Forest Carbon Management, the Greenhouse Effect and Electric Utilit

Senate Committee on Agriculture, Nutrition and Forestry

Testimony of Gary Kaster, Manager

Forestry and Recreation Programs

American Electric Power Company

Senator Lugar, members of the Committee, thank you for the opportunity to address you today. My name is Gary Kaster and I am the manager of American Electric Power Company's Forestry and Recreation Programs. For the past several years, I have had intensive involvement in dealing with carbon sequestration projects, both for American Electric Power and with UtiliTree Carbon Company. What I hope to share with you this morning is a brief overview of the Electric Utility industry's and American Electric Power Company's perspective and experience with carbon sequestration projects. The credentials that I bring to this hearing and which qualify me to address this subject include:

· Being Chair of Edison Electric Institute's Utility Forest Carbon Management Program, representing 55 utility companies, and whose goal is to promote forest carbon management as a means of addressing climate change.

· Being Chairman of the UtiliTree Carbon Company, a non-profit corporation established by 41 companies, which have invested over $3.2 million dollars in eight domestic and international forest carbon management projects.

· Technical Advisor for AEP's Noel Kempff Mercado Climate Action Project in Bolivia, the largest forest climate change project in the world.

· Technical Advisor for AEP's Guaraquecaba Climate Action Project in Brazil.

· Manager of AEP's forest carbon management projects, which include the planting of 20 million trees on company and private land holdings.

While AEP does not support the Kyoto Protocol in its current form, the immutable fact is that the issue of climate change will not go away. The target is fossil fuel use, especially coal; and the pressure to reduce CO2 emissions will be relentless. AEP believes, as does the industry, that any future treaty must include an unconstrained international trading system, crediting of all legitimate and verifiable joint implementation and Clean Development Mechanism projects, full credit for the enhancement of natural sinks that absorb carbon dioxide, such as forests and agricultural lands; and a compliance regime that will be an effective deterrent against noncompliance.

In spite of an uncertain future, electric utilities are interested in all technically and economically feasible alternatives for managing greenhouse gas emissions. Most commonly, utilities will concentrate on energy supply and energy demand activities to manage emissions. However, among the activities included in their greenhouse gas reduction portfolio will be land use change and forestry projects.

Land use change and forestry opportunities are among the most economical ways to address CO₂ emissions, often costing only a few dollars per ton. Properly implemented, these practices are

technically proven and can offset a large amount of CO₂. In addition, such projects often have secondary environmental and social benefits -- e.g., restoration of degraded lands and protection of biodiversity.

UtiliTree Carbon Company

An excellent example of what the industry has done in the area of carbon sequestration projects is that of UtiliTree Carbon Company.

UtiliTree Carbon Company is a non-profit corporation established in 1995 by 41 utilities to sponsor a portfolio of eight international and domestic forestry projects that manage greenhouse gases, especially CO₂. UtiliTree has committed slightly over $3.2 million to fund these projects which consist of a diverse mix of rural tree planting, forest preservation, forest management and research efforts at both domestic (Louisiana, Mississippi and Oregon) and international (Belize and Malaysia) sites. Carbon dioxide (CO₂) will be managed at a cost of under $1 per ton, including administrative expenses. Over 3 million tons of CO₂ benefit will result from the projects over their lifetimes.

More detail about UtiliTree's Projects can be found in the long version of my testimony and in the UtiliTree Informational Packet that will be attached with my testimony.

American Electric Power Company

An excellent example of what a major US utility is doing in this arena would be that of American Electric Power Company. AEP serves 4.8 Million Customers in 11 states; 7 in the Midwest: Ohio, Indiana, Michigan, West Virginia, Virginia, Kentucky and Tennessee; and 4 in south central US: Louisiana, Oklahoma, Arkansas and Texas (197,500 square miles). The company's assets are valued at $35.7 Billion; annual operating revenues in 1999 was $12.5 Billion. AEP's domestic generation capacity is 38,000 MW, which is 67% Coal-fired, 23% Gas, 7% Nuclear, and 3% Hydro & Other Renewables. In 1999 AEP burned 78 million tons of coal.

