In spite of flaws, carbon markets put a price on climate pollution

The extraordinary costs of climate change hit home for Cody Desautel during the 2015 wildfire season.

Now the executive director of the Confederated Tribes of the Colville Indian Reservation, Desautel was a forester and a firefighter who had just completed taking a full inventory of the 922,000 acres of forest on the 1.4 million acre reservation in north-central Washington. About half of those forests – 450,000 acres – were nearly ready to be enrolled in California’s emissions trading program, where tribal-owned forests have become the workhorses of the state-regulated carbon offset market.

At least eight Indigenous nations in the U.S. today generate carbon credits worth hundreds of millions of dollars for the California offset market from their forests, including the Confederated Tribes of the Warm Springs Reservation in central Oregon. To date, about half of the more than 180 million offset credits generated from forest projects enrolled in California’s market are from tribal forests.

For Desautel and other tribal leaders, carbon markets are a way for corporations responsible for environmental degradation to reward and protect Indigenous forest management practices that have historically been less extractive. Desautel saw it as a way for his tribe, in one of the poorest corners of Washington, to generate revenue on the back of a promise that few industrial forest owners today are willing to make: ensure that above all other interests, especially logging, forests keep providing the air-cleaning, water-filtering, habitat-supporting work they’ve done for free, forever.

But now those forests were burning.

Ongoing drought exacerbated by long stretches of abnormally hot days created the conditions for the 2015 fires, many of which were really windstorms with fire. They created so much convective and radiant heat that Desautel said it was like the trees had been put in an air fryer. The fires that year ultimately burned over 255,000 mostly forested acres on the Colville Reservation.

“I did 20 years of fighting fire before that, and I had never seen fire behavior like that,” he said.

Pricing pollution

Dealing with megafires is among the many ways tribes and the general public bear the brunt of the high costs of climate change and continued greenhouse gas pollution. Tribal, local, state and federal governments pay overwhelmingly with public dollars to respond to the fires, hurricanes, extreme heat, ice storms and other natural disasters that have gotten worse in recent years as the climate has dangerously warmed from more than a century of humans burning fossil fuels.

Study after study shows that putting a price tag on each metric ton of carbon dioxide a company emits, such as a fine or tax, works at reducing emissions. Modeling shows it is the single most effective policy decision any government could make to accelerate decarbonization and curb the worst effects of climate change by the end of the century. In fact, the U.S. has enacted policies before that forced polluters to pay before – and they were more successful than anticipated.

In the early 1990s, Congress passed an amendment to the Clean Air Act that put a price on emissions of sulfur dioxide from coal-burning power plants, which was causing acid rain harming marine life in lakes, rivers and streams all over the country and in Canada. By putting a cap and a price on the pollution, the U.S. reduced sulfur dioxide emissions 43% between 1990 and 2007, despite a 26% increase in the number of coal-fired power plants that were built during that time. The threat of paying to pollute successfully spurred energy companies to pursue new technologies and methods for keeping sulfur dioxide out of the air.

But, Congress has failed to pass repeated proposals to enact a cap or fee on greenhouse gas emissions, and a growing voluntary market in the U.S. has grown in place of a regulatory one, where companies can choose to buy credits.

Both regulatory and voluntary markets have drawn criticism for being easy to manipulate and for offering a way for companies to delay transitioning off of fossil fuels, or essentially paying to pollute. Investigative reports from ProPublica, the New Yorker and The Guardian, among others, have revealed bad actors in these schemes, responsible for generating carbon credits from forests that don’t add any real climate value. But carbon markets are, according to their architects, the only way to effectively begin putting a price that’s long overdue on greenhouse gas pollution in the U.S. And they can be used to change how forests are managed to improve biodiversity and help combat climate change.

Among those architects is Alexia Kelly, who grew up on the Oregon coast, and who has spent her career attempting to get governments to put a price on carbon dioxide emissions. She’s worked in state and federal governments helping to draft and enact carbon policies, and spent six years as lead negotiator for the U.S. on emissions trading at the United Nations, helping to create key climate accords that govern the international emissions trading programs for much of Europe. Most recently, she helped create The Integrity Council for the Voluntary Carbon Market, a watchdog group hoping to improve standards and accountability among carbon project developers and credit buyers.

“The hard truth is that our economy is 100% built on unfettered access to basically free-polluting, fossil fuels. Everything about our economy is built on the back of unpriced carbon,” she said.

If existing carbon markets can earn the trust of buyers and the public, it could make the idea of enforcing a carbon tax or fee more palatable to regulators, she said, or it could drive consumers to demand companies participate in the voluntary market and start addressing their emissions.

“That’s the fundamental shift that needs to happen,” she said. “We need to go from no pricing to some pricing.”

Carbon concerns

For several years leading up to the 2015 fires, Desautel had worked to earn support for putting some of Colville Tribe’s forests into a carbon market. He organized dozens of meetings with the tribe’s council and public meetings to discuss the idea with the tribe’s 9,200 members. Several developers had approached him and tribal leaders over the years, hoping they could help broker a deal to enter the tribe’s hundreds of thousands of acres of forest into the California carbon market.

Council and tribal members expressed many of the concerns about entering markets that had been borne out in investigative reports of forest projects in carbon markets. Namely, they were concerned that it would not help curb climate change, but instead allow oil companies to buy their way out of changing.

It didn’t help that the tribe’s plan was to sell the credits – more than 12 million – directly to oil giant BP. The company planned to spread the credits out over several years to help it meet its California emissions ceilings – while continuing to sell fossil fuels.

“One of the biggest concerns we got, particularly from the tribal membership, was that they saw this as us just giving the ability for polluters to continue to pollute,” he said. “I think they saw it almost as, like, prostitution: ‘You guys are just taking money so they can pollute.’”

