Ducks Unlimited Wades into the Carbon Market

Biodiversity Climate Forests Investments Water Jan 1, 2001
Alice Kenny

The Ecosystem Marketplace zooms in on an innovative carbon-trading scheme facilitated by Ducks Unlimited. With successes already notched on its belt, the program also has much to teach about the challenges—scientific, political and economic—that face forest sequestration projects in the United States. Aggregating terrestrial credits for the voluntary carbon market sounds like a fairly esoteric enterprise to most, but for Ducks Unlimited—a 70-year-old conservation organization that has worked with thousands of landowners on projects covering 11 million acres of land—pulling together land for CO2 sequestration was a natural evolution of its services. And so, when President George W. Bush dangled a carrot in 2002 challenging U.S. smokestack industries to reduce carbon dioxide emissions voluntarily or face possible mandatory emission-reduction legislation, Ducks Unlimited was quick to capitalize on the opportunity. Unlike trading centers or investment funds, Ducks Unlimited aggregates land credits, matching groups of private landowners with energy companies seeking to offset their green house gas emissions. Now, two years after thousands of hardwood seedlings were planted on 400 acres of former farmland, Ducks Unlimited and the 25 energy companies with whom they partnered can tick off a list of achievements – sequestering greenhouse gas emissions, restoring forests, reducing erosion, preventing floods and improving water quality. Meanwhile, landowners got paid for turning marginal farmland into forests. The reforested land sequestered far more carbon than the tilled land had. Ducks Unlimited acquired rights to sell the carbon that the restored forests sequestered to energy companies, thereby gaining locations and income to protect waterfowl. And energy companies took credit for sequestering carbon without reducing their industry emissions. "We regard CO2 trading as a huge part of our future. Industries developing proactive strategies will stay ahead of the curve while those ignoring the issue will lag behind," says Ed Steadman of the Energy & Environmental Research Center, who is project leader for the Plains CO2 Reduction Partnership, a U.S. Department of Energy funded program. Despite these successes, Ducks Unlimited has also learned the financial, political and technical hurdles involved in orchestrating a carbon-trading program in a nation where it is not yet mandated. Accordingly, people inside and outside the organization have begun evaluating the project's challenges and pitfalls in order to get a better sense of what is needed to foster continued success.

Forests as Super Heroes

In the world of global warming, distinguishing between the good and bad guys at first glance appears fairly black and white. Draped in the dark capes are the carbon-fueled power plants and iron, steel, cement and paper factories spewing CO2, the dominant heat-trapping greenhouse gas. Meanwhile, the green-hooded forests, AKA the Good Guys, use the process of photosynthesis to suck up CO2 while creating sugar and oxygen. But the good guy/bad guy scenario is not as simple as Man vs. Nature. In fact, natural forces help warm the atmosphere and energy companies are finding ways to reduce global warming. Ducks Unlimited capitalized on this nuance when creating its aggregation plan. The balancing act begins with the acknowledgement that CO2, methane and other gases stored in the Earth's crust have warmed the planet since its formation. Exhaled into the atmosphere through volcanoes, rotting vegetation and flatulent animals, the gases create a greenhouse effect, warming the Earth's surface by 93 degrees Fahrenheit for thousands of years. The problem with excess warming began when industrialization replaced the days of horse and buggies. As a result, the earth's average temperature has warmed by one degree during the past century and could increase by between two and 10 degrees by the year 2100, climatologists say, triggering glacier melts, sea level rises and a nightmarish series of disasters. The temperature rise is related partially to the advent of power plants and also to the disappearance of forests. Deforestation contributes 25 percent to the global warming phenomenon, experts say. Meanwhile, no simple, cost-effective technology has been put in place to significantly cut CO2 emissions from the power plants on which we have grown to depend. Unfortunately, geological sequestration methods, or pushing greenhouse gases back into the earth, are expected to take at least another decade before they are perfected and widely used, says Steadman. So forests have become, at least temporarily, one of the acknowledged heroes in the fight against global warming.