AEP voluntary commitments under the Climate Challenge include a broad portfolio of actions which include supply-side improvements, demand-side efficiency improvements, and land use change and forestry projects. Included among AEP's forest carbon sequestration projects are enhanced forest management of the company's forest lands, planting 20,000,000 trees on company and other lands, and the Noel Kempff Climate Action Project in Bolivia, and the Guaraquecaba Climate Action Project in Brazil.

More detail on AEP's forestry projects can be found in the power point presentation attached to my testimony.

Compliance with Kyoto Protocol

To give the committee a perspective of the potential importance of carbon credits from forestry and agricultural sinks I would like to share with you, the projected impact on AEP in complying with Kyoto Protocol in the absence of market mechanisms. Without joint implementation, clean development mechanism projects, emissions trading, and Article 3.4 activities, compliance would force premature retirement of 11 GW's of generation, a $1.2 billion write-off; replacement of 10GW's of generation with natural gas combined cycle at a cost of $5.3 billion; an increase in generation cost of between 25% - 45% depending on natural gas trends; and a system wide coal burn reduction of 30 million tons per year which would be replaced by 485 billion cubic feet of natural gas.

Obviously, cost effective solutions to managing greenhouse gases will be important to my Company.

Conclusion

As previously mentioned land use change opportunities such as forestry and agricultural sinks will be among the most economical ways to address CO₂ emissions.

To date investments in most projects have been for voluntary commitments or banking for future use and as such do not reflect a true market price.

Looking down the road we would be less than honest in not anticipating that there is the possibility there will be a future voluntary or mandated domestic or international carbon regime. At that time the market will demand a greater supply and at that time I would anticipate the industry being interested in credits from credible and well quantified agricultural carbon sequestration projects.

Forest Carbon Management, the Greenhouse Effect and Electric Utilities

John Kinsman, Edison Electric Institute, 701 Pennsylvania Avenue, N.W.,

Washington, D.C., 20004, U.S.A.

Gary Kaster, American Electric Power Company, 59 West Main Street,

McConnelsville, Ohio, 43756, U.S.A.

Abstract

Electric utilities in the U.S. have initiated numerous forestry projects to conserve energy and to offset carbon dioxide (CO₂) emissions. Many have included forestry activities in their voluntary agreements with the U.S. Department of Energy under the very successful Climate Challenge program; over 600 utilities have committed to reduce, avoid, or sequester over 160 million tons of CO₂equivalent in the year 2000. One of numerous, voluntary, industry-wide Climate Challenge initiatives, the Utility Forest Carbon Management Program, was developed in 1993 by the Edison Electric Institute with support from 55 electric utilities, to expand utility industry efforts to manage CO₂ via forestry projects, both domestic and international. Since 1995, 41 of these companies raised $3.2 million to establish the non-profit UtiliTree Carbon Company. UtiliTree is now sponsoring eight projects representing a diverse mix of rural tree planting, forest preservation, forest management and research efforts at both domestic (eastern and western U.S.) and international sites. These projects will manage CO₂ at a cost of about one dollar per ton. The UtiliTree projects include extensive external verification. Such forestry projects, properly documented and monitored, should be a major component of any domestic and international strategies to address greenhouse gas emissions, due to their greenhouse gas benefits, cost-effectiveness and many secondary environmental benefits (e.g., creating wildlife and bird habitat, reducing erosion, preserving biodiversity). Experts have determined through a series of technical workshops and projects that greenhouse gas benefits can be accurately quantified for most types of forestry projects. This paper overviews these programs, which were designed to advance the state of knowledge regarding options for managing greenhouse gases via forestry; establish low-cost forestry options to manage greenhouse gases; and promote environmental stewardship.

The current policy situation for forest carbon management is also addressed. The December 1997 international Kyoto Protocol established mechanisms for addressing forestry management at both the project and national levels, including joint projects between entities within different countries. Putting aside the debate regarding the pros and cons of the Kyoto Protocol, and questions regarding when or if the Protocol will enter into force, details of the Protocol and its implementation are currently being debated and will take several years to resolve. The Protocol's treatment of forestry is currently blurry because it established uncertainty for some types of projects and, more importantly, there exists conflicting interpretations of several articles of the Protocol. These questions will be addressed by mid-2001 when the Intergovernmental Panel on Climate Change (IPCC) issues a special report on forest carbon management. This report should dispel widespread misconceptions about forestry projects and educate policymakers regarding the many environmental, social and economic opportunities available through these projects.

