The State of Alaska issues regulations for a carbon offset program

JUNEAU — The Dunleavy administration has finalized regulations allowing the sale of carbon offset credits on state lands.

The Legislature approved Senate Bill 48 last May to allow the state to establish a carbon offset program. The new state law is set to take effect July 19. A yearlong public process has begun in Haines to change the state’s forest management plan to allow for carbon offsets.

Trevor Fulton, manager of the state’s carbon offset program, said it will likely be another 18 months to two years before the state starts selling carbon credits.

“We are still relatively early in the process,” he said at a public meeting in Haines in May.

This process has been going on for over a year.

During his annual address to the Legislature last January, Gov. Mike Dunleavy outlined plans to monetize Alaska’s carbon emissions. SB 48 created a framework for establishing carbon offsets on public lands. Dunleavy’s second bill, approved by lawmakers in May, allows the state to establish a regulatory framework for storing carbon deep underground.

Dunleavy said last year that a carbon management system could generate billions of dollars a year in new revenue for the state. However, initially expectations for revenues from carbon credits are much more modest.

The state is considering three areas to begin selling carbon offsets: Haines State Forest, Tanana Valley State Forest and state forest lands in the Matanuska-Susitna region. All three pilot projects are expected to cover between 75,000 and 100,000 acres each. Anew, an outside consultant, estimated in 2022 that the state could get $8 million a year from these three areas in the first decade.

“We hope to see that number grow as projects are developed across the landscape and as we continue to leverage Alaska’s carbon offsetting potential,” Fulton said.

Under the law, 80% of revenues generated from carbon credits would go to the state’s general fund, which could be used for any purpose. The remaining 20% ​​would go to a state renewable energy subsidy fund for clean energy projects.

Carbon offsetting in Alaska could mean the state would be compensated for preserving forests, farming kelp and even selling millions of acres of timber killed by bark beetles for biochar, a carbon-rich material used in agriculture.

(Environmentalists are calling on the U.S. to plan a “phasing out” of the Trans-Alaska Pipeline due to climate concerns)

In an interview, Fulton said the state intends to participate in carbon offsetting in two ways: by developing its own offset program and then establishing a program to lease carbon management projects to third parties. Fulton said state law likely makes it impossible to manage leasing of Alaska’s timber resources. That means third-party leasing would likely be limited to projects such as biochar and seaweed farms, he said.

Alaska is set to participate in a $2 billion global voluntary carbon market that allows corporations such as airlines to purchase carbon credits to offset their emissions. The much larger $800 billion compliance market that California participates in through its cap-and-trade program requires corporations to reduce emissions to a certain level, including through carbon offsetting.

Each carbon offset equals one ton of carbon avoided or removed from the atmosphere. Fulton said that would be equivalent to the amount of carbon produced by an average round-trip trip from Anchorage to Seattle.

Climate vs. Logging

The revenue implications of carbon credits for Alaska are uncertain—as are the environmental benefits. A growing body of research has questioned how offsets measure emissions reductions and whether they work at all.

In response to concerns about an unregulated, voluntary carbon market, the Biden administration in May released a set of rules defining high-integrity carbon offsets that have a measurable impact on emissions reductions.

Legislative debates about monetizing carbon storage in Alaska have focused more on the potential for revenue and industrial investment than on environmental benefits. But proving these environmental benefits could be crucial.

(Previously: Alaska’s carbon storage bill, once a revenue-generating measure, is now seen as a boon to the oil and coal industries)

Dominick DellaSala, chief scientist at Wild Heritage, a California forest conservation group, said the state would have to show how its offset program would reduce emissions and verify it. Using logging as an example, DellaSala said the state could commit to not cutting down old trees and instead using them as a carbon sink.

“That difference between what they could release through logging and what they protect, that’s carbon offsetting,” he said.

The Alaska Department of Natural Resources said the state will demonstrate the environmental benefits of the compensation program through improved “forest management projects” to increase “carbon stocks year after year.” The spokesman said these projects could include planting trees and thinning tree stands to reduce congestion — among other practices.

Sealaska Corp., a Southeast Alaska corporation, agreed several years ago to participate in California’s cap-and-trade program and protect thousands of acres of old-growth forests for 100 years. The value of the transaction in 2015–2020 was USD 100 million.

DellaSala said “reasonable” carbon offsets in Southeast Alaska will come from protecting old-growth forests for decades. He said state regulations and other forest management practices appear “vague” and pose a risk of “eco shaming.”

In May, state officials held a public meeting to begin discussing whether to allow carbon offsets in the Haines National Forest. The 260,000-acre state-managed forest has some of the “highest levels of carbon per acre” studied by Anew.

Jessica Plachta, executive director of Lynn Canal Conservation, welcomed the state’s interest in carbon offsets. She said much of the timber in the area is of low value because of the flaws in the wood. Carbon offsets would be a significant improvement in forest management practices compared with selling large, old trees, she said.

“These forests provide excellent salmon spawning and rearing habitat, host the world’s largest gathering of white-tailed deer, and support the local subsistence and commercial fishing and tourism industries that underpin the local economy,” she said in an email.

SB 48 states that national forests used in a carbon offset program “must remain open to the public” for hunting, fishing and other recreational opportunities. The Dunleavy administration has also stated that carbon offsetting can coexist with resource-extractive industries such as logging.

But there can be a balancing act. Trees with the greatest potential to capture carbon emissions are typically the most attractive to the timber industry.

State forester Greg Palmieri said in May that the five-year timber sale schedule in Haines would be put on hold as the forest management plan was discussed. Once this process is complete, state officials should have a better idea of ​​how to apply carbon offsets in Haines.

“Every acre of forest that is available for timber sales will be available for carbon offset programs,” Palmieri said, adding that “the goal is to create the most value for the state in the resources they have on the lands we manage.”

State officials say they have heard some concerns from the timber industry, but highlighted several factors that will help address concerns. National forests considered for carbon offsetting are below allowable logging, which refers to the amount of wood that can be harvested sustainably; there are no specific projects under active consideration; and public involvement will be strong as compensation programs are developed, they said.

“Entering into an improved forest management project does not eliminate logging, it only eliminates the most aggressive logging scenario,” a Department of Natural Resources spokesman said.

Bryce Dahlstrom, president of the Alaska Forest Association, said the timber industry trade group will not comment on carbon offsets until state projects are ready to be submitted.

In the case of the Southeast Conference, a regional economic development organization, there is interest in the potential benefits of carbon offsets. Robert Venables, executive director of the Southeast Conference, said he intends to develop a mariculture program to see how much carbon can be sequestered in seaweed and kelp.

He added that the challenge for the state and others is to combine science with the potential economic benefits of carbon offsetting.

“I think there is a lot of potential, both on the mariculture and forest side,” he said. “This will require a new approach on both fronts.”