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This story by ESI Journalism Fellow Nora Hertel was originally published in the St. Cloud Times, where it appears with additional photos and resources.
John I. Scheef has purchased hundreds of acres in the north woods of Minnesota in the last 20 years.
The retired investment manager initially thought about developing the forestland in the northeastern corner of the state. Then his priorities shifted toward conservation.
Scheef planted 1,000 conifers on the land — “a drop in the bucket,” he said. He also allowed for some logging at the recommendation of a forester.
Now he is among a group of landowners deferring all timber harvests for payment brokered by startup company NCX in a new forest carbon marketplace.
Scheef’s land is home to cedar and spruce bogs, old birch and new aspen growth, and a variety of conifers including white pine and white spruce among other tree species and shrubs.
He likes to walk through it, but it’s so remote he doesn’t go too far in when he’s alone. His plans for the land aim to keep it habitable to moose, black bears, ruffed grouse, chestnut-sided warblers and many others.
Scheef is not making much money in the deal with NCX, he said. But he likes that there’s a market-based and cooperative solution taking on climate change.
NCX launched a pilot program in 2019 with 20 landowners in Pennsylvania and funding from Microsoft. Now it has more than 670 landowners with 2.35 million acres and has sold 270,000 carbon credits.
As of July, NCX was operating in 16 states.
The units from the landowners are pooled together. Companies that bought units from Scheef’s land include Microsoft, Rubicon, Patch, Lune and Cargill, according to NCX. All the companies that buy carbon offsets from NCX do it voluntarily to counteract their carbon emissions.
“We really, really believe in the power of markets to really quickly and efficiently bring the full weight of forests as a natural climate solution to bear,” said Alex Macintosh, director of U.S. origination for NCX.
Planting new trees and changing forest management practices are two strategies to reduce the effects of climate change known as natural climate solutions. These solutions protect plants and ecosystems that already store carbon and encourage growth of those systems to draw in more carbon dioxide, a greenhouse gas.
Carbon markets are one incentive. Land owners are paid to keep carbon locked up in landscapes by encouraging more plant growth. Companies that want to reduce their carbon footprint — essentially make up for the greenhouses gases their operations produce — pay them to do so through those markets.
NCX is not the only player in the field. The Family Forest Carbon Program has a similar goal and is launching in Pennsylvania. It was created by the American Forest Foundation (a timber industry group) and The Nature Conservancy.
There’s a large stretch of forest in north central Minnesota already enrolled in a carbon market.
Much of a 188,000-acre permanent conservation easement is in the American Carbon Registry, a nonprofit and the first private voluntary greenhouse gas registry in the world. The land is owned and managed by UPM Blandin, a paper company. Some of it can be harvested for timber and the land is open for outdoor recreation.
“Based on our experience it does seem like a really valuable tool, in terms of promoting these natural climate solutions and supporting forestry practices that are maybe better suited to higher levels of carbon sequestration or storage,” said Sawyer Scherer, a forest ecologist for UPM Blanden, about forest carbon markets. “It’s certainly been helpful for us. … I think it will be important for a lot of new forest owners in the future, and I think it’s a good way to support those practices.”
Taking on climate change will require drastic cuts in greenhouse gas emissions on top of carbon sequestration efforts.
NCX has set up a unique carbon marketplace. It uses satellite images and artificial intelligence to assess forests, which means it can work with a lot of smaller landowners efficiently.
“I think we take an especially strong stance on the importance of landowners getting to be part of this solution and getting to have this extra tool in their toolbox for forest management,” Macintosh said.
NCX works on a year-by-year basis and doesn’t require long-term commitments from landowners. Other forest markets work on 30- to 125-year projects, said Chris Wright, a landscape ecologist at the Natural Resources Research Institute at the University of Minnesota-Duluth.
“I think it’s a really interesting idea, in the sense that they’re trying to get as many people involved in the carbon market as possible,” Wright said.
“I think it’s a huge opportunity to reorient the way we approach our forests,” he said.
One marker of a high-quality carbon credit is that it represents a permanent reduction in carbon levels.
Carbon credits are meant to allow companies or countries to make up for some of their greenhouse gas emissions because the credits represent greenhouse gas reductions or removals.
Rather than bring in a few, long-term protected forests, NCX seeks to bring in a high volume of smaller, short-term protections.
“We think it’s much, much better to have that environmental impact all at once, today, if possible,” Macintosh said. “If you just take a unit of carbon retained over a period of time has an environmental benefit, and you stack up enough of those blocks, in one year, today, that can be really significant.”
Another marker of a high-quality carbon credit is that it’s “additional,” meaning the reduction of carbon dioxide represented by the credit only happened because the carbon credit program incentivized it. Forest carbon credits don’t mean much if the forest was already protected or the landowner never intended to cut it down.
“When you look at NCX, I think there’s reasons to believe that they are doing a better job on the additionality problem,” said Danny Cullenward, policy director for CarbonPlan a nonprofit that analyzes climate solutions. “They’re trying to create a contractual structure that would actually, potentially change how a forest manager manages his or her lands. That’s good.”
NCX requires an attestation from the land owner that they’ll defer timber harvest.
The company conducts an inventory of the property that includes species mix and density and local market factors, such as the distance to nearby mills.
John Scheef’s land is pretty far from the closest mills, in Two Harbors and Cloquet. He has about 660 acres enrolled in the NCX program.
The land is divided into swaths with hills, wetlands and small lakes. They’re remote and difficult to access. Plus markets for logging products aren’t strong.
The company expanded its reach from the spring to the summer — an increase from 119 to 577 landowners — which had an impact on the cost of a “harvest deferral credit.” Those credits are currently worth $12 a piece and landowners get the full payment, Macintosh said.
Credit buyers pay an origination fee to NCX to cover the cost of running the program and certification auditing.
Macintosh said most landowners will make enough from carbon payments to cover their property taxes on the land.
That’s not true for Scheef, but there are some non-financial incentives for him too.
“It’s playing into the long-term conservation theme, and you’re earning a few dollars to do it,” he said. “I’d like to see the quality and diversity of these forests improve over time.”
NCX is focused on forest carbon credits now, but the company is considering selling credits that reward landowners for reducing the risk of wildfires on the land through management choices. It also plans to offer credits for ecosystem services, meaning they’ll pay landowners for protecting habitat.
“I think that’s again in the spirit of fully valuing the forest landscape and making sure the landowners are being compensated for their, you know, their stewardship of this really important resource,” Macintosh said.
Scheef has noticed that the plot he logged several years ago is regenerating and drawing moose who like that phase of regrowth.
Minnesota’s moose population is declining and is considered highly vulnerable to climate change, according to a Climate Change Vulnerability Assessment and Adaptability Plan led by three of the state’s Ojibwe reservation governments.
Scheef’s land is in the part of the state most likely to keep its boreal forests, even as the climate changes and strains the region typically covered in trees.
“It’s probably one of the last areas of true moose habitat,” Scheef said.