Introduction

Human activities related to energy production and land use are increasing the atmospheric concentration of greenhouse gases such as carbon dioxide (CO₂), which in turn may change the energy flux of the Earth/ atmosphere, possibly causing global warming and other changes in climate. The impacts of greenhouse gas emissions are very uncertain, however -- the rate, magnitude and regional characteristics of human-induced climate change are difficult to predict and require additional research. Regardless, because of the potential consequences of climate change, policies and programs are being developed to adapt to or mitigate greenhouse gases and climate change.

Many options exist for managing greenhouse gas emissions and sinks: increasing the efficiency of energy supply and use, including use of environmentally beneficial electrotechnologies; increased use of renewable and nuclear energy systems; fuel switching from coal and oil to natural gas; capturing and using methane from coal mines and landfills; and increased motor vehicle fuel economy. Adaptation (e.g., planning for sea-level rise, or planting different crops) would lessen impacts.

Electric utilities are interested in all technically and economically feasible alternatives for managing greenhouse gases emissions. Most commonly, utilities will concentrate on energy supply and energy demand activities to manage emissions. Other activities include management of terrestrial (e.g., forest) carbon, recovery and use of landfill methane, joint implementation of projects in other nations, and transportation-sector reductions. When an emissions source manages its emissions indirectly by effecting a reduction at another source, it is said to be "offsetting" its emissions. The emission of a ton of CO₂ can be negated or offset by avoiding the release of a ton elsewhere, or by removing a ton of CO₂ from the atmosphere.

The use of emissions offsets in environmental management is not new, having been applied in some cases for as long as 15 year in the U.S. Carbon dioxide offsets, however, exist within a different scientific and regulatory context. First, stack-based CO₂ controls are both extremely expensive and present severe practicality problems (Fluor Daniel, 1991). Second, CO₂ is long-lived in the atmosphere, mixes globally, and thus can be offset anywhere in the world. Third, CO₂ is different from other emissions, because it can be practically removed from the atmosphere after being emitted.

In 1994, the U.S. electric utility industry and the U.S. Department of Energy established the Climate Challenge Program -- a joint, voluntary partnership between the U.S. electric utility industry and DOE to reduce, avoid or sequester greenhouse gases. The Climate Challenge is the cornerstone of the electric utility industry's approach to managing greenhouse gases. DOE has reported that close to 640 utilities, through over one hundred signed participation accords, have committed to 170 million metric tons of CO2 equivalent (MMTCO2) reductions. In other words, without these actions, emissions from these utilities in the year 2000 would be 170 MMTCO2 higher than in 1990.

Forest Carbon Management and U.S. Electric Utilities

An important option to manage greenhouse gases is to sequester CO₂ in "sinks" such as plant biomass. Trees are referred to as "carbon sinks" because they take CO₂ out of the air and sequester it in plant tissue. About one-half of a tree is carbon. Carbon can be managed through many different types of forestry activities, including: forest preservation and management projects to maintain carbon sequestered by reducing deforestation and harvest impacts; forest management to enhance existing carbon sinks; creation of new carbon sinks by planting on pasture, agricultural land or degraded forest sites; storing carbon in wood products; and energy conservation through shading buildings and homes. Carbon can be sequestered in halophytes (salt-tolerant plants), organic matter in soil, in oceanic seaweed, or in microalgae in the ocean. Biomass can be used as a substitute for fossil fuel to produce energy.

The technical potential for forest carbon management is great, able to counteract a meaningful portion of the 3 Pg (1 Pg = 1 billion tonnes) carbon annual addition to the atmosphere. In addition, vigorous efforts to control land degradation in these areas could result in a net sequestration of up to one Pg carbon per year. Carbon offsets, properly documented and monitored, should be a major component of an international strategy to respond to greenhouse gas concerns.

The subject of this paper is the management of carbon in trees from the electric utility industry's perspective. The Climate Challenge Program, Utility Forest Carbon Management Program, and UtiliTree Carbon Company will be described.

