Carbon Markets in the Woods

By Calvin Norman 

The Penn State College of Agricultural Sciences owns 140 forested acres in central Pennsylvania. The land was farmed until the mid-1800s and consisted of fields and pastures when Penn State took ownership. The trees returned when agricultural operations ceased and what grew back is typical of the area — an oak-hickory forest with a small amount of eastern hemlock and eastern white pine. It has been stewarded through the decades by the careful management of several foresters, including Jim Finely, David Jackson, and myself.  

During its early stage of growth, the land did not look like a forest. It was a field of golden rod and raspberries. There were trees but they were small, and being trees, they took time to grow. This field was not barren, but full of life, including animals like Eastern Bluebird, American Woodcock, and red-tailed fox. After 10 years, the old field was dense with young trees that provided a home to many species of wildlife like Ruffed Grouse (the state bird), Gold-winged Warbler, and eastern cottontail. As time passed and the forest aged, the trees competed for space, light, and nutrients. This competition changed the habitat, so the animals that had lived in the young dense saplings left and were replaced by the likes of Black-capped Chickadee, gray tree frog, and the Red-tailed Vireo. The ax also returned to the forest. Under the supervision of a forester, it was used to reduce competition and release high-value trees like white oak, northern red oak, and shagbark hickory.  

Eventually, the forest fully matured, and the wildlife that called it home changed again. Black bears, Pileated Woodpeckers, and Great Horned Owls arrived. Throughout the life of this forest, trees grew and pulled carbon dioxide out of the atmosphere and turned it into sugar and oxygen in their chloroplasts with the help of water, nutrients, and sunlight. And as they grew, they released oxygen into the air. Capturing carbon dioxide is the often discussed but rarely seen act of sequestration. Keeping it is known as carbon storage — another important act.  

As with many forests, long-term management plans were set in place. The goal for this forest was to ensure that it could provide an educational experience for stakeholders, a place for wildlife to live, and a source of income that would pay for future forest improvements. Eventually, it would have been harvested as generations of forests had been before, but due to an unforeseen event, the harvest happened earlier than anticipated.  

Hemlock woolly adelgid, a non-native insect, attacked the eastern hemlocks, and within two years of its appearance, all the hemlocks were killed. No longer could Northern Flickers feed in their branches and porcupines spend a night in their boughs, nor could white-tailed deer take shelter in a storm. This mass die-off forced us to accelerate our harvest plans, as this piece of the woodlot, or stand, was roughly one third hemlock. To ensure the forest grew back, and with the goals of providing educational opportunities, wildlife habitat, and income, Jim Finely and David Jackson initiated a shelterwood harvest. This type of harvest consists of two to three cuttings which allow for an adequate amount of light to reach the forest floor, resulting in the regeneration of oak and hickory.  

Pictured top left, is the forest seven years after the first harvest, which occurred in 2012. This harvest removed 48,970 board feet of saw timber (a piece of wood that is 12 in x 12 in x 1 in) which is cut from large diameter logs relatively free of defects. This timber was sold to a local sawmill to create lumber for solid wood products like floors, cabinets, and furniture. The harvest captured 135 tons of carbon (CO2e). Wood that could not be sold for sawlogs (too small or not high quality) was sold as pulp, to be shredded or chipped to make paper, oriented strand board or fiberboard. We sold 1,294 tons of pulpwood, which equates to 1,067 tons of carbon. 

In total we captured 1,192 tons of carbon, some of which would go into creating high-value long-lived wood products, while keeping carbon out of the atmosphere. The harvest generated $12,860 in revenue and contributed to the regeneration of the forest, which is again full of a wide variety of birds, plants, and amphibians. Within the next two years, we plan to remove the remaining large trees to allow the young trees beneath them to grow. 

The money from the harvest was used to erect deer fencing — an 8ft tall woven wire fence — to protect young sapling from the overabundant deer, whose browsing would kill some trees and prevent others from growing past the size of shrubs. This cost us about $8,500 (about $3 a foot). After the trees grew to a size large enough for the deer to no longer be a problem, we paid $3,200 to take the fence down, roughly breaking even. We also managed invasive plants like Japanese stiltgrass, multiflora rose, and oriental bittersweet that would have prevented the regeneration of saplings. 

This experience at Penn State is not unique. Pennsylvania is home to roughly 16.6 million acres of forestland, nearly 70% of which is held by private landowners. Pennsylvania is the number one exporter of hardwood lumber in the US and has been for many decades, as our forests increase in volume by about 2 billion board feet a year.  

Unfortunately, there are threats to forest health. These threats include non-native forest pests, invasive species, and climate change. Addressing these threats would not be possible without financial support for many landowners. Traditionally, landowners relied on the money brought in by harvesting — with as much as 90% of harvest income coming from the sale of sawlogs. With forest management becoming more expensive, there is increased interest in carbon markets that would allow landowners to ensure that forests sequester and store carbon in the trees and soil. 

