It’s not a big deal for the Christensen’s who don’t rely on timber revenue for income, but for small forest owners who do, carbon companies have to make the case that the sale of credits could one day counterbalance some of the lost revenue from reducing or ending logging. Until carbon credits are worth significantly more than the $6.50 that each one fetches on the voluntary market today, or the $30 to $40 the regulatory markets command, the companies have to make an appeal to landowner values.

“We basically don’t make any money from this. This is out of love,” said Julie Christensen walking with John through the forest on a rare, cool July afternoon. The couple gets less than $2,000 per year on their forest project, and said they invest most of that in planting new trees. Meanwhile, they get regular notes in the mail from timber harvesters and companies offering to buy the property or to help log it for shared profit.

David Bugni, another small forest owner near Estacada with 100 acres in the carbon market, is collecting similar returns as the Christensens on his credits. Bugni, a 2022 Oregon Tree Farmer of the Year, has been doing restoration work on the forest since the 1990s, and has probably spent more money on it than he’s bound to ever receive from the sale of his carbon credits, unless the value per ton of carbon rises significantly. He’s been able to leverage his forest restoration work over the years to bring in more than $1 million in state and federal grants to build fish passages and native plant habitat in his forest, but he’s spent tens of thousands of dollars of his own money either matching grant investments in projects or paying for them outright.

Choosing a legacy

Both the Christensens and Bugni entered the carbon market to protect their legacy. They did it as an alternative to an old-fashioned conservation easement, which is a legally binding agreement between landowners and a government agency or conservation organization, ensuring little to no development on a swath of land in perpetuity to protect it. In exchange for agreeing not to develop the land, landowners can get tax incentives and, in some cases, a payment from an agency or a land trust.

But the Christensens quickly learned that to do an easement, they’d need to pay someone to do an appraisal of their forest, which could cost up to $30,000. Bugni found he’d need to hire a lawyer to help draft all of the paperwork, which could cost up to $10,000.

In the carbon market, they didn’t have any upfront costs – Forest Carbon Works, which will work with forests as small as 40 acres – took care of it. The average forestland owner with a project under the company’s management is about 450 acres, according to Sandy Letzing, its senior Northwest forester.

Letzing would not share the company’s cut in carbon credit revenue from small landowners, which varies by project, but said it’s enough to make up the costs of hiring consulting foresters and third party auditors who verify the integrity of the small carbon projects. They also have cost-saving methods for inventorying forest carbon – including using a phone app – and work almost exclusively with voluntary markets run by nonprofits and private companies rather than regulatory markets run by California or Washington. The company also got a $200 million infusion of funding in 2022 when they were acquired by a division of Kimmeridge, an energy investment company.

Letzing believes the market for carbon credits from small forests in Oregon and across the U.S. is just getting started. Companies such as Microsoft and Facebook, or Meta, are buying carbon credits from Oregon-based forest projects, she said, and earlier this year, created a coalition with Salesforce and Google to a invest in “nature based” carbon credits equal to offsetting 20 million tons of carbon dioxide emissions by 2030.

“It’s growing exponentially. I’d say that the demand for credits far exceeds the supply,” she said.

A patchwork approach

Hoping to compete with Forest Carbon Works and cash in on the growth in forest carbon credit projects in Oregon are two of the largest nonprofit conservation groups in the U.S. and the largest carbon crediting company in the country. The Nature Conservancy and the American Forest Foundation have since 2020 been bringing together forestland owners in the East and Midwest, and aggregating their acreage together as one big project, allowing them to generate and sell carbon credits collectively.

Their Family Forest Carbon Program has connected 100,000 acres of forests across 19 states and enrolled them in voluntary carbon markets resulting in nearly $24 million in payments to landowners, according to data on the program site. The groups are hoping to expand to the West in coming years, according to Emily Heber, a spokesperson for The Nature Conservancy in the Northwest, but data regarding forest carbon storage across the west that’s needed to inform baselines for projects is not detailed enough to meet verification standards used by the group currently, she said in an email.

Finite Carbon, the nation’s biggest carbon planning and brokerage company, is planning to roll out a patchwork program in the West in the next couple years, according to Caitlin Guthrie, Finite’s director of forest carbon origination. The company currently does not work on projects less than 2,000 acres in the West, but does in other parts of the country. It will plan to integrate forests as small as 40-acres into aggregated forest plans in Oregon and other western states by 2026, Guthrie said.

The company, which was founded in 2009 and is today majority owned by oil company BP and headquartered in Philadelphia, opened up its third and largest office in Portland in 2022.

The Christensens and Bugni described their decision to enter their forests into carbon markets as an attempt to protect their legacy of conservation, and as a response to the growing number of neighbors and companies around them cutting down forests. It was also a way to confront concerns about climate change, but it in larger part, they see the carbon market as the best way for them to make sure the forests they spent their lives on continue to stay forests.

Across the road from Bugni’s place, a Christmas tree farm with neat rows of small Noble firs that stand stick-straight like stubble across the bare ground serve as a frequent reminder to him of the alternative to protecting his forest. The Christmas tree farm was, just a generation ago, an old forest. Now, trees get cut and regrown and cut again about every seven or so years.

“Hopefully I’m around for another 20, or 25 years – but forests live on for centuries. I want to make sure that happens.”

John Christensen made a similar calculation.

“If we hadn’t been here and done this, this probably would have been logged off. But we want this to become an ancient forest, with all the benefits that it provides to wildlife, to watersheds, up to carbon sequestration,” he said, passing St. Francis on the way back to his house.

Reporting for this project was supported by the MIT Environmental Solutions Journalism Fellowship.