Preparing for Carbon Trading – A Preparing for Carbon Trading – A Tree Farmer’s PerspectiveTree Farmer’s Perspective

Mark NussbaumMark NussbaumHickory Grove Tree FarmHickory Grove Tree Farm

Photo of Matt and mewalking at Sam A.Baker trail here.

Our Tree Farm’s Carbon Experiences to Date

• In September 2007 we sent our enrollment In September 2007 we sent our enrollment documents to an aggregator for trading on the CCX documents to an aggregator for trading on the CCX Exchange.Exchange.

• We withdrew our application in January 2009.We withdrew our application in January 2009.• We are keeping detailed records to support our We are keeping detailed records to support our

future application. future application.

CCX Carbon Prices for 2009 VintageCCX Carbon Prices for 2009 Vintage

Carbon is trading for about Carbon is trading for about $0.25/ton on CCX today.$0.25/ton on CCX today.

Carbon is trading for about Carbon is trading for about $20/ton on the European $20/ton on the European Exchange right now.Exchange right now.

Why Did We Withdraw Our Carbon Enrollment?

• The Obama election appeared to be a “game The Obama election appeared to be a “game changer”.changer”.

• US House of Representatives have passed US House of Representatives have passed Waxman-Markey. Senate is debating their Waxman-Markey. Senate is debating their bill, which sets a floor of $12/ton for bill, which sets a floor of $12/ton for carbon. carbon.

• We are speculating on carbon pricesWe are speculating on carbon prices. .

How Are We Preparing For the Next Carbon Enrollment Opportunity?

• Continuing aggressive thinning/pruning.Continuing aggressive thinning/pruning.

• Documenting our timber and pulp sales.Documenting our timber and pulp sales.

• Continuing to plant trees on our poorer Continuing to plant trees on our poorer agricultural fields.agricultural fields.

• Considering how $10-20/ton Carbon credits Considering how $10-20/ton Carbon credits will affect our forestry management going will affect our forestry management going forward. forward.

Our Forest Management

YearYear ActionAction0 Autumn - timber harvest.0 Autumn - timber harvest. Major timber stand improvement andMajor timber stand improvement and

minor pruning and planting.minor pruning and planting.

10 Minor timber stand improvement and10 Minor timber stand improvement and minor pruning.minor pruning.

15 Feb./March – Prescribed burn.15 Feb./March – Prescribed burn. Autumn - timber harvest.Autumn - timber harvest.

Our Forest Management

Our goal is to grow veneerOur goal is to grow veneerand grade hardwood timber.and grade hardwood timber.We remove all trees that We remove all trees that don’t have the potential fordon’t have the potential fora “flooring grade” or bettera “flooring grade” or betterbutt log.butt log.

Mark beside the best single log we’ve ever sold.Mark beside the best single log we’ve ever sold.The “V++” log brought $2.25/bd.ft. to the owner, The “V++” log brought $2.25/bd.ft. to the owner, for a net of $432. (12/07)for a net of $432. (12/07)

Could Carbon Prices Exceed Timber Prices for Some Trees?

About 70% of a tree’s worth is About 70% of a tree’s worth is in the “butt” (first) log.in the “butt” (first) log.

Example log: 12’ long, 20” in diameter Example log: 12’ long, 20” in diameter at the small end, containing 192 board at the small end, containing 192 board feet.feet.

Value to landownerValue to landownerVeneer $210Veneer $210Furniture Grade $115Furniture Grade $115Flooring Grade $33Flooring Grade $33Railroad Ties $23Railroad Ties $23Pallet Pallet $6 $6 Pulp $1Pulp $1

Worth moreWorth moreas carbon?as carbon?

Timber Stand ImprovementTimber Stand Improvement for Carbon Sequestrationfor Carbon Sequestration

BeforeBefore Net carbon sequestrationNet carbon sequestrationis low. Large volumeis low. Large volumeof carbon in un-salable trees.of carbon in un-salable trees.

Timber Stand ImprovementTimber Stand Improvement for Carbon Sequestrationfor Carbon Sequestration

AfterAfter Higher carbon sequestration.Higher carbon sequestration.Carbon inventory is inCarbon inventory is inhigher value trees.higher value trees.

How Could a $10-20/Ton Carbon How Could a $10-20/Ton Carbon Affect Our Management?Affect Our Management?

To date, when a TSI/thinning pass has resulted in onlyTo date, when a TSI/thinning pass has resulted in onlypulp/pallet timber being cut, we left the wood in the pulp/pallet timber being cut, we left the wood in the forest. The sales value didn’t justify selling of the forest. The sales value didn’t justify selling of the thinnings. The above TSI pass left about 40 tons/acre of thinnings. The above TSI pass left about 40 tons/acre of pulpwood on the ground.pulpwood on the ground.

