An ongoing fire in northern California has likely damaged at least two forestry projects that generate carbon offsets for use in the state's cap-and-trade program.
The Park Fire, ruled arson by California Department of Forestry and Fire Protection (CAL FIRE) investigators, has burned through the region since 24 July consuming more than 426,500 acres across Butte, Tehama, Shasta and Plumas counties.
Sierra Pacific Industries maintains several forest carbon offsets projects in the region, including the Lassen and Cohasset projects, which are within the path of the fire, according to fire data from CAL FIRE and project registry documents. The full extent of the damage is unclear at this time as the fire continues to burn through the region.
The Lassen and Cohasset projects, registered in 2020 and 2019, have generated 593,000 California Carbon Offsets (CCOs)s to date and qualify as providing direct environmental benefits (DEBS) to the state under the cap-and-trade program's compliance offset program. Credits from both projects are still within the program's eight-year invalidation period.
Argus last assessed CCOs with DEBS that carry an eight-year invalidation at $30.88/metric tonne on 2 August.
Sierra Pacific Industries did not respond to a request for comment.
Increased temperatures, wind conditions, and low moisture levels, along with the area's steep terrain, continue to hinder fire responders in extinguishing the fire.
Under California's offset program, all forestry projects must commit 10-20pc of their total issued CCOs into a buffer account. The exact number for each project is determined by risk metrics that are specific to the state's US forest projects compliance offset protocol.
When an unintentional project reversal occurs, where a project no longer sequesters or removes the full or partial amount of CO2 previously credited, a comparable amount of credits may be retired from the buffer to account for program losses.
After notifying the California Air Resources Board (CARB), project operators must conduct a third-party verification to estimate remaining carbon stocks, if any, in the project before the agency decides to retire credits from the forest buffer account.
Critics of California's handling of forest offsets have long warned CARB underestimates fire risk for registered projects, leaving an inadequate buffer pool to cover future losses after large wildfires impacted the state's enrolled projects in recent years. CARB's use of nationwide risk numbers that underestimate regional risks in areas like the western US, coupled with a smaller buffer pool compared with the higher risk facing California's forest offsets leaves inadequate protection for projects that are required to endure 100 years under the state's program, according to researcher Danny Cullenward, with the University of Pennsylvania.
CARB will not examine updates to its forest offset protocols until an ongoing program rulemaking is complete, the agency said. Regulators expect the rulemaking, which will include tougher future GHG targets, to conclude in early 2025.
The agency is awaiting finalization of research it commissioned on fire risk ratings and climate change, which CARB staff have said will provide necessary data required to move forward with any potential rulemaking on its offset protocol.
"By stalling reform on the buffer pool, CARB has been encouraging projects in the Sierra foothills that are among the most fire-prone forests in the entire country to enroll in the forest carbon program on the assumption that they look like upstate New York for fire insurance purposes," Cullenward said.
