U.S. Public Forests Are Cashing In on Dubious Carbon Offsets

The State of Michigan and five counties in Wisconsin recently inked agreements with Blue Source, LLC, a carbon development firm in Salt Lake City, to create projects on approximately 800,000 acres. That’s about three-times more public land than is currently generating carbon credits in the U.S. These projects are expected to begin selling credits later this year or in 2023. At least a dozen more Wisconsin counties and several other states are considering following suit, according to county documents and interviews with public officials.

The recently signed agreements are expected to generate around 10 million credits over the next decade. That’s equivalent to a year’s pollution from a large coal power plant or more than two million cars. The government agencies will get to sell credit for these emission reductions to companies, who can then subtract this volume of pollution from their own ledgers.

These claims, however, will be greatly exaggerated. Each carbon credit is supposed to represent one ton of carbon dioxide that’s been absorbed because the promise of payments caused a landowner to alter their practices. But overseers of each of these public forests aren’t planning to change how they manage their trees, according to public records reviewed by Bloomberg Green and interviews with forest managers. Instead, they’re able to capitalize on weak rules in the carbon markets to garner payments for continuing the same forest practices they’ve utilized for decades.

“We’ve already done the legwork to get where we need to be,” says Jeremy Koslowski, forest administrator for Rusk County, who says he doesn’t anticipate a carbon project impacting their harvests.

Steven Davis, a professor of political science at Edgewood College in Madison, Wisc., who has studied county forests in the U.S., says the impact will be minimal. “It’s kind of a nothing-burger for the climate,” he says. “These forests have been managed the same way for 70 years.”

This impending surge in questionable offsets comes at a precarious moment for the carbon industry. On one hand, the market for offsets recently surged past $1 billion for the first time. But a torrent of criticism has cast doubt on the market’s future. Bloomberg Green reported last month on a U.S. timber executive’s revelation that most offset projects — including some of his own — are shortchanging the climate. Meanwhile, controversy is roiling the offsets industry in Australia after a key official described carbon projects there as “largely a sham.” BloombergNEF, a clean energy research group, has said the market for offsets could either skyrocket past $100 billion or crumble if there are little improvements in quality.

Blue Source, which usually takes between 10% to 33% of a carbon project’s proceeds and stands to make millions of dollars from these newly-signed deals, staunchly defends their climate benefits. “All of these projects meet the highest quality standards,” says Joshua Strauss, executive vice president at Blue Source.

But a close examination raises major questions. Take the case of Michigan’s 105,000-acre Pigeon River Country state forest. In late 2020, Michigan’s Department of Natural Resources signed a deal with Blue Source to begin developing a carbon project on these wildlands where a young Ernest Hemingway hunted and fished a century ago. For decades, the land has been managed to balance sustainable timber harvests with preservation of “the natural beauty of its forests and waters, and to sustain a healthy elk herd, fish, and wildlife populations,” according to a 2007 management plan for the forest.

Little will change because of the carbon project. In emails and documents obtained through a public records request, state officials repeatedly assured timber companies that the carbon project won’t diminish their harvests. The carbon project is “consistent with our harvest strategies,” wrote state official Scott Whitcomb in an email to a manager with the Michigan Forest Products Council. “We’re not expecting to see a change or difference in management from the working forest model we have now,” he added.

Carbon projects, however, are supposed to deliver climate friendly practices that wouldn’t have occurred in the absence of carbon payments. In this case, the Michigan project is claiming that harvests in Pigeon River Country were about to explode. After harvesting an average of 20,000 cords of timber per year over the past 17 years (as far back as the state has compiled this data), the carbon project is claiming the harvests would have nearly tripled over the next decade to 55,000 cords per year. (A cord is 128 cubic feet of wood — stacked four-feet high, four-feet deep and eight-feet across.)

By refraining from this eye-popping increase and continuing with its existing practices, the state gets to claim about one million carbon credits over the next decade. DTE Energy, a Detroit-based energy company that supplies electricity and natural gas to millions of customers in Michigan, has already agreed to spend $10 million to acquire these credits. DTE is planning to sell  these claims of emission reductions to its climate-conscious customers who voluntarily pay the utility an extra $48 to $192 per year to neutralize the climate impacts from their usage of natural gas.

None of this makes sense, however, if the state wasn’t actually going to triple its harvests. When asked for details on this, Michigan officials said there weren’t any such plans. But, they point out, such a massive spike in harvests would have been allowable under the law and the project follows the rules set up by the American Carbon Registry, one of several organizations that create protocols for carbon projects. “By enrolling the lands in the carbon market, you’re taking those most aggressive scenarios off the table,” says Whitcomb, a director with the state’s office of public lands.