Trees are referred to as "carbon sinks," because they take carbon dioxide (CO₂) out of the air and sequester it in living plant tissue. About one-half of a tree is carbon. Carbon can be managed through many different types of forestry activities, including: forest preservation and management projects to maintain carbon sequestered by reducing deforestation and harvest impacts; forest management to enhance existing carbon sinks; creation of new carbon sinks by planting on pasture, agricultural land or degraded forest sites; storing carbon in wood products; and energy conservation through shading buildings and homes.

Carbon can be managed through many different types of forestry activities (Kinsman and Trexler, 1993):

· Forest Protection -- Protecting or managing standing forests can be an attractive means of implementing a carbon offset program. Tropical forests are being cleared for timber export, fuel wood, shifting cultivation, permanent agriculture, pasture, and urbanization and infrastructure (Postel and Heise, 1988). Millions of hectares (ha) of forest are cleared annually (Houghton et al., 1992). Deforestation in tropical latitudes is responsible for 10 to 30% of anthropogenic CO2 emissions.

Forest Management -- Improved forest management practices (e.g., thinning) can lead to increased carbon uptake and also reduced carbon releases. For example, in the process of reduced impact logging, CO₂ releases during the logging process can be greatly reduced by improved siting of logging trails, directional felling of trees, and vine removal prior to harvest, which are all intended to decrease damage to undergrowth and unharvested trees during the logging process, thereby decreasing CO₂ released to the atmosphere as well as facilitating regeneration of the forest.

· Improved Management of Degraded Lands -- Hundreds of millions of hectares around the world that previously supported tree cover could do so again. Formerly sustainable slash and burn agricultural systems have become unsustainable under the pressures of growing populations; salinization, soil compaction and erosion have rendered agricultural land and pasture unproductive over many millions of hectares; and many millions of hectares have been degraded through logging, fuel wood collection, grazing, and fire. In these cases carbon storage on the land declines, often dramatically. While some degraded forests recover on their own, often only after many decades, others do not.

· Agroforestry -- The incorporation of trees with agricultural and other practices can play a significant role in carbon offset projects, particularly when combined with forest regeneration or protection. These types of projects can be consistent with the economic development goals and can help reduce pressures on surrounding forested areas. These projects require intensive involvement of local communities and site-specific tailoring and education.

· New Plantations -- Tree plantations on pasture, agricultural land or degraded forest sites can offer rapid growth rates over large areas of land, along with uniform management and quantifiable costs and benefits (Sedjo and Lyon, 1990).

· Wood Products -- Harvested wood can be used in long-lived products such as lumber in construction. Another option is to increase recycling of building material as well as paper products.

· Soils -- Globally, soils contain about 150 to 300% as much carbon as above-ground biomass (Dixon and Turner, 1991). Some management practices (e.g., cultivation and intense prescribed fire) lead to soil carbon loss, while crop fertilization and reduced tillage can increase carbon storage (Johnson, 1992). Reversion of agricultural land to forest leads to significant soil carbon storage (Brown et al., 1992; Sedjo, 1992).

· Drylands -- Approximately 40% of the Earth's land surface is drylands (United Nations Environment Programme, 1992). Small increases in storage/small decreases in releases can be significant and vigorous efforts to control land degradation in these areas could result in a net sequestration of up to 1.0 Gt C per year (Squires et al., 1995), through relaxing grazing intensity, fertilization and residue management in dryland crop management, enhanced bush encroachment in semi-arid savannas, introduction of legume trees into grass pastures, energy crops, increased biofuel use efficiency, agroforestry, improved pasture management, savanna fire control and woodland management. One particular carbon management option for drylands is addressed in detail by Glenn et al. (1992 a,b) -- carbon sequestration in halophytes (salt-tolerant desert plants). About 130 million of the world's 700 million ha of salt desert habitat could support halophytes, with carbon sequestration rates comparable to those of tree plantations, and halophytes could potentially sequester up to 0.7 Pg carbon per year (Glenn et al., 1992a). The harvested biomass could be stored in desert soils if its decomposition is slow, or it could be burned to produce energy. A key advantage of using halophytes is that they grow in saline soils that are useless for conventional agriculture and thus can be irrigated with saltwater, avoiding the use of fresh water.

