Forest Carbon: What Is It Worth?

What are the environmental AND social impact of doing business?

We often make cost benefits analysis in our everyday world. With the world facing global climate change, we are all coming to terms with the cost of too much carbon in our atmosphere. Rising temperatures, more weather extremes, loss of habitat and threats to human health are just a few of the many drastic impacts expected from man-made climate change. Using various tools and metrics, esteemed scientists have tried to place a price on this impact. Perhaps the most familiar calculates the impact of emissions from one ton of carbon. In this framework, we are told that one ton of carbon emissions costs us a certain dollar figure. The EPA and other federal agencies call this the “social cost of carbon” (SCC). The SCC is a comprehensive estimate of climate change damages and includes changes in net agricultural productivity, human health, property damages from increased flood risk, etc. Using this tool, the government has estimated the cost of one ton of emissions ranging from $12 to $116.

Big companies are doing their own internal pricing and projections on the costs of carbon.

For example, ExxonMobil is assuming a cost of $60 per metric ton by 2030, and BP currently uses $40 per metric ton.

There are now functioning markets in the United States and around the world that set the price on emission allowances. In the two largest functioning domestic carbon markets, pricing is significantly less robust. The Regional Greenhouse Gas Initiative, Inc. (RGGI) is a nine state cooperative that works to reduce greenhouse gas emissions, and they sold allowances for $4.88 at their last auction. Even in the nation’s largest system, California’s Global Warming Solutions Act Cap and Trade program, allowances were recently trading at $12.12.

Turning to the forests of the US South, which make up one of the nation’s largest carbon sinks, how can we evaluate the price of the carbon contained in those forests?

For making paper, particle board or wood pellets, the cost of pine roundwood which is made up of approximately 50% sequestered carbon will run you approximately $10 per ton as a living breathing tree “on the stump.” In some markets for hardwood pulpwood (another name for roundwood), the wood that goes into making paper and other low-grade products is even less. In addition, when corporations and individuals make decisions about offsetting their carbon emissions, there seems to be market failure as well. It will cost you $9.00 to purchase a California program forest carbon offset like those produced by Dogwood’s Carbon Canopy Project. Yet according to a recent report, offsetting one ton of carbon brings an additional $664 in benefits to the communities where carbon reduction projects are based.

Price of 1 Ton Carbon
What’s the true cost of one ton of carbon?

So why the disconnect? Why are emissions reduction decisions being made in the real world based on a financial framework at a fraction of the cost of the actual value and real world benefit of carbon?

Why are decisions concerning the forests of the South, the lungs of the nation, being made at a fraction of the true cost of carbon?

This market failure is a huge impediment to addressing global climate change. Dogwood Alliance is working hard to understand why this is happening and to advocate for a better way forward, one that values forests left standing.

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