Creating Carbon Sinks

From a struggling farmer's viewpoint, a dollar paid by an energy company is just as good as a dollar earned hawking tomatoes. Stressing this concept, Ducks Unlimited convinced owners of marginal farmland that their land could generate more income if placed under permanent conservation easements. Ducks Unlimited then pooled or aggregated these lands together for industry investors, making the purchase worth the investors' while. Buoyed by a Department of Energy grant, Ducks Unlimited established an infrastructure that used U.S. geologic surveys to track prime land available for carbon sinks and determine which land use activities sequester the most carbon. They targeted potential investors and developed mechanisms to monetize credits from these projects. Dick Kempka, who designed and ran Ducks Unlimited aggregation program, says that with this information in hand, "we're primed and ready to do portfolio management." From the Department of Energy's standpoint, Ducks Unlimited made a perfect partner. "We saw potential for carbon sequestration and Ducks Unlimited saw an opportunity to enhance duck and wildlife presence," says Steadman. What sealed the deal, he explains, was that Ducks Unlimited had already developed a sophisticated geographic information system as well as a respected pool of staff scientists. Unlike other conservation organizations he has worked with, Steadman says, "Ducks Unlimited took the science and reacted to it, like us." In Ducks Unlimited's trial run as an aggregator, it marketed conservation easements on 400 acres of farmland to a group of 25 U.S. power companies that banded together under the name of PowerTree Carbon Company LLC. The project reestablished bottomland hardwood forest on private land along Bayou Bartholomew, part of the Lower Mississippi Alluvial Valley in Southeastern Arkansas. There, nursery raised native seedlings, planted at 302 seedlings per acre, are expected to reestablish forests of sweet gum, bald cypress, tupelo, green ash and oak trees. Over the project's life, emission reductions are projected at 180,000 US tons of CO2, according to PowerTree Carbon Company president Michael Rodenberg. This allows PowerTree's 25 member companies to take credit for reducing greenhouse gases without incurring the significant expense and energy loss that reducing their own emissions would have cost. When designing the project, Ducks Unlimited generally copied requirements outlined in the Kyoto Protocol regarding the concepts of permanence, co-benefits, leakage and additionality to help ensure that PowerTree could recoup its investment when regulations hit the States. PowerTree established a 100-year conservation easement on the land to give it a significant degree of permanence. The project included co-benefits, restoring migratory bird and waterfowl habitat, increasing flood protection and eliminating the polluting fertilizers that used to flow into the water. They chose locations that would not cause "leakage," or clearing of nearby land to make up for property taken out of farming. And they worked on the tricky concept of "additionally," demonstrating that the now untilled land sequestered more CO2 than it would have without PowerTree's investment.

Not as Simple as 2 Plus 2

As environmentalists and industries battle out the details for a possible carbon trading program in the United States, the definition of additionality causes particular controversy, standing in the forefront of a slew of questions that must be answered for Ducks Unlimited's carbon aggregation program to thrive. Because of concerns about additionality, Ducks Unlimited believes the future for carbon sequestration trading lies in private land, Kempka says. Private land comprises 70 percent of land available for restoration. Meanwhile, turning relatively undeveloped public land back into forests would realize only minimal additional carbon sequestration potential. Further, there is concern about allowing industries to reap credits on taxpayer-subsidized land. Since, however, no federal dictates exist, innovative energy companies such as PowerTree hedged their bets by also buying partnerships where public land is restored. At least temporarily, this dried up Ducks Unlimited's business as an aggregator for energy companies. So Ducks Unlimited is focused short term on aggregating land for speculative investors anxious to get in on this market's ground floor. They have not closed these deals yet but Kempka says he expects to see them cross the finish line within the next two years. Ducks Unlimited also faces potential competition from wetland mitigation bankers. Some bankers say they hope to "stack" credits, or get paid for sequestering carbon on land where they already received payment for restoring seasonal wetlands. But stacking, similar to restoring forests on public land, could cause duplicate counting of a property's carbon sequestration value, Kempka and others say. These controversies make it difficult for Ducks Unlimited to find firm footing in the potential carbon sequestration market. "The biggest difficulty we face is the lack of clarity on what will count as a carbon offset," Kempka says. "We don't know the rules and regulations yet so we try to focus on high-quality credits to get investors. But without clarity, not many people are buying."

Unanswered Questions

With an anemic market unsupported by regulations and a short projected time frame before geologic sequestration fills the technology gap, some question the viability of carbon trading markets for forestry. "A lot of questions need to be answered before we move on with something like what Ducks Unlimited is doing," says Brandon Scarborough, a research fellow specializing in carbon sequestration and global warming at the Property and Environment and Research Center, a conservative environmental think tank. From an investor's perspective, he continues, what matters is whether sequestration credits will make goods investment over time. The market for forest sequestration credits could dry up when geological sequestration takes off and zero-emission coal-fired plants become cheaper than creating new forests. Also, there is the farmer and world-food-pantry concern that once an easement is placed on land it cannot be farmed even if other methods surpass its ability to sequester carbon. Meanwhile, since markets require monitoring and measuring, they add extra cost to emissions reduction. Finally, since forests are prone to natural disasters, carbon-for-forest trading would allow energy companies to emit CO2 into the atmosphere without guaranteeing permanent sequestration. Energy companies and Ducks Unlimited spokespersons acknowledge these concerns. Eventually, they agreed, new technologies could supercede the need for carbon markets. But with the earth's rapid warming, many say the program has real value for its ability to fill an immediate, if temporary need. Scientists estimate that power plants will likely learn not only how to limit carbon emissions; they will also learn how to sequester them geologically, burying them safely within the earth and away from the atmosphere. With the earth's rapid warming and no other solutions immediately at hand, most experts agree that the time is now—and not tomorrow—for terrestrial carbon sequestration programs. "We see these projects as a bridge, allowing us to take action now during the gap in development of technology that will ultimately allow us to remove CO2 from stack gases," says PowerTree Carbon Company president Michael Rodenberg. After all, he adds, "a pound of CO2 is a pound of CO2." Alice Kenny is a regular contributor to the Ecosystem Marketplace. She may be reached at First published: October 23, 2006 Please see our Reprint Guidelines for details on republishing our articles.