But, he told his neighbors, friends and family, they could be part of a market whose end goal was to make companies pay for the costs of their pollution. Companies would have their emissions capped, and there would be a cost associated with meeting those limits.

“The company’s writing the check one way or the other, and they’re either writing it to the state or they’re writing it to us,” Desautel explained.

The forests of the Confederated Tribes of the Colville Indian Reservation were ideal for companies hoping to develop a carbon project because of the extraordinary number of credits they could generate with relative ease. Like many Indigenous nations, the tribe already practiced conservative logging and ecological forest management compared to the industrial forest owners surrounding them, which is the baseline they’d be measured against. If “business as usual” in the region is to clear-cut as many acres as possible every 40 years, the tribe could show far more carbon stored on their landscape. They do not, on the whole, practice clear-cutting, Desautel said. They keep most of their timber harvests on an 80- or 100-year rotation and leave at least five trees permanently on every acre to become old growth.

Finite Carbon, the company they chose to broker a deal, works with several Western tribes, and about half of its carbon credit portfolio is from projects that tribes or tribal corporations have launched, according to Brendan Terry, a spokesperson for the company.

The company has been criticized for targeting tribes in need of revenue and for proving the many tribal forest acres it helps to enroll in carbon markets – which are often far healthier and more intact than the industrially logged forests they’re compared with in carbon markets – were bringing an “additionality,” or extra carbon storage. In carbon markets, polluters aren’t supposed to be able to buy the carbon storing power of existing forests, necessarily, but only ones that are being improved or managed specifically to store more carbon dioxide than they typically would.

Other members of the tribe were worried that the plan would further limit logging on forests, and the jobs that come with it, for four or five generations. The tribal government depends on timber revenues for many general operating costs, including for schools, health care and law enforcement.

“I didn’t take it lightly that this was a decision that would potentially change how we do business or what we had access to for over a century,” Desautel said.

Signing on to a legally binding plan for the forests’ next 100 years brought up another concern – permanence. By 2015, the project was ready to be verified and entered into the market. But after the fires, Desautel and Finite had to rework parts of it, and take some acreage out. Fires, pests and disease, all likely to become more intense and more common under climate change, could lead to major reversals and cancellations on credits. Those credits allow companies to release tons of carbon dioxide into the atmosphere forever, and that can’t be taken back.

After two years of addressing concerns in meetings with the tribe’s membership and council and doing due diligence on the protocols and laws they’d have to abide in California’s market, Desautel and members of his natural resources team, along with Finite Carbon, created a plan to show they could store millions of tons of additional carbon dioxide on the reservation’s forests for the next century and generate credits worth an estimated $80 million. The plan was to invest the earnings in money markets and would grow, giving the tribe leverage for loans to build critical infrastructure and to fund future wildfire prevention and response.

‘Buying the promise’

Despite even more large fires since 2015, including some that required cashing in on “buffer pool credits” – credits that are set aside and not sold from a project as insurance for credits that were sold but that get reversed or canceled – the project has dipped only slightly below the baseline for the amount of carbon storage it’s supposed to be holding, Desautel said.

“We haven’t lost half the carbon because we’ve burned half of the project,” he said.

Even a burned forest holds onto most of its carbon before decomposing over decades. In many Northwest forests, less than 10% of carbon in the environment enters the atmosphere during and in the immediate aftermath of a wildfire, according to researcher Bev Law, a forest scientist and professor emeritus at Oregon State University.

Not all forests registered in the market survive fires. In the 2020 Lionshead Fire that swept through central Oregon, the Confederated Tribes of the Warm Springs Reservation had the bulk of its 24,000-acre forest carbon project enrolled in the California market burn up. It’s currently being reviewed to see whether it can be maintained or needs to be entirely reversed and canceled, according to David Clegern, a spokesperson for the California Air and Resources Board. Over the last decade, one-quarter of California’s buffer pool credits have had to be used to cover losses from wildfires, according to an analysis from San Francisco-based CarbonPlan, a watchdog group that investigates proposed climate solutions.

Keeping the carbon on the landscape, even in the form of decomposing trees, coupled with the amount of growth happening across the rest of the forest, means the Confederated Tribes of the Colville Indian Reservation have been able to keep the project mostly in balance, Desautel said. The tribe has delayed some logging, protected more old growth and has undertaken major forest restoration on the burned landscape.

“By and large, we’ve been growing a lot more than what we’re cutting,” Desautel said.

He said the tribe was likely on track to execute the forest management plan it agreed to with Finite Carbon, regardless of the carbon market, undermining the additionality requirement that involves proving a project would not happen without the incentive of the market.

But, he said, what the market is buying from the tribe is not just additionality – which he argues only rewards bad actors – but a promise to keep carbon on the landscape for the next century. Agreeing to lock the landscape into a 100-year forest management plan for $80 million is not as financially lucrative as leaving it open to logging as needed, Desautel said.

“We’ve got over 4 billion board feet of timber out here, which is probably worth a couple billion dollars,” he explains. “You’re buying the promise that if our leadership totally changes, and they get really zealous for timber, we’re not going to go liquidate those assets to generate a lot of money.”

This argument, he said, will get more and more potent as climate change threatens the health and access to critical natural resources: that people and companies and governments will have to pay for certain ecosystems to remain intact, say a forest remaining a forest so that it continues to keep our air and water clean, provide habitat for living creatures while providing food, a place to recreate and fostering spiritual health and a sense of purpose.

“We are starting to see, with carbon, that we have to place a value on it, so that people who protect those ecosystems and the services those ecosystems offer have a reason to continue to provide that,” he said. “My personal perspective on this is that, for most of our history, those ecosystem services have come for free, but because of the pressure we put on the environment, I don’t think that’s going to be the case in the future.”

oregoncapitalchronicle.com