This document discusses emerging opportunities for the forest industry in carbon markets. It provides an overview of Eric Kingsley's company, Innovative Natural Resource Solutions LLC, which focuses on consulting at the intersection of forests, energy and economics. It then summarizes different carbon market mechanisms, including compliance and voluntary markets, and what makes a good carbon offset project for forests. Examples of current forest carbon programs are outlined, and implications for the forest industry are discussed, including new revenue opportunities but also potential constraints on timber supply.

1. Carbon Markets
Emerging Opportunities for the Forest Industry
NCFAE Meeting – Jackson Hole, Wyoming
July 2021
Eric Kingsley
Innovative Natural Resource Solutions LLC
kingsley@inrsllc.com
Phone 207-233-9910

2. Innovative Natural Resource Solutions LLC
• Founded in 1994
• Offices in New Hampshire and Maine
• Focus at the intersection of forest industry, energy and economic
development
• Services include:
- consulting in renewable energy
- advocacy
- forest management and protection
- forest certification and sustainability
- forest carbon projects
• Clients from the private, non-profit and government sectors
• Conducted work in all regions of North America
• www.inrsllc.com

3. Climate Change is the Greatest
Challenge to Face Humanity
The Forest Products Industry Is
Part of the Solution

5. Forest Are Carbon Capture

6. 440,000,000
450,000,000
460,000,000
470,000,000
480,000,000
490,000,000
500,000,000
510,000,000
2002-2007 2008-2012 2013-2019
Above and Below Ground Carbon in Live Trees
Private Timberland in New York

7. 0
100,000,000
200,000,000
300,000,000
400,000,000
500,000,000
600,000,000
2006 - 2009 2009 - 2013 2013 - 2019
Above and Below Ground Carbon in Live Trees
Private Timberland in Mississippi

8. 380,000,000
385,000,000
390,000,000
395,000,000
400,000,000
405,000,000
410,000,000
415,000,000
420,000,000
425,000,000
430,000,000
435,000,000
2006 - 2009 2009 - 2013 2013 - 2019
Above and Below Ground Carbon in Live Trees
Private Timberland in West Virginia

9. What Are Forests Carbon Offsets?
• Trees sequester carbon – about 50% of dry weight is carbon
• Companies (and others) pay forest landowners to capture that
carbon, then make claims regarding offsetting emissions
Money $$$
Offsets

11. Forest Carbon Markets
Compliance Market
• Companies purchase offsets to
help meet their legally
mandated emissions targets
• California, EU
• More consistent pricing
• Built in demand through 2030
• Unless regulatory changes occur
• 100 years
Voluntary Market
• Companies (or individuals)
voluntarily choose to purchase
offsets to reduce net emissions
• Greater variation in price
• Premium value attributed to
“charismatic” projects
• Uncertain demand
• 40 Years

12. Compliance Market Mechanics
• The landowner receives a large
credit issuance after the
project’s first year equal to the
distance between the property’s
stocking and the average
stocking within that same forest
type / ecoregion
• After Y1, the landowner receives
credits equal to the growth net
of harvest.
• If a landowner harvests 100% of
growth, there are no new credits
100

13. Voluntary Market Mechanics
• Under voluntary market protocols, the
landowner receives credits equal to
the difference between their stocking,
and the stocking that would exist
under short-term profit maximization
• “Short-term profit maximization” is
generally liquidation of merchantable
volume, subject to state law
• Bulk of credits are issued in the first
several years
• After that, the landowner receives
credits equal to the growth net of
harvest.
• If a landowner harvests 100% of growth,
there are no new credits

14. What Makes A “Good” Carbon Project?
• Specific to Voluntary and Compliance Markets
• Need 3k – 6k acres (region specific) to make it work financially
• Plan (and practice) to harvest less than growth for the long-term
• Sustainable forest management (incl. 3rd party certification – FSC/SFI/ATFS)
• No expectation of a sale of land
• Have seen carbon used as a form of estate planning
• You can sell land with a carbon encumbrance, but will certainly impact the sale price
• Suppressed timber markets / mill closures
• That currently describes many places that are not the Southeast
• Compatible with easements

15. There are Other Markets (and More Coming…)
• Family Forest Carbon Program (AFF and TNC)
• NCX (formerly SilviaTerra)
• Many states pursuing their own markets (or market
bundling)
• Federal efforts – with a focus on smaller forest and
farm landowners
• This will be a rapidly and wildly evolving space

16. Family Forest Carbon Program
• Project of American Forest Foundation & The Nature Conservancy
• 30 – 2,400 acres (current average about 150 acres)
• In some PA counties now
• Moving to PA, MD and WV this year
• The expansion to the Northeast and Upper Midwest
• Payment of $50 - $280 per acre, with a front-loaded payment then
payment over time

17. Family Forest Carbon Program
Growing Mature Forests
• 20-year commitment
• Required management plan
(program will connect you with a
forester if necessary)
• Restricted timber harvests
• Some harvesting allowed
Enhancing Future Forests
• 10-year commitment
• Reduce competing vegetation by
85% (compared to initial)
• Maintain
• Perfect for properties with
invasive species

18. NCX (formerly SilviaTerra)
• Open to landowners across the contiguous U.S.
• Interested landowners can submit their property for assessment at
landowners.ncx.com.
• After receiving the assessment of their predicted business as usual harvest level, landowners can
choose to participate by bidding the volume of harvest they are willing to defer.
• Landowners complete a Seller Agreement and proceed to defer their harvest at a volume that
matches their accepted bid volume.
• After one year, NCX verifies that the harvest deferral commitments were
made and landowners are paid per the accepted bid price
• The term length is 1 year. Landowners are eligible to re-enroll in the
following year if they wish, but they are not required to re-enroll
• Landowners are not required to pay any fees to participate in the program
• So far this year, nearly 2,000 landowners have requested a free eligibility
assessment of their property, with ownerships ranging in size from 25 acres
to 100,000+
• All assessment / monitoring done remotely

19. It’s Not Just Forests….
• European Markets Rewarding Mass Timber and Biochar
• U.S. projects potentially eligible
• I am involved in a project where the largest revenue source is
carbon credits, not the finished product
• Possibility that lumber and panel products, perhaps even long-
lived paper, receive similar treatment
• Might be a carrot (incentives) or a stick (tax on competing
products), but expect carbon to be a factor in many purchasing
decisions
• If / when this occurs, it will impact our transportation costs (as
well as everyone else’s)

20. Implications for the Forest Industry…
• New revenue opportunities for landowners
• May constrain supply for some products
• Loggers impacted by change in harvesting
• If we are deferring harvests and growing more big sawlogs, what does that
mean for wood flow? For pulpwood and other small diameter?
• What does this mean for investment in manufacturing?
• If carbon offset prices rise, how does the equation change?
• #forestproud recently shared an article predicting a 10x increase in the price
of carbon

21. Evaluating Opportunities
• INRS helps landowners consider whether a carbon project
is right for their situation
• Also help industries evaluate what impact might be on them –
both opportunities and challenges
• We have a non-exclusive relationship with carbon project
developer Blue Source, but have worked with a number of
programs and developers
• This isn’t a good fit for many landowners right now, but
markets are constantly changing and evolving (and will for
a while)

23. Eric Kingsley
Innovative Natural Resource Solutions LLC
Phone 207-233-9910
Email kingsley@inrsllc.com