Trees have been around for 200-370 million years, depending on the species, which has given them plenty of time to perfect carbon capture through photosynthesis. Plants are so effective at this process that they changed earth’s atmosphere from mainly carbon dioxide to a high concentration of oxygen. At that time, most of Earth’s organisms were photosynthetic and relied on carbon dioxide — rather than oxygen — for life. Today we face the opposite problem: there is an increasing amount of atmospheric carbon dioxide, and we (humans) are searching for a solution. While there is not one solution to this complex issue, trees play an important role in reducing atmospheric carbon dioxide.  

While carbon is not new to forests, the market for carbon is. The idea behind carbon markets is to allow carbon emitters to meet emission reduction goals by paying someone, in this case a forest owner, to take a new action that captures carbon — this is called additionality. The other key term in carbon markets is permanence, which is how long the carbon is locked out of the atmosphere. If permanence is short, the impact on the climate is minimal. To make a long-term impact on reducing climate change, carbon dioxide must be taken out of the atmosphere for a long time. In forest carbon markets, only carbon stored in trees is measured (even though soils in eastern forests can contain almost as much carbon as the trees) because trees are much easier to measure, grow, and manage.  

There are two kinds of carbon markets, regulated markets that are required and regulated by governments and voluntary markets, where there are no regulations and participation is voluntary. In both regulated and unregulated markets, credits are created in many ways, such as installing renewable energy, capping fossil fuel, and in forests.  

The largest regulated market is the California Air Regulatory Board (CARB), which requires companies/emitters to meet California state emission standards. Carbon credits in this market are created by people or companies inside or outside of California, so forest owners in Pennsylvania can and have sold carbon credits to participating California entities. In 2021, Pennsylvania forest landowners could earn as much as $15 per acre by participating in CARB, although actual earnings varied by forest and contract terms. 

Unlike regulated markets, participants in voluntary markets are not required by a government or regulator to offset their emissions — they are offsetting by choice to meet Energy, Social, and Governance (ESG) goals, net-zero emissions promises, or for other reasons. The voluntary market is a rapidly growing sector, especially in Pennsylvania, and accounts for much of the overall growth in carbon markets. Demand for voluntary credits is increasing as the threat of climate change becomes more pressing and by stakeholder demand. Through the purchase of credits, carbon market participants seek to be part of the solution to climate change.  

Because the voluntary market is largely unregulated, the actions required to participate vary; in some programs, landowners are paid to control invasive species, others pay landowners to regenerate new forests by harvest, and others pay landowners not to harvest. The time that landowners engage in these programs also vary, as well as the permanence. The credit purchaser pays the forest owner to undertake a change of behavior that impacts carbon. The definition of some of the measurements in voluntary market can also vary by program — for example a program may offer 1.2 credits per acre of forest while others may say there are 2 tons of carbon per acre. When buying credits in voluntary markets, it is important that buyers do their homework and understand what they are purchasing.  

In 2021, Pennsylvania forest landowners could earn $4-10 per acre per year by participating in voluntary markets. While these programs can be a potential income source for forest owners, not every program is appropriate for every forest. For example, a landowner was recently offered a contract that would prohibit harvesting their late maturity aspen forest for 60 years. However, to maintain the health of the forest, the aspen would need to be harvested in 20 years. The owner turned down the contract to ensure their forest was productively growing and sequestering carbon. Every forest is different, and management needs to be tailored to each forest. 

The construction industry plays a large role in forest management as it is one of the main customers of forest products. A tree’s monetary worth is nothing until it is cut down (squirrels, birds, and salamanders can’t live without them, but they do not pay rent). By specifying sustainably managed, American-grown hardwoods, architects can support forests, carbon sequestration, carbon storage, and create a home for the diverse species of wildlife that call the forests home. Building with wood means building with carbon and increasing carbon storage, while building with other materials releases carbon. The comparative carbon benefits of using wood instead of other building materials is known as the substitution effect. 

Trees sequester carbon by growing, and store captured carbon for long periods of time in their wood. Sustainably managed Pennsylvania forests provide habitats for a diversity of wildlife, employ thousands of workers, pay for increasingly important forest management, and store carbon that would have been released through natural decomposition. Using forest products and supporting forest management is not going to stop climate change, but it can certainly help slow it.  

Calvin Norman is Assistant Teaching Professor of Forestry in the Penn State College of Agricultural Sciences. He is a Wisconsin native, who moved to Pennsylvania after earning a Master of Science degree from Clemson University. Prior to that he worked in Michigan’s Upper Peninsula, where he managed 10,000 acres of forest.