Turning trees' carbon into silver

A Wayne company aims to help forest owners profit from a potential demand for antipollution credits.

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Finite Carbon founders Scott Nissenbaum (left) and Sean Carney see forest-carbon offsets as a way to make money while improving the environment. (Michael S. Wirtz / Staff)

Scott Nissenbaum doesn't consider himself a tree hugger. But his appreciation for a leafy canopy goes well beyond shade.

In the stands of elms, cottonwoods, maples, birches, and pines that help form the 747 million acres of U.S. forestland, he sees profit.

Not in helping landowners cut trees down for sale as lumber. But in helping them continue to nurture their woods and make money off the carbon sequestered there - the carbon dioxide taken up through photosynthesis and stored in the trees' trunks, branches, foliage, and roots.

The national push for climate-change initiatives, coupled with falling timber prices and a growing demand for protecting and regenerating forests for the good of the environment, has helped create "a tidal wave of momentum" in the forest-carbon market, Nissenbaum said.

He hopes to ride that wave to profitability while doing something good for the environment through Finite Carbon, the Wayne company Nissenbaum, formerly with Novitas Capital, founded in February with another venture capitalist, Robert Verratti.

Until April 2007, Verratti headed Wayne-based Traffic.com Inc., a commercial supplier of digitally gathered traffic data. He is Finite Carbon's chief executive officer; Nissenbaum is its president.

The company helps owners of forestland determine the carbon-capture value, if any, of their towering assets and provides the capital to finance the expensive, complex, and time-consuming process of evaluating, registering, marketing, and selling those carbon offsets.

That cost is typically close to $200,000, but could exceed $1 million on tracts of more than 100,000 acres, Nissenbaum said.

Largely untested in the United States, forest-carbon offsets are a source of concern among environmentalists. They worry offsets will be overused or abused, with credits going to owners who were not considering clear-cutting or whose land does not matter much in the overall national carbon footprint.

There is also concern that trading carbon credits will supplant what environmentalists really want - a full-scale assault on greenhouse-gas emissions.

"It can't be looked at as a silver bullet," said Nathan Willcox, an energy and clean-air expert for PennEnvironment, a nonprofit advocacy group. "We need to be cutting global-warming pollution at its source, versus just finding new places to put the pollution once it's created."

Finite Carbon is believed to be the first company of its kind, in that it offers one-stop forest-carbon shopping - from conducting property inventories, project design, and verification management to funding tree measuring and carbon modeling; paying transfer, registration, and brokerage fees; and hiring any other experts needed to convert captured carbon into revenue for the property owner.

Not that forest carbon is a monster-size industry.

In the carbon-offset market, forestry "is either small or, in people's minds, doesn't exist," Nissenbaum said. So far, Finite Carbon reports having evaluated nearly two million acres for "several dozen" owners throughout the United States, including in Maine, Alaska, and Texas.

A few years from now, Nissenbaum said, forest-carbon trading could reach more than $1 trillion - especially if U.S. cap-and-trade legislation is passed, establishing a mandatory national market.

In a cap-and-trade system, government sets a limit on the release of certain pollutants, allowing companies that would have difficulty reducing emissions to buy credits from those that can.

Citing confidentiality provisions, Finite Carbon would not disclose whether its work had resulted in sales of carbon credits.

Europe has had a cap-and-trade system since 2005. Its entire traded-carbon market was $120 billion in 2008, Nissenbaum said. "The world has really made a determination that climate change is real, that it's a true hazard to the population."

Sequestration is considered among the least expensive ways of limiting carbon dioxide in the atmosphere. That, along with weak demand for timber, has prompted owners to pursue monetizing their forestland's carbon-sequestration value, especially in the United States.

The European carbon market "has really ignored forestry," Nissenbaum said.

At least 1,000 acres, preferably more than 5,000, are considered necessary to make carbon sequestration "financially feasible," he said.

Tree sizes and types also are factors.

On Finite Carbon's staff of seven is Matt Delaney, a 10-year veteran of forest-carbon monitoring, who "spends a lot of time . . . measuring the trees," Nissenbaum said. The data are fed to Sterling Griffin, a professional forester, who creates models of the land's carbon-sequestration potential for third-party verification and regulatory approval.

Large utilities are often buyers, looking to snap up carbon credits in anticipation of cap-and-trade legislation's passage and a rise in the cost of credits, said Sean Carney, Finite Carbon's vice president of carbon finance.

Hedge funds and multinational firms also view carbon credits as promising investments, he said.

What's missing is a national market that would put a price on carbon. The American Clean Energy and Security Act, which the U.S. House passed in June and is awaiting Senate action, would do that.

Currently, prices on voluntary-compliance markets such as the national Climate Action Reserve and regional markets such as the Regional Greenhouse Gas Initiative vary widely, from 40 cents per ton of carbon offsets to nearly $6.50 per ton.

"While the presence of a mandatory national market would create the greatest opportunity for Finite Carbon, the company's success is not dependent on it," Nissenbaum said.

Worth noting, he said, is that the interests of Finite Carbon and its clients are aligned. Rather than charge a fee, the company gets a percentage of the forest-carbon offsets after a project is registered and approved. The cut is based on such things as the number of acres and their location, the carbon stocks, and the type and number of landowners.

"Not only do we have a vested interest in the success of the project, our compensation comes from monetization at the end," Nissenbaum said.

In the environmental community, meaningful payoff is reducing global warming. At PennEnvironment, Willcox's reaction to credits granted in any cap-and-trade system is decidedly mixed.

"How do you ensure that the forest-carbon industry doesn't become another Wall Street, whereby forest owners are getting credit for pollution reductions not actually achieved, due to loopholes in the system?" he asked.

Carney, a former broker at CantorCO2e, an emissions-brokerage subsidiary of Cantor Fitzgerald L.P., insisted Finite Carbon's motives are as much about protecting the environment as they are about making money.

"We're here to do well, by doing good," he said.

 


A Primer on Cap-and-Trade

"Cap-and-trade" is another name for emissions trading - a method of controlling greenhouse gases by creating a market for permits to pollute.

The government sets

a hard limit - the cap - on emissions and grants allowances to regulated emitters of gases such

as carbon dioxide. Industries that need more allowances trade for them from companies that have an excess.

Under legislation passed by the U.S. House and awaiting action in the Senate, the cap would gradually be reduced to achieve a 3 percent reduction of 2005 emissions levels by 2012 and an 83 percent reduction by 2050.

- Andrew Maykuth


Contact staff writer Diane Mastrull at 215-854-2466 or dmastrull@phillynews.com.