Carbon offsetting not profitable yet: Partnership says prices are still too low for Inland Northwest farmers

Oct 29, 2008 (The Spokesman-Review - McClatchy-Tribune Information Services via COMTEX) -- CXCHF | Quote | Chart | News | PowerRating -- Carl Mattson gets a small cash bonus for practicing no-till farming on his 4,000-acre dryland wheat farm near Chester, Mont.

Seeding his fields without plowing keeps carbon locked in the soil. "We don't expose the organic material to oxygen, so we aren't releasing carbon dioxide into the atmosphere," explained the third-generation farmer, who sells credits from his greenhouse gas-reducing farm practices on the Chicago Climate Exchange.

At the moment, the credits are worth 70 to 80 cents per acre -- a pittance for Mattson, who spends about $100 per acre seeding his fields with the hard red wheat grown on Montana's prairies.

"No one's interested in this for 70 to 80 cents per acre," said Mattson, a speaker at Tuesday's annual meeting of the Big Sky Carbon Sequestration Partnership in Spokane. "We're interested in the potential, if this stuff goes to $20 to $30 per acre."

Part of the solution to global warming is locking up carbon, said researchers at the Big Sky partnership, a six-state effort headquartered at Montana State University.

Carbon dioxide can be pumped into salty, underground aquifers; stored in the pores of basalt rocks found in the Columbia and Snake River flood plains; captured by trees in temperate forests; or contained in prairie soils.

Storing carbon keeps it out of the atmosphere, helping buffer climate change. But without mandatory limits on U.S. greenhouse gas emissions, there's little market incentive to develop carbon sequestration projects, speakers said.

That may change with a new presidential administration. Both candidates say they support a "cap-and-trade" system for emissions, which would create pollution allowances for businesses and industries. They could sell credits if they fell below their allotted emissions, or buy offset credits if they exceeded their limits.

It "puts a price on carbon, and quits making it free to vent into the environment," said Melisa Pollak, a research fellow at the University of Minnesota's Hubert H. Humphrey Institute of Public Affairs.

Developing underground carbon storage costs about $30 to $80 per ton of carbon dioxide, Pollack said. Without a strong market for carbon offsets, investors won't fund projects, other speakers said.

In Europe, where carbon dioxide emissions are capped by law, carbon credits run about $22 per ton. The going rate on the Chicago Climate Exchange, where industries voluntarily buy carbon credits to offset pollution, is $1.20 per ton.

In late May, while Congress debated legislation that would have capped U.S. emissions, the Chicago Exchange rate briefly shot up to $7 per ton. The legislation failed, and the price dropped.

A cap-and-trade system could also create new cash flows for Northwest forests.

In the United States, forests absorb about 10 percent of the nation's carbon dioxide emissions each year. About 700 million metric tons of carbon dioxide are taken in by forests each year, or stored in wood products.

"Trees eat carbon. They pull it down out of the atmosphere," said Jay O'Laughlin, director of the Idaho Forest, Wildlife and Range Policy Analysis Group at the University of Idaho.

Trees take in carbon dioxide during photosynthesis, using it to build branches, leaves and roots. Young forests, in their 20s are 30s, soak up the most carbon, but older forests store greater quantities.

At the moment, however, stands of fir, larch and pine are worth more at the sawmill than they are as carbon sinks, O'Laughlin acknowledged.

The Nez Perce Tribe replanted 5,000 acres along the Clearwater River to get into the carbon credit business. But prices have been so low that the tribe is holding off on selling some of its credits, O'Laughlin said. Most landowners would break even at carbon credit prices of $10 per ton, he said.

As carbon sinks, forests hold tremendous potential, said Brian Murray, director of economic analysis at Duke University's Nicholas Institute for Environmental Policy Solutions. They're already absorbing 10 percent of the nation's carbon dioxide emissions. "That's a pretty big number to start with," Murray, who was not at the meeting, said in a phone interview.

However, carbon offsets from forests come with uncertainties, he added.

Stands of trees can be incinerated in wildfires, killed by bark beetles, or toppled by windstorms. "Somehow, you have to make up for the loss of that carbon," Murray said.

The 2006 fire season in Idaho was a prime example, O'Laughlin said. So many acres burned in the Gem State, that forests -- which cover 41 percent of the state -- were net producers of carbon dioxide that year.

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