1. American Forest Foundation Forest Climate Opportunities for Family Forest Owners Robert S. Simpson Senior Vice President Center for Family Forests October 17, 2008

2. How can family forest owners help address climate change? Voluntary markets Cap and Trade Legislation Mitigation under the Cap Programmatic Opportunities Outside the Cap

3. AFF’s Strategy for Family Forests Boots on the ground Loafers on the Hill

4. AFF Boots on the Ground Three Pilot Projects for Carbon Aggregation New York Oregon Louisiana, Mississippi, Arkansas Goal: To establish a new opportunity for Tree Farmers to participate in emerging carbon markets for: New income opportunities for family forests Added incentives for long-term sustainable management To help keep forests in forest management

5. Role of Aggregators Maintain a database of all projects at the stand level that reflects management activities, growth and yield, and other forest details. Arrange for verification of project records and lands. Manage the Reserve Accounts for Projects Obtain CCX-required reports from landowners; submit summary reports to CCX. Assure CCX that all projects continue to meet CCX rules. Trade offset pools on the CCX trading floor; pay net receipts to project owners.

6. CCX - Sustainable Forest Management Forests must be certified through American Tree Farm System ATFS, SFI, PEFC or FSC. Earn credits on the basis of verified annual increases in above- and below-ground portions of live trees. Baseline is December 31 of the year prior to project initiation, based on current forest inventory. Model can be used to project growth from inventory year. Model results are discounted 20%. No discount for projects with annual inventory.

7. CCX - Sustainable Forest Management Projects must place 20% in Reserve Pool. If subsequent inventory reveals a decrease in forest carbon stock, project must provide additional credits to cover the loss, or use their Reserve Account in the Reserve Pool. In the event of catastrophic loss, owners liability is limited to the credits in the Reserve Pool. If forest land is sold or purchased, the allowable carbon stocks will be adjusted to the new land area. Landowner agrees to maintain forest certification for 15 years and keep forest stocks in the project beyond the contract period.

8. ATFS Certified Forest Example 110 Acres – managed plantation Actual inventory and growth model (Oregon) Started CCX Accounting in 2008 Plans a 9 acre second thinning in 2010, all sawtimber Plans a 40 acre first thinning in 2014, half pulp, half sawtimber

9. Project Accounting – 110 Ac. Item Year 2008200920102011 Baseline (tCO 2 e) 4,2434,7225,2015,336 Growth 479 Removals 003440 Net Change 479 135479 20% Reserve 96 2796 Reserve Account Total 96192219315 Net to Market on CCX 383 248383 Harvested Wood Credits 001400

10. Item Year 2012201320142015 Baseline (tCO 2 e) 5,8156,2946,7736409 Growth 479 Removals 008430 Net Change 479 -364479 20% Reserve 96 -160256 Reserve Account Total 411507347603 Net to Market on CCX 383 0223 Harvested Wood Credits 002040 Project Accounting – 110 Ac.

11. Item Year 2012201320142015 Baseline (tCO 2 e) 5,8156,2946,7736,830 Growth 479 Removals 00422 Net Change 479 57 20% Reserve 96 11 Reserve Account Total 411507518529 Net to Market on CCX 383 148 Harvested Wood Credits 00102 Optional Plan – Split the Removal

12. What Happened? The Carbon Credit Sales are highest in the years when there is no timber harvest. Harvested Wood Products Credits help smooth out the accounting. This Tree Farm got about 3.5 tons/acre CO2 in the high years. If carbon prices are high enough, the harvest plan might be changed to keep removals below predicted growth.

13. The Summary Carbon Credits can provide an additional source of income for Family Forest Owners. Transactions costs are a concern. Extra expenses and contractual obligations are involved. It is not free money. Professional foresters will help most forest owners with inventories, and provide model results to predict yields. New opportunity for consultants. Working through an aggregator helps Family Forest owners sell carbon credits.

14. AFF on the Hill FCWG meeting with Senate Ag Committee and Ag LAs as I speak. How Forest Carbon Offsets Can Work Under a Cap Beyond Offsets Programmatic Approaches Reducing Transaction Costs Adaptation Challenges

15. Questions? bsimpson@forestfoundation.org 001-202-463-2458 www.treefarmsystem.org Thank You!