The article in the url below is both hopeful and insightful. It covers the growth in the market for carbon offsets that, in practical terms, means the preservation of forests:
"For much of human history, the way to make money from a tree was to chop it down. Now, with companies rushing to offset their carbon emissions, there is value in leaving them standing. The good news for trees is that the going rate for intact forests has become competitive with what mills pay for logs in corners of Alaska and Appalachia, the Adirondacks and up toward Acadia. That is spurring landowners to make centurylong conservation deals with fossil-fuel companies, which help the latter comply with regulatory demands to reduce their carbon emissions."
Because of this encouraging news that the value of keeping forests intact is competitive with that earned from chopping them down, some companies are beginning to speculate that their price will increase further. As a result, more than a useful offset today, the forests become a worthwhile investment for the future:
"For now, California is the only U.S. state with a so-called cap-and-trade system that aims to reduce greenhouse gasses by making it more expensive over time for firms operating in the state to pollute. Preserving trees is rewarded with carbon-offset credits, a climate-change currency that companies can purchase and apply toward a tiny portion of their tab. But lately, big energy companies, betting that the idea will spread, are looking to preserve vast tracts of forest beyond what they need for California, as part of a burgeoning, speculative market in so-called voluntary offsets."
BP is one example of a firm that is beginning to see greater long-term potential in this natural capital beyond any immediate gains off-setting can provide. The key is their push to develop a "voluntary market" beyond their immediate off-setting needs and/or any regulatory requirement—a kind of buy-and-hold option where the forests are purchased now to be offset or traded at some point in the future:
"[BP] has already bought more than 40 million California offset credits since 2016 at a cost of hundreds of millions of dollars. Last autumn, the energy giant invested $5 million in Pennsylvania's Finite Carbon, a pioneer in the business of helping landowners create and sell credits. The investment is aimed at helping Finite hire more foresters, begin using satellites to measure biomass and drum up more credits for use in the voluntary market. BP has asked Finite to produce voluntary credits ASAP so they can be available for its own carbon ledger and to trade among other companies eager to improve their emissions math. As part of its shift into non-fossil-fuel markets, BP expects to trade offset credits the way it presently does oil and gas."
Perhaps it is not surprising to see that California is leading the way in the U.S. after the level of investment by the federal government has stalled in recent years:
"California forged ahead, setting caps on emissions, which become stricter over time, and creating a corresponding number of allowances. Refiners, fuel importers and utilities vie for the allowances at auction and turn them over to regulators to cover their emissions. … The companies have the option of covering up to 4% of their emissions with less-costly offset credits, which California issues for capturing methane from dairies and mines, destroying ozone-depleting substances and, most popularly, preserving forests."
As a result:
"About 153 million forest credits have been issued, each representing a metric ton of sequestered carbon. They limit logging on about five million U.S. acres. That's a sliver of the 740-million-odd acres of U.S. forests and woodlands that aren't already reserved, but the amount of offset-protected property is growing fast."
It is this exponential growth where the advantage lies for a company like BP, which is beginning to understand forests as an asset:
"If other governments join California and institute cap-and-trade markets ["Quebec linked its own program with California's in 2014"], voluntary offsets could shoot up in value. It could be like holding hot tech shares ahead of an overbought IPO. Like unlisted stock, voluntary credits trade infrequently and in a wide price range, lately averaging about $6. … California credits changed hands at an average of $14.15 in 2019 and were up to $15 before the coronavirus lockdown drove them lower. They have lately traded for about $13."
There are also advantages around internal carbon budgeting, which has the dual advantage of appealing to employees and also preparing companies for the day when a carbon price will be imposed and expensive:
"These days, voluntary offsets are mostly good for meeting companies' self-set carbon-reduction goals. BP is targeting carbon neutrality by 2050. Between operations and the burning of its oil-and-gas output by motorists and power plants, the British company says it is annually responsible for 415 million metric tons of carbon emissions."
Take care
David
David Chandler
© Sage Publications, 2020
Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler5e
Strategic CSR Simulation: http://www.strategiccsrsim.com/
The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/
Emissions Rules Turn Saving Trees into Big Business
By Ryan Dezember
August 24, 2020
The Wall Street Journal
Late Edition – Final
A1, A10