· Trees for Energy Conservation -- Because of the replacement of soil and vegetation with concrete, asphalt and metal, many urban areas have experienced a heat island effect characterized by a several degree higher temperature than in nearby rural areas. The heat island effect has caused the need for an additional 1500 MW of electric power plants in Los Angeles (U.S. Environmental Protection Agency, 1992). Trees can counteract this heat island effect through the process of evapotranspiration -- a tree can transpire up to 100 gallons of water per day, equivalent to the cooling effect of 100 hours of air conditioners in a hot, dry climate (U.S. Environmental Protection Agency, 1992). In addition, shade trees can reduce the requirement for cooling residences and buildings, sometimes offsetting the need for fossil fuel use and reducing CO₂ emissions. Shade tree planting on the south and west sides of a home can reduce air conditioning needs by 10 to 50% (U.S. Environmental Protection Agency, 1992). Trees also sequester carbon from the atmosphere and can serve as windbreaks, reducing winter heating requirements. However, proper maintenance of urban trees is difficult in urban areas and proper species selection and location are key -- the U.S. electric utility industry spends approximately $1.5 billion annually and considerable energy clearing trees, which are the number one cause of electricity outages, away from power lines.

· Biomass as an Energy Source -- Wood or other biomass can be turned into a carbon offset through its conversion to energy if it is used in place of fossil fuel. Emissions of CO₂ can be offset in a system where CO₂ released during biomass combustion is simultaneously sequestered by the next energy crop. A 100 MW power plant, operating at 35% efficiency, would require slightly more that 40,000 ha of land, or about 2% of the area within 80 kilometers, for energy crop plantations (assuming a feedstock yield of 24 green tonnes carbon per ha each year) (Turnbull, 1993). Research and development activities are focusing on promising energy conversion technologies (such as whole tree burning, biomass gasification, and co-firing wood chips with coal), plus improving feedstock yield. With advances in energy conversion and crop yield, short-rotation trees grown on a 6- to 12-year rotations have been estimated to have the potential to reduce U.S. fossil fuel CO₂ emissions by 20% (Graham et al., 1992). Sampson et al., (1992) claim that opportunities to reduce CO2 emissions by using biomass for energy production could be in the range of 1 to 4 Pg C per year.

The electric utility industry has a long history of involvement with traditional forest management and tree-planting programs, through preserving forest lands for both recreational use and wildlife habitat, tree maintenance around power lines, education of homeowners on tree placement around power lines, and commercial forestry on electric utility-owned lands. In association with events such as Earth Day and Arbor Day, many utilities supply seedlings for employees, children and others to plant. The electric utility industry owns a large amount of land in order to house and surround its current and future generation, transmission and distribution facilities.

Utilities have also recently initiated numerous forestry projects specifically to conserve energy and to offset CO₂ emissions (Kinsman and Trexler, 1993, 1995; Kinsman and Kaster, 1996; Dixon et al., 1993). A dozen or more electric utility companies are involved in urban forestry energy conservation programs such as American Forests' Global ReLeaf and the DOE/American Forests' Cool Communities. A growing number of electric utility companies, such as the New England Electric System, PacifiCorp, American Electric Power Company, Wisconsin Electric Power Company, Cinergy Corp., Detroit Edison Company, Florida Power & Light, Southern Company and Texas Utilities have initiated forestry or research efforts targeted at managing carbon. In addition, some utilities are using biomass as a fuel to produce electricity.

The non-profit UtiliTree Carbon Company was established in 1995 by 41 utilities to sponsor a collection of five forestry projects that manage greenhouse gases, especially CO₂. The projects consist of a diverse mix of rural tree planting, forest preservation, forest management and research efforts at both domestic (Louisiana and Oregon) and international (Belize and Malaysia) sites. The UtiliTree Carbon Company has committed slightly over $3.2 million to fund these projects.

Also in 1995, many electric utilities entered into voluntary agreements under the voluntary Climate Challenge program. Many of these voluntary commitments included forestry activities. Utilities have reported over 70 forestry projects in the Energy Policy Act section 1605(b) voluntary data base.

Some specific reasons for utilities to participate in forest carbon management include:

· There is a large technical potential for forest carbon management -- a project can offset millions of tons of carbon emissions.

· Forestry options to manage carbon are cost effective in many cases -- e.g., a few dollars per ton of carbon offset. Forest carbon management opportunities can be among the most economical ways to address CO₂ emissions (Sedjo et al., 1995).

