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CONSERVATION CORNER
(For the week of October 22, 2007)
Part 2: Carbon Sequestration
by James L. Cummins

Last week, we began our discussion of carbon sequestration.

Very seldom does a day go by that a landowner doesn't call and ask about selling their carbon. He or she usually asks "Can I sell my carbon and what can I get for it?" The answer is "yes you can," but without a well developed market – with real demand – you probably won't get much for it. However, if, or when, the United States has policy in place to regulate carbon dioxide emissions, you may get a respectable price for it.

The Chicago Climate Exchange reported that their trading volume for the first half of 2007 was 11.9 million tons of carbon dioxide. As of September 5, carbon closed at approximately $3.00 per ton on the Chicago Climate Exchange, which isn't that exciting. To put this in perspective, most forests in Mississippi will sequester about 1 ton per acre per year from years 1 to10, 3 tons in years 10 to 20, 6 tons in years 20 to 30, 9 tons in years 30 to 40, 10 tons in years 40 to 50, 9 tons in years 50 to 60 and 7 tons in years 60 to 70. If I tell you I can get you $3.50 per ton, but it is going to cost you $2.00 per ton to get it and you are going to have to agree to some fairly strong, long-term commitments, your interest might drop. However, if I could get you $10 to $12 per ton and it will cost you $2.00 per ton to get it, that is pretty good. To put it in perspective, $3.00 carbon will yield $1.00 per acre in year one and $28 per acre in year 40. On the other hand, $12 carbon will yield $10 per acre in year 1 and $118 per acre in year 40, which is very good. Getting to this higher price level will require a carbon emission cap at the state, regional or national level.

While price is an important factor, the quality of the carbon project is more important to some buyers and will yield a higher price. The focus of The Carbon Fund (www.thecarbonfund.org.) is the sequestration of carbon, long-term, in forests and native prairie. The principle is based on the assumption that carbon bound in biomass cannot form carbon dioxide. In essence, The Carbon Fund's focus on reforestation and revegetation will have a positive impact in reducing GHG. But The Carbon Fund takes this effort another step by assuring that the reforestation and revegetation occurs in a biodiverse fashion. By planting a variety of tree species rather than a monoculture, The Carbon Fund will be promoting the restoration of a naturally functioning forest and grassland ecosystem that will have benefits beyond carbon sequestration. Reforestation and revegetation that promotes biodiversity will promote such public benefits as improved water quality, reduced soil erosion, fish and wildlife habitat and outdoor recreation. These improved environmental assets will be quantifiable and may be marketable, thus providing economic incentives to continue environmental enhancement.

But the bottom line is the carbon market is improving even without mandatory emission reduction policy. I think there is a great future in it and that the price will increase to the point that it makes good economic sense for Mississippians to participate in emission reduction projects.