Carbon Credits Cited as Potential Revenue Source in B.C.

The growing carbon credit market could be a source for forestry funding in Canada according to forest industry proposal.

Lignum lays out plan for carbon sequestration: Forest company leading way in encouraging business of greenhouse-gas trading credits The Vancouver Sun Sat 02 Mar 2002 Business F1 / Front Business; Column Harvey Enchin Harvey Enchin

An exporter can hedge against fluctuations in the value of the dollar by buying a currency contract. Similarly, a mining company can sell a contract for future delivery of gold to lock in profit. A farmer can sell his crop at a set price in the futures market before he plants it. An investor can limit his risk in the stock market using call and put options.

However, how do you hedge against the Kyoto Protocol?

Canada’s commitment under the protocol is to cut greenhouse gas emissions to six per cent below 1990 levels by 2012

Trying to achieve it, the Canadian Manufacturers and Exporters Association warns, will wipe out 450,000 jobs in Canada by 2010.

It doesn’t seem much of a choice: cut emissions and suffer the consequences of slower economic growth, job losses and higher consumer prices; or continue to pump climate-changing pollutants into the air, and perhaps suffer ostracism by the international community.

Reducing emissions has become a cost of doing business regardless of the Kyoto Protocol.

A number of U.S. states already impose strict standards. Washington state, for example, requires any new energy plant to offset all the greenhouse gas emissions it produces.

Managing the risks associated with greenhouse gas emission reductions is a challenge Canadian governments are slowly beginning to realize.

That’s why an attentive B.C. cabinet caucus listened attentively to a presentation by Lignum Ltd., a Vancouver-based forest-products company. Lignum laid out a pilot project that added the element of carbon sequestration to its sustainable forest-management practices.

Carbon sequestration is the process by which carbon is removed from the atmosphere and stored naturally in forests, soil and oceans.

Trees accumulate carbon as carbon dioxide through their growth cycle. When they are harvested, a new crop is replanted and it also accumulates carbon.

The place where carbon is stored is called a carbon sink. The Kyoto protocol recognizes forests as carbon sinks.

Lignum told the politicians that carbon can be a marketable forest product.

The accumulation of carbon in the forest can offset the carbon dioxide added to the atmosphereby industrial processes.

In short, Lignum would sell its carbon accumulation to an industrial company looking to offset the greenhouse gas emissions it expects to produce from a new plant.

Lignum approached Gary Bull of the UBC Faculty of Forestry and a private firm, Forest Ecosystem Solutions, to assist with carbon research, computer modeling and forest resource analysis.

Lignum’s goal is to demonstrate that carbon accumulation in its pilot project can be verified. PricewaterHouseCoopers is looking into auditing greenhouse gas offsets and two multinational insurance companies, AON and Partners re, are mulling the insurance opportunities.

The concept has interested a number of Canadian energy companies, including B.C. Gas, ATCO, Enbridge, Epcor, Nova Scotia Power, Ontario Power Generation, SaskPower and TransCanada PipeLines.

They have established a consortium, Vancouver-based GemCo, which has become a leader in greenhouse gas emission management.

GemCo president Aldyen Donnelly sees greenhouse gas emission offsets as an important risk management tool.

“If there’s only a 20-per-cent probability that the top 20 greenhouse gas emitters have to stabilize emissions at 1990 levels by 2010 and it costs $10 a ton of CO2 equivalent to reduce emissions to that level, the net present value of that not very threatening risk scenario is almost $2 billion,” she said.

Bill Bourgeois, Lignum’s vice-president of environment and government affairs, said B.C. is not capitalizing on this hidden asset and lags behind other jurisdictions like Australia, where greenhouse gas emission credits trade on a stock exchange.

“This is definitely an asset for forest management in B.C.” said Joyce Murray, B.C.’s water, land and air protection minister. “We are going to be as persuasive as we can with the federal government that the asset should accrue to the land owners, which is the province of B.C.”