· Forestry carbon management adds flexibility, thus expanding the electric utility repertoire of options.

· Experience leads to improved future projects.

· Forestry projects yield positive public relations -- using forestry to manage CO₂ is well received by the public and environmental groups.

· Forestry efforts have positive secondary environmental and social benefits -- e.g., restoration of degraded lands and protection of biodiversity.

· International projects will help to demonstrate the effectiveness of joint implementation activities with other nations, which is a critical tool for economically addressing GHG issues.

UtiliTree Carbon Company / Utility Forest Carbon Management Program

The electric utility industry has established two related programs to evaluate and sponsor forest carbon management activities, the UtiliTree Carbon Company and the Utility Forest Carbon Management Program.

UtiliTree Carbon Company

A new non-profit corporation called the UtiliTree Carbon Company was established by 41 utilities to sponsor the projects identified by the Utility Forest Carbon Management Program (see below). The five projects in the final pool represent a diverse mix of rural tree planting, forest preservation, forest management and research efforts at both domestic (Louisiana and Oregon) and international sites (Belize and Malaysia). The UtiliTree Carbon Company has committed slightly over $3.2 million to fund the pool of projects. Carbon dioxide (CO₂) will be managed at a cost of under $1 per ton, including administrative expenses. Over 3 million tons of CO₂ benefit will result from the five projects over their lifetimes. Participants will share on a pro rata basis reporting of CO₂benefits into the voluntary Energy Policy Act section 1605(b) data base.

Forest carbon management opportunities are among the most economical ways to address CO₂ emissions, often costing only a few dollars per ton. Joint implementation of international projects with developing nations is an especially promising arena for forestry projects. Properly implemented, these practices are technically proven and can offset a large amount of CO₂. In addition, forestry programs often have secondary environmental and social benefits -- e.g., restoration of degraded lands and protection of biodiversity.

The UtiliTree Carbon Company believes strongly that carbon offsets, properly documented and monitored, should be a major component of any domestic and international strategy to respond to greenhouse gas emissions. Experts have determined through a series of technical workshops and projects that, for most types of forestry projects, greenhouse gas benefits can be accurately quantified. All UtiliTree projects include extensive external verification of benefits.

Brief descriptions of the five projects are provided below.

· Bottomland Hardwood Forest Restoration in the Mississippi River Valley -- This project investigates the feasibility of using bottomland hardwood forest restoration on marginal farmland in the Mississippi Valley as a means of sequestering atmospheric CO₂. The 80 acre study site, located in Catahoula Parish, Louisiana, is owned by the Louisiana Department of Wildlife and Fisheries and will be part of the Beouf Wildlife Management Area. The School of Forestry at Louisiana Tech University is conducting the project. Hardwood forests planted in 1996 will sequester an estimated 47,000 tons of CO₂ over 70 years. The Louisiana Department of Wildlife and Fisheries will make verification of these plots, measurements, and carbon sequestration achievements. Restoration of bottomland hardwood forests in the Mississippi River Valley will improve depleted wildlife habitats and provide potential economic stimulus for a depressed region by serving as a sustainable source of raw materials for the forest products industry and as a source of recreation revenues.

· Rio Bravo Carbon Sequestration Project -- The Project is a partnership between Programme for Belize, The Nature Conservancy, Wisconsin Electric Power Company, Cinergy Corp., Detroit Edison Company, PacifiCorp, and UtiliTree Carbon Company. The Project consists of two components. Component A includes the purchase of a 14,400 acre parcel of endangered forest land that will link two properties owned by Programme for Belize in the northwestern corner of Belize. Component B establishes a sustainable forestry management program at the Rio Bravo Conservation and Management Area that will increase the total pool of sequestered carbon, over a 120,000 acres area. The forestland, purchased as part of the project was threatened by imminent conversion to intensive agricultural land. By retaining the parcel in its native forest cover and combining its acreage with adjoining forested lands, an area large enough to implement a sustainable forestry program was created. This Project has been chosen as one of a select group of projects acknowledged by the U. S. Initiative on Joint Implementation (USIJI) as reducing the potential for climate change and contributing to sustainable development worldwide. The project will yield many environmental benefits beyond carbon sequestration, including maintaining critical wildlife and neotropical bird habitat and improving water quality. In addition the project will help in the protection of Mayan archeological sites. Anticipated CO₂ benefits attributable to UtiliTree funding are over 1 million tons of CO₂.

