Cost to produce Carbon credits by reducing the harvest level in British Columbia, Canada

Abstract

This paper uses the inventory of three actively managed forest estates located in the Coastal, Central Interior, and Northern Interior forest regions in British Columbia to estimate the cost to produce Carbon credits ($ per Carbon credit) when the harvest is reduced below the baseline level. The financial analysis was conducted over a range of discount rates (0-16%) and the total cost included the opportunity cost due to harvest reduction and the Carbon project cost (the Carbon project initial establishment and validation cost and the ongoing verification cost for two frequencies (1-year and 5-year)). When the opportunity cost was not included, the cost per Carbon credit was similar to previous findings (lower cost per Carbon credit for higher site index (i.e. top height in meters at age 50)). However, when the opportunity cost was included the cost per Carbon credit was higher for higher site indices which corresponded to higher average value per hectare harvested (AVHH) (i.e. timber revenue multiplied by average harvested volume per hectare per year). The reversal of trends is the result of the average timber revenue being higher for higher site indices which resulted in a higher opportunity cost and higher AVHH. The opportunity cost represented 58% to 97% of the cost per Carbon credit. Compared to the 5-year verification, the 1-year verification frequency increased the total cost per Carbon credit by 1% to 22%, with the smallest increase being when the Carbon project cost represented a small percent of the total cost. The estimates for the three forest estates analyzed here represent three points from a larger spectrum, and they identify the cost per Carbon credit over a range of site indices (14.7 to 25.6 meters top height at age 50), AVHH (12.2 to 63.7 thousand $ ha −1 year −1 ), and timber net revenues ($4 to $35 m −3 ). Further research is required to determine if the trends found in this study hold over a more densely populated spectrum.

Cost to produce carbon credits through fluctuating harvest levels in British Columbia, Canada

“…In this study, we continue the analysis conducted by Man et al (2013) and Man et al (2015) on the potential of the harvest reduction strategies to produce carbon credits in British Columbia. Man et al (2013) explored the potential of alternate forest management strategies to sequester and store carbon in two actively managed forest estates in British Columbia.…”

“…Many of the methods used in this study are detailed in Man et al (2013) and Man et al (2015), yet for clarity and convenience critical information is included here.…”

“…Man et al (2013) found strategies that reduce harvest levels significantly outperformed strategies that increase stand growth. Man et al (2015) estimated the costs to produce carbon credits using strategies that reduce harvest levels over the first 25-year period for three significantly different and actively managed forest estates in British Columbia. The inclusion of the opportunity cost due to harvest reduction significantly increased the cost to produce carbon credits (higher cost for higher value stands).…”

“…(1) is identical to the levelization equation from Richards and Stokes (2004) and to the discounted carbon equation from Boyland (2006). Here, H is the harvested volume ( B -baseline, C -carbon project), TNR is the average timber net revenue per cubic meter (the difference between the timber revenue and the harvesting cost, estimated at $35 m -3 for the last 10 years of financial data for MKRF (Man et al 2015)), C is the number of carbon credits produced for the 25-year carbon project life, CC is the carbon project cost which includes the initial establishment and validation cost (estimated at $5.61 ha -1 from Galik et al (2012)) and ongoing 5-year frequency verification cost (estimated at $1.52 ha -1 from D r a f t the 25-year carbon project).…”

“…Moreover, out of the harvest reduction strategies mentioned above, the harvest reduction to a fixed target level is better able to adapt to changing markets and natural disturbances (Man et al 2013). However, the opportunity cost due to harvest reduction (i.e., the cost of leaving the forest standing to produce carbon credits as opposed to generate revenue from selling the timber) can account for 58-97% of the total cost to produce carbon credits (Man et al 2015).…”