Forest Carbon Terms and Rules of Thumb for Timberland Investors

In forestry, I always found rules of thumb helpful in providing context. For example, a log truck in the U.S. South carries just over 25 tons (~28) of wood and a sawmill needs about 4 tons of logs to produce one thousand board feet (1 MBF) of softwood lumber. These guidelines, matched with clear terminology, supports decision-making.

Forest carbon, and carbon markets generally, provide ample opportunities for misunderstanding and confusion for timberland investors. Carbon policies, prices and measurements mean different things to different people across different programs with different rules and definitions. This article defines select terms and shares a few basic metrics to strengthen our common understanding of forest carbon concepts.

Carbon 101 Terms

Carbon dioxide (CO2) is a chemical compound that exists in our atmosphere; burning fossil fuels for power or cars are primary man-made sources of CO2. Forest carbon generally refers to the carbon dioxide absorbed from the atmosphere by trees as they grow.

Carbon Sequestration 101

Carbon sequestration refers to removing carbon dioxide from the atmosphere and storing it in a carbon sink such as forests, the ocean or another natural or man-made system or product. In sum, sequestration refers to any process that captures and stores carbon.

Forest Carbon Offsets 101

Markets have evolved for three forestry-related approaches to carbon offset projects. Afforestation (or reforestation) projects involve restoring tree cover to previously non-forested land. Avoided conversion projects prevent the conversion of forested land to non-forested land. Finally, improved forest management (IFM) projects include land management activities that increase (or maintain) current levels of carbon stocking.

Meaningful forest carbon projects have important attributes. One is additionality, which requires the forest project sequester more carbon than what would have happened in a “business as usual” (aka baseline) scenario.

Forest Carbon Context: Rules of Thumb

According to The Nature Conservancy, the average annual carbon “footprint” per person in the U.S. is 16 tons (versus the global average of ~4 tons). How much is that? We turn to the EPA’s Greenhouse Gas Equivalencies Calculator to provide some context. In the United States, a family with two passenger vehicles would generate 9.2 metric tons of emissions per year (based on 1,035 gallons of gas consumed). Offsetting this requires about 11 acres of mature forests growing for one year. So, we’re talking 5 to 6 acres of forest growth for one year per car per year.

The importance of forest carbon and the range of markets and contracts developing for timberland investors continues to generate questions. I will address this topic at Forisk’s 5th annual “Wood Flows and Cash Flows” conference on September 2nd, 2021.