· Reduced Impact Logging of Natural Forests in Sabah, Malaysia -- UtiliTree's Reduced Impact Logging (RIL) project involves an expansion of New England Power Company's (NEP) initial implementation of techniques to reduce CO₂ emissions associated with uncontrolled logging of natural tropical forests. The expanded project will be carried out on 2,500 acres. The Forest Research Institute of Malaysia, Sabah Forestry Department, Center of International Forestry Research in Bogor, Indonesia, and Rainforest Alliance, a New York-based non-governmental environmental organization, join NEP as cooperators in the project. Historically, in the process of harvesting as few as 10 to 15 trees per hectare, much CO₂ was emitted due to uncontrolled and destructive logging practices. It has been demonstrated that by utilizing RIL guidelines logging damage could be reduced by as much as 50% through precutting vines, directional felling, and planned extraction of timber on properly constructed and utilized skid trails. The project will yield many secondary environmental benefits related to habitat and watershed protection. The anticipated greenhouse gas benefits of this UtiliTree project are 147,000 tons of CO₂ by the year 2000 and 379,000 tons of CO₂ over the project's 40-year life.

· Western Oregon Carbon Sequestration Project -- The project will sequester carbon by planting trees on unforested non-industrial timberland in western Oregon that otherwise would not be replanted. Native species such as Douglas Fir, Western Red Cedar, and Ponderosa Pine will be planted by landowners with the financial support of UtiliTree Carbon Company. Principal vendors for the project are Trexler and Associates (TAA) and Oregon Woods, Inc. (OWI). The project includes a long-term forest management plan for each site. The project brings a notable sustainable forest management program to a region which contains some of the most productive timberland in the United States. A contract obligates landowners to maintain planted trees for a minimum of 65 years. Slightly over 300 acres of new trees have been committed to and the project will sequester approximately 200,000 tons of CO₂. Verification of carbon sequestration achievements will be made by OWI personnel as well as by representatives of UtiliTree Carbon Company. The project will yield environmental benefits beyond carbon sequestration, such as expanding wildlife habitat, improving water quality through watershed protection, and reduction of soil erosion and soil compaction. The project will also advance the state of knowledge regarding the application of the extended stewardship concept for sustainable resource management and the use of innovation legal instruments to promote the long-term success of the program.

· Additional Bottomland Hardwood Forest Restoration Projects in the Lower Mississippi River Valley - Four other projects will conduct bottomland hardwood forest restoration on marginal farmland in the Lower Mississippi River Valley. The project sites are located in Louisiana, Arkansas and Mississippi on lands recently acquired by the U.S. Fish and Wildlife Service which will be added to the National Wildlife Refuge System. These projects will reestablish the bottomland hardwood forests on 2,400 acres. Nursery seedling species to be used include sweet gum, sugarberry, cottonwood, and green ash. The projects are being overseen by the School of Forestry at Louisiana Tech University. Hardwood forests planted on these marginal farmlands will sequester an estimated 9.0 tons of CO₂ per acre over the first five years after establishment, and 600 tons per acre by the end of a 70 year growing period. For the 2,400 acres established in 1999, benefits are expected to exceed 1,440,000 tons of CO₂ over 70 years. The project will yield many environmental benefits. Established bottomland hardwood forests in the Mississippi River Valley will serve as wildlife corridors, connect fragmented habitats, and increase regional biodiversity. Breeding and nesting habitat for migratory neotropical birds and waterfowl will be restored. In addition, the planted forests may eventually serve as a sustainable source of raw materials for the forest products industry and as a source of recreation revenues. The project will advance the current state of knowledge regarding plantation establishment and maintenance in the region, as well as on the quantification of carbon sequestration by bottomland hardwoods.

Utility Forest Carbon Management Program (UFCMP)

This program is an initiative by the Edison Electric Institute, with support from 55 electric utility companies, to expand efforts to manage CO₂ through domestic and international forestry projects. The goals of the program are to advance knowledge regarding forestry options for managing greenhouse gases, establish and implement low-cost forestry options, and promote environmental stewardship by the electric utility industry.