Strauss, the Blue Source executive, adds that decades of modest timber harvests doesn’t necessarily mean such practices will continue in the future. In fact, he says, bigger stands of trees provide even more of an incentive to cut them down. “There’s a bunch of mature timber that could absolutely be harvested right now and there’s quite a bit of financial benefit that would be realized from that,” he says.

A DTE spokesperson defended the decision to purchase the credits by saying the project will follow the rules of the American Carbon Registry. And the registry’s executive director, Mary Grady, said that harvest plans frequently change and the carbon project “now provides legal certainty, which was absent before, that the project area will increase its carbon stocks over time.”

But carbon experts say offset projects have to be based on realistic scenarios for the climate claims to be trustworthy. “If a landowner has been managing their land the same way for the past 15 years, there has to be a really strong impetus to suggest that they would manage it differently,” says Bodie Cabiyo, a PhD candidate at the University of California at Berkeley and a science advisor at Carbon Direct, which advises companies on carbon-reduction strategies.

Without such an explanation, he says, the claims of emission cuts aren’t very credible. “DTE is basically giving license to its customers to burn as much gas as they want and feel good about it, under the premise that they’re funding some sort of change in practice,” he says. “But on the other side, you have this landowner that’s not changing what they’re doing. In the end, the atmosphere loses. The homeowner also loses because they’re spending money on something that’s probably not real.”

Pigeon River Country could be just the first of many new carbon projects on state lands. Michigan recently began working with Blue Source to develop a second carbon project on an additional 125,000 acres of state forestland. And at least a half-dozen other states are contemplating their own carbon projects, according to Marvin Brown, a staff member with the National Association of State Foresters.

An even bigger batch of questionable carbon credits will likely emerge from taxpayer-owned forests in Wisconsin. The state boasts a unique system where counties are huge forest owners, with timber revenues supplying large portions of the county budgets. Wisconsin counties own some 2.4 million acres of forests, which is more than 40% of all county-owned forests in the U.S.

In the last several months, five of the state’s counties — Bayfield, Rusk, Iron, Washburn and Price — have signed contracts with Blue Source to set up carbon projects. Blue Source says the projects will encourage the counties to preserve more trees in order to earn heftier carbon payments. “There’s going to be some significant motivation to cut less in order to generate more carbon revenue,” says Strauss.

But administrators with all five counties said the carbon projects are not going to impact how much they harvest. “We’re not anticipating any changes to our timber management,” says Eric Peterson, forest administrator for sparsely-populated Iron County, which abuts Lake Superior and is home to about 6,000 residents and 175,000 acres of county forests.

Rather, most of the county managers said they view the expected payments as a reward for their decades-long practices, in which they consistently harvest less than the growth of their trees and their forests lock away more carbon every year. “It’s a way to get money for the good work we’ve been doing,” says Peterson, who estimates the carbon proceeds could provide as much as 10% of Iron County’s budget.

Other county officials in Wisconsin say the carbon payments will lock in their current practices for decades to come. And, if carbon prices eventually rise high enough to compete with timber values, it could encourage them to harvest less down the road, said Mike Peterson, forest administrator for Washburn County.

But it’s unclear if or when carbon prices will increase that much; and it’s unlikely that Wisconsin counties would substantially ratchet up their harvests in the absence of carbon payments. These forests have been packing away more carbon in part because they’re instructed by state law to balance timber harvests with several other purposes, including recreation and the preservation of wildlife. The county harvest plans must be approved by state regulators, who say they wouldn’t sign off on proposals to aggressively cut the trees. “It’s so ingrained in how we manage the forests, it never comes up,” says Douglas Brown, a county forest specialist at the Wisconsin Department of Natural Resources.

This means the counties are likely to be paid for what they were already doing — and purchasers of the ensuing carbon credits won’t be causing a reduction of carbon dioxide in the atmosphere. “It’s nice that poor, rural counties are getting an extra stream of revenue,” says Davis, the Edgewood College professor. “But it’s going to give companies credit for a carbon achievement that was going to happen anyway.”

Wisconsin’s biggest carbon payday likely resides in Douglas County, which boasts the state’s largest county forest at more than 280,000 acres. Carbon development firms, including Blue Source, have been pitching officials there, who are contemplating a carbon project that they estimate could generate more than $30 million over the next decade.

Despite the sizable windfall, the exaggerated climate calculus has at least one official there scratching his head. “It’s a little asinine to pay us to do something that was already going to happen, which could allow someone to pollute somewhere else,” says county supervisor Mark Liebaert. “I’m not sure this is an environmental salvation.”