Forest Carbon Offset Pilot Program

Purpose

The purpose of the Forest Carbon Offset Pilot Program is to assist land trusts with forested fee lands in gaining access to voluntary carbon offset markets by aggregating their holdings with those of other land trusts. The Land Trust Alliance (the Alliance) and Finite Carbon have established a collaboration to effectively design and nimbly implement this pilot program for the benefit of individual land trusts nationwide.

The voluntary carbon offset market refers to the voluntary purchase and sale of carbon offsets, which represent reductions or removals of greenhouse gases (GHGs) resulting from eligible project activities. It is a global market with demand provided primarily by corporations motivated by corporate social responsibility. The natural climate solutions that land trusts already provide on their lands creates a natural fit for the voluntary carbon offset market, most commonly through improved forest management (IFM) projects.

IFM projects increase or maintain forest carbon stocks relative to baseline levels through management actions, such as extending harvest rotation lengths, maintaining stocks at a high level, widening stream buffer widths and increasing productivity by removing diseased or suppressed trees. Forests that are passively managed or managed for old-growth characteristics are eligible. The overarching goals of IFM projects are generally aligned with land trusts’ stewardship and management goals, creating an opportunity for substantial unrestricted and sustainable income streams to support land trust operations.

Goals and Program Benefits

• The program will support land trusts in successfully developing carbon offset projects that will:
• Advance climate change mitigation through development of projects that naturally remove carbon from the atmosphere and store it in trees
• Provide unrestricted revenue for land trusts to enhance their land protection and stewardship activities, and support organizational sustainability
• Prevent the release of existing large, natural carbon stores (in addition to a broad range of co-benefits)
• Establish participating land trusts as early adopters and leaders in climate change mitigation and the voluntary carbon offset market arena

Eligibility

Land trusts which own forest land and are accredited by the Land Trust Accreditation Commission, or have validly executed a board resolution committing to pursue accreditation, are eligible to participate in the program. In addition, land trusts must demonstrate, through a signed, non-binding Memorandum of Agreement, that they have the interest and organizational capacity to participate fully in an IFM multi-landowner carbon offset project development process.

Project Development Process

Upon entering the Pilot Program, land trusts’ projects will be developed as aggregated projects under the American Carbon Registry’s (ACR) Improved Forest Management Methodology for Quantifying GHG Removals and Emission Reductions through Increased Forest Sequestration on Non-Federal U.S. Forestlands methodology. Permanent conservation agreements are not required for participation in ACR IFM projects, and project life is a fixed 40 years.

The Alliance and Finite Carbon are collaborating to offer comprehensive development and project management services to participating land trusts. As project developer, Finite Carbon will provide a full suite of technical and advisory services to develop IFM multi-landowner projects, including:

1. Conducting initial evaluation to determine eligibility and viability of the project
2. Designing and implementing the forest carbon inventory
3. Modeling and quantifying carbon offsets generated for each participating land trust
4. Completing and submitting project documentation
5. Selecting and managing an independent and certified third-party verifier to review and verify project eligibility and carbon offset quantifications
6. Selling carbon offsets

One of the major barriers which has inhibited land trusts from aggregating holdings to enter the voluntary carbon market has been the lack of a legal framework to protect each land trust’s interests. To address this, the Alliance is providing participating land trusts with a template “Carbon Offset Project Operating Agreement” to use and adapt. This Operating Agreement, developed by the Alliance with assistance from legal counsel, establishes protocols, procedures, responsibilities and liabilities among the participating land trusts and/or private landowners for implementing a multi-landowner IFM project. Land trusts participating in the program may also apply to the Alliance for a grant of up to $10,000 per land trust to cover costs associated with project development.

Costs, Fees, and Distributions

Finite Carbon will develop the project at no up-front cost or financial risk to the land trusts and serve as project manager for a specified multi-year term. All project costs will be recouped from revenues generated through offset sale and issuance. After Finite Carbon’s term has concluded, the land trusts will be responsible for, among other things, operations, and maintenance costs for the remainder of the 40-year project term. These costs may be substantial but can be covered through revenue generated by offset sales and set aside by the land trusts for such purposes.

Key Documents and Agreements

The following agreements represent the expected suite of binding and non-binding documents to implement the development, management, and governance of an IFM multi-landowner carbon offset project under this pilot program:

• Mutual Non-Disclosure Agreement. Between Finite Carbon, the Alliance, and each participating land trust to restrict, control, and manage the disclosure of confidential technical and business information which the disclosing party desires the receiving party(s) to treat as confidential.
• Program Description and Land Trust Commitment MOA. Between the Alliance and each participating land trust that outlines the expectations and scope of the IFM project and secures each participating land trust’s non-binding intent to devote time and attention to pursue participation in the project.
• Carbon Offset Project Operating Agreement. A binding agreement between participating land trusts that sets forth their respective rights, obligations, entitlements and undertakings with respect to the IFM carbon offset project, to ensure the viability of the project, maximize revenues produced by the project, and establish a governance framework to jointly manage the project. As further described below, one participating land trust will be designated as the “Project Proponent” of the IFM carbon offset project.
• Carbon Development Agreements. Various binding and non-binding agreements between participating land trusts, Finite Carbon and the offset buyers which define project development services, commercial terms for the project, how offsets will be transacted, and revenue distributions among parties.

Project Proponent

The ACR requires that one entity serve as the “Project Proponent” over the forty-year term. Such entity is responsible for, among other things, entering into all applicable agreements with ACR, and serving as the ACR account holder for the issued offsets generated by the project.

The program contemplates that one participating land trust will be designated as the “Project Proponent” of each IFM carbon offset project. The Project Proponent will be the only land trust entering into the Carbon Development Agreements. Given that fact, the Project Proponent will need to exercise its rights, powers and remedies under the Carbon Development Agreements, on behalf of themselves and the other land trusts involved in the project. The land trusts involved in an IFM carbon offset project will need to determine which land trust will serve as the Project Proponent.