The UFCMP developed criteria and a process to review proposed projects and, subsequently, a request for proposals was issued to hundreds of individuals and organizations in February 1995. Over 30 detailed project proposals were received. UtiliTree was formed to sponsor the best of these projects. The UFCMP has also supported a research project on urban forestry, a conference on managing forests for greenhouse gas benefits, and an educational effort by The Nature Conservancy

SUMMARY AND CONCLUSIONS

Electric utilities are interested in all technically and economically feasible alternatives for managing greenhouse gases emissions. Utilities are being pro-active, through the Climate Challenge and other programs, to ensure operational flexibility to achieve greenhouse gas reductions using the most cost-effective methods. The electric utility industry recognizes the technical and economic potential for forest carbon management. Electric utility companies are supporting a broad range of activities on their own lands and at other sides in the U.S. and abroad. Carbon offsets, properly documented and monitored, should be a major component of any such program to respond to greenhouse gas concerns.

International Policy Deliberations

The United Nations Conference on Environment and Development (UNCED), held in Rio de Janeiro in June 1992, was the forum for the signing of the Framework Convention on Climate Change by 154 countries. At the first meeting of the Conference of Parties (COP-1) to implement the Convention, held in Berlin during April 1995, a process was initiated to address future actions in 2005, 2010 and 2020, to culminate with a decision at COP-3 in 1997.

Development of a Market for Biotic Carbon Management

Eventually there may be a potential large market for enhancing biotic carbon storage. However, there are many reasons why a large market is unlikely to develop in the near future:

· At present, there is no regulation or pending legislation in most nations that would force emitters to undertake any specific activities to manage greenhouse gases. While the U.S. signed the Kyoto Protocol on November 12, 1998, the U.S. Senate must ratify it.¼

· There is at present no resolution of major issues related to implementing projects jointly with other nations. The debate over "credits" and criteria continues. Some developing nations are quite wary of joint implementation, but others see such projects as a vehicle for providing numerous environmental benefits, including greenhouse gas management, as well as a source of money for development. Since participants from the developed nations will often be private businesses and industries, not governments, the money spent on joint implementation projects usually will be in addition to the direct governmental aid already received. It should be noted that, in general, U.S. electric utilities might be more interested in supporting joint implementation projects in countries that have expanding markets for electricity, where companies affiliated with a utility might develop energy projects.

· The U.S. electric utility industry is entering an era of open competition from a typical condition of state-regulated, regional monopolies. Companies are carefully considering all costs to enhance their competitiveness within their regions of the country. Thus, utilities must balance current voluntary environmental actions against the need to keep costs low.

· It is likely that many years will pass before there could be much money flowing into carbon offset projects. It will be several years before the key questions are resolved at international level and then actions are translated into regulations in the U.S. regarding greenhouse gas controls and carbon sinks.

· An international market-based system through which credits from such projects could flow from one participant to another would take many years to develop due to the many uncertainties, e.g.,: the tremendous complexity of establishing the "currency" of emissions via monitoring or calculations; the large numbers of different greenhouse gas emission sources in different nations; and questions regarding enforcement.

SUMMARY AND CONCLUSIONS

The utility industry has unique contributions to make in greenhouse gas management, possessing special competence in providing cost-effective customer service and in achieving environmental excellence through technical innovation, such as energy-efficient electrotechnologies; supply-side efficiencies through clean coal technologies, nuclear energy, natural gas, and renewable energy technologies; and demand-side management.

The technical potential for forest carbon management is great, able to counteract a meaningful portion of the 3 Pg carbon annual addition to the atmosphere. In addition, vigorous efforts to control land degradation in these areas could result in a net sequestration of up to one Pg carbon per year. Carbon offsets, properly documented and monitored, should be a major component of any such program to respond to greenhouse gas concerns.

Utilities have also recently initiated numerous forestry projects specifically to conserve energy and to offset CO₂ emissions, such as funding the five UtiliTree projects.

There are many reasons why a large market (billions of dollars annually) is unlikely to develop anytime soon and why whatever market does develop will do so slowly.

Acknowledgments

The authors appreciate the advice and support of the UtiliTree Carbon Company's Board of Directors, its members companies, the Utility Forest Carbon Management Program's Steering and its Policy Committee.

References

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