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Case Study 1: Two Landowners' Experiences With Carbon Payment Programs

This article describes the experiences of two Pennsylvanian forest landowners considering more than one carbon program.

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Updated:

January 31, 2023

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Two large trees with farm buildings in background. Photo credit: Keri Griffin-Rowles

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Since forest carbon is still a new market commodity, selecting a broker may seem a bit complicated to the average forest owner. This paper describes the experiences of two small forest landowners in Pennsylvania who considered more than one carbon incentive program. The names of the landowners and identifying details have been changed to protect the identity and privacy of the parties involved.

The Wilsons

The Wilsons are active forest landowners in Bedford County, PA. They own roughly 135 acres of land, 130 acres are forest, and the other 5 acres are gardens, chicken coops, and other native habitat. They have owned the land for more than 35 years and they want to manage the forest to enhance biodiversity and conserve it for future generations. In 2010, they donated the development rights to the Western PA Conservancy through a conservation easement. The management they conduct includes harvesting timber and deer, installing deer fencing, and controlling invasive species to help promote healthy forests. To help improve their management activities, the Wilsons are always looking to learn new things about their forest. For example, they have worked with their local DCNR Service Forester, NRCS Forester, Penn State Extension, Forests for the Bay, PA Game Commission Wildlife Diversity Biologist, and are certified Forest Stewards. These experiences and relationships led them to join the Golden-Winged Warbler Conservation Program (the Golden-wing warbler is a near endangered bird that needs early successional habitat). With funding through the USDA Environmental Quality Incentives Program (EQIP) they conducted a seed tree harvest on 30 acres of their forest in 2014. This harvest opened the canopy and created excellent habitat for the Golden-wing warbler.

Through their experiences, the Wilsons were made aware of forest carbon markets and became interested in learning how their forest could help support climate change solutions. What was of primary importance to the Wilsons was being able to create small openings in the canopy to support a diversity of birds and native plants by harvesting timber. Another important objective was to protect the forest for future generations, so they were willing to consider a multi-year contract. After investing their options, they figured out that they would likely qualify for programs offered by the Natural Capital Exchange (NCX) and the Family Forest Carbon Program (FFCP).

One of the ways they learned more was talking to their friends. After exchanging some emails, they predicted that enrolling in NCX and delaying harvest for one year would provide about $8 an acre. Applying this value to their 100 acres of mature forest this would provide a total of $800 for one year. The Wilsons had to talk to a representative at the FFCP to learn more about how they may qualify. The FFCP offered the Wilsons $280 an acre to help with competing plant control in the 30 acres of warbler habitat (as part of Enhancing the Future Forests program) and $230 an acre for the 100 acres of mature forest (through Growing Mature Forests), which totaled $31,400 over a 20-year contract. To help make comparisons between programs, the authors of this paper estimate that the FFCP payments for the Wilsons would have an average annual net present value of $4.00/acre (3% discount rate). Assuming they would get about $8 per acre from NCX for the next 20 years the authors of this paper estimate the NCX payments would have an average annual net present value of $2.60/acre (3% discount rate). All NCX contracts are for 1 year and payment levels are renegotiated each year, which means future payment levels could increase or decrease based on supply and demand. Since the FFCP program incentivized management activities were in line with their forest management objectives, the Wilsons elected to participate in the FFCP program.

Joining FFCP involved a multi-step process. They already had a forest management plan but joining FFCP meant they needed a new forest management plan written by an approved forester. Forests for the Bay had offered almost $1,000 to help them write a new forest management plan and FFCP also gave them $800 to supplement the cost of writing a plan, but it was challenge for them to find a forester who would write one for under $2,000. After two months of trying to find a forester, they were finally able to find forester who wrote a plan that met the criteria for both programs. The Wilsons are now fully enrolled in the Family Forest Carbon Program. After this article was initially published, FFCP has updated their policy to allow foresters on their staff to write plans for landowners. This may reduce the barriers of entry to landowners and speed time to enrollment.

Linda

Linda had been a small business owner in Philadelphia, but with the economic crunch caused by Covid, concerns over her aging parents, and a desire to return to the land, she sold her business and moved back to her family’s farm. The farm was a small dairy that was struggling to get by, and they could not afford the new equipment which was needed to maximize output. The new technology that they needed to keep the farm functioning was also becoming too complicated for them.

After taking a serious look at the farm's budget and accounts, speaking to her local Extension educators, and doing some deep-thinking Linda made the tough decision to get out of dairy and to invest in a horse boarding business. To make the transition, she dipped into her savings and built a new barn with a place for guests to stay along with several hoop houses for growing vegetables and medicinal herbs. She also sought out ways to diversify the farm's income, so with help from the PA DCNR she planted a multi-use riparian buffer with pawpaw, raspberries, and fruit trees. The buffer would both protect the stream from pollutants and produce fruits that could be turned into jams and preserves. She also got an EQUIP grant to turn several of the pastures into pollinator habitat with trails for her boarders to ride through and enjoy.

After maximizing income from the farm, she turned to the 37 acres of forest surrounding the farm. Linda's cousin suggested that harvesting the forest to help fund the farm upgrades, but the forest had been high-graded several times and the standing trees had little economic value so harvesting was not an option. She began farming mushrooms and investigated forest carbon market opportunities. Since she needed income rapidly, she decided it would be faster and more straight forward to put in a bid at NCX. However, her bid of $22 a credit was too high. They rejected her bid, and she was not able to sell the additional carbon stored in her forest that year. Next, she considered the FFCP and found her forest qualified for "Growing Mature Forests" program. Linda was offered $200 an acre over 20 years for a total of $7,400. The authors of this paper estimate that the net present value of the FFCP payments average about $1.30 per acre per year for Linda's property (3% discount rate). The somewhat lower payment was likely due to having fewer merchantable trees in her forest, the result of historical high grading practices. Carbon payments are only associated with trees that are at a high risk of being harvested. It took her a month to find and hire a forester to write the required plan, but she was eventually able to join the program. Linda believes that while the money from selling carbon is not as substantial, it does give her guaranteed income that can offset the costs of her other investments in the farm and help preserve the aesthetic values of the property which she and her boarders enjoy.

Closing Thoughts

Both forest owners successfully sold carbon, but it took some work to find the program that was the best for them and to meet the requirements for the different programs. The largest obstacles were finding a qualified forester. This is due to both a lack of foresters in Pennsylvania and that few of them are certified to work with forest carbon programs, since carbon markets are a new industry. Joining a carbon program was easiest when the owner was already working with a forester, so if an owner is thinking about selling carbon it would be best to already have a relationship with a forester.
The owners interviewed all recognized that forest carbon does not generate a huge sum of money, but after considering their values and forest management objectives, they found that forest carbon payments supplemented their income in ways that helped them meet their own management objectives and help contribute to climate change solutions.
We conclude that while forest carbon markets are an exciting new opportunity, it is important that owners do their research and get advice from others (like legal and forest professionals), so they fully understand what they are joining.

This article was produced by the Forest Owner Carbon and Climate Education (FOCCE) program. What do you think? Please take this short survey.