How Could $10-20/Ton Carbon How Could $10-20/Ton Carbon Affect Our Management?Affect Our Management?

Historical value of 40 Historical value of 40 tons of pulp/acre is tons of pulp/acre is about $40 net to us.about $40 net to us.

One ton of pulp is equal to about One ton of pulp is equal to about 1.1 tons of carbon. At $10/ton, 1.1 tons of carbon. At $10/ton, 40 tons of pulp is worth over 40 tons of pulp is worth over $400 in carbon payments! (but $400 in carbon payments! (but check the details….)check the details….)

Would $10-20/Ton Carbon Cause Us Would $10-20/Ton Carbon Cause Us to Give Up Prescribed Fire?to Give Up Prescribed Fire?

Photo of oak treePhoto of oak treewith fire burningwith fire burning

We use fire to to kill undesirable We use fire to to kill undesirable tree species (gum, elm, maple) and tree species (gum, elm, maple) and stimulate growth of oak seedlings.stimulate growth of oak seedlings.

We have not been able to We have not been able to consistently regenerate young oaks consistently regenerate young oaks without fire.without fire.

We are documenting our use of fire, We are documenting our use of fire, and it’s ecological and economic and it’s ecological and economic benefits. We want to keep it in our benefits. We want to keep it in our management tool kit.management tool kit.

We will give up fire if we get paid We will give up fire if we get paid enough. Then we’ll reduce our enough. Then we’ll reduce our emphasis on oaks. emphasis on oaks.

Carbon Trading in Forest Management Carbon Trading in Forest Management (It’s (It’s finallyfinally about about volume)volume)

The average Missouri wooded acre sells about 110 board-feet The average Missouri wooded acre sells about 110 board-feet of timber per acre per year, along with a negligible amount of pulp.of timber per acre per year, along with a negligible amount of pulp. Possible Carbon Credit: 0.6 tons/acre/year, or:Possible Carbon Credit: 0.6 tons/acre/year, or: $6-$12/acre$6-$12/acre..

Our tree farm sells about 275 board feet of timber per acreOur tree farm sells about 275 board feet of timber per acrealong with about 0.6 tons of pulp each year.along with about 0.6 tons of pulp each year. Possible Carbon Credit: 1.97 tons/acre/year, or:Possible Carbon Credit: 1.97 tons/acre/year, or:

$18-$38/acre$18-$38/acre..

What Should Forest Landowners Do What Should Forest Landowners Do to Get Ready for Carbon Trading?to Get Ready for Carbon Trading?

Get educated Get educated in forest management! Start with a forestin forest management! Start with a forestinventory and forest management plan. Find out how muchinventory and forest management plan. Find out how muchof your forest volume is in pulp and pallet timber. Make anof your forest volume is in pulp and pallet timber. Make anaggressive plan to remove these trees and start immediately.aggressive plan to remove these trees and start immediately.

Export pulp/pallet from your property. Get involved in effortsExport pulp/pallet from your property. Get involved in effortsto develop new markets for pulp. (Torrefaction, ethanol, etc.)to develop new markets for pulp. (Torrefaction, ethanol, etc.)

Join the American Tree Farm organization. The educational,Join the American Tree Farm organization. The educational,certification and lobbying benefits are tremendous.certification and lobbying benefits are tremendous.

What Should Forest Landowners Do What Should Forest Landowners Do to Get Ready for Carbon Trading?to Get Ready for Carbon Trading?

Take a serious look at Take a serious look at reforesting your poorest reforesting your poorest cropland and pastureland. cropland and pastureland. As proposed, new hardwood As proposed, new hardwood plantings will be credited for plantings will be credited for 1.425 tons/year of carbon. 1.425 tons/year of carbon.

Getting Ready for Carbon TradingGetting Ready for Carbon Trading

Don’tDon’t enter into a forest management carbon contract if you enter into a forest management carbon contract if youhave a typical overstocked/undermanaged timber stand. have a typical overstocked/undermanaged timber stand. Pulpwood timber can hurt you in several ways:Pulpwood timber can hurt you in several ways:

1.1. It will slow your forest’s net carbon sequestration. It will slow your forest’s net carbon sequestration.

2.2. You’ll be stuck with the pulpwood timber. You can’t sell You’ll be stuck with the pulpwood timber. You can’t sell significant amounts, because you have to have significant amounts, because you have to have moremore net netwoody biomass at the woody biomass at the endend of your contract. of your contract.

Getting Ready for Carbon TradingGetting Ready for Carbon Trading

In short:In short:

Thin, Thin, Thin!Thin, Thin, Thin!

But get a forestry plan first, and do it right. But get a forestry plan first, and do it right.

Happy Tree Planting from Hickory Happy Tree Planting from Hickory Grove Tree FarmGrove Tree Farm

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