DNR wants in on Wash.’s emerging carbon-credit market

SEATTLE — The Washington state Department of Natural Resources wants to make land conservation and restoration more profitable.

Two bills introduced in both chambers of the state Legislature would allow the agency to use state lands for carbon sequestration, habitat restoration or other projects benefiting ecosystems. In turn, carbon credits associated with those projects could be sold as offsets under the state’s ambitious 2021 Climate Commitment Act, which requires the state’s biggest polluters to pay for and reduce their emissions.

Under Senate Bill 5688 and House Bill 1789, the Department of Natural Resources could generate money for trust beneficiaries, including rural counties and schools, through those carbon credits. The revenue could also fund additional conservation projects.

“By allowing them into this carbon market,” said Sen. Liz Lovelett, D-Anacortes, the Senate bill’s lead sponsor, “they’re able to not only do the natural remediation that we so desperately need to reforest areas, and to work on the health of our Salish Sea, but additionally gives them the ability … to generate more funding for schools, libraries, fire stations and counties.”

DNR manages nearly 6 million acres of forest, range, agricultural, aquatic and commercial lands.

Under law, DNR is only allowed to sell “valuable materials” from state-owned lands. That doesn’t include carbon and ecosystem services. In lieu of logging all working forests, the legislation would allow DNR to conserve some forestlands and replant areas scorched by wildfire. Trees — especially mature forests — are among the cheapest, fastest, most reliable forms of carbon storage. And, they provide critical habitat.

“I share the bounty of my hunting with our community. It puts food on my family’s table,” said J.J. Wilbur, vice chair of the Swinomish Indian Tribal Community. “So I want to express how valuable it is to ensure that our wildlife have a large areas of forest habitat that are continuous, so our elk and deer can roam freely and maintain healthy populations.”

The bill would also allow for the preservation of “blue carbon” in kelp and eelgrass beds. According to a 2021 study by the University of California, Davis, coastal habitats remove carbon from the atmosphere at approximately three times the rate of land-based habitats like forests. The agency anticipates the aquatic carbon sinks could generate as much as $35 per credit.

“While nonprofits and businesses can sell carbon, the Department of Natural Resources cannot,” said Hilary Franz, commissioner of public lands, at a news conference Thursday. “We can sell timber, we can sell wheat, we can sell apples, we can sell grapes, we can sell shellfish, and geoducks. We can even sell marijuana, but we cannot sell carbon.”

The agency makes money for its trust beneficiaries — rural counties, schools and emergency services — through logging, agriculture, grazing, commercial real estate, communication sites, solar and wind power, and other uses. Timber sales make up about 80 percent of the total revenue on state lands, but those earnings have been sharply declining as the cost of operations has risen.

DNR has continued selling timber, including valuable mature trees, as part of its stated responsibility to state trust beneficiaries. The state has lost over 400,000 acres of working forest and is on track to lose 660,000 more in the next two decades, Franz said Thursday. State trust lands contributed more than $155 million in net revenue to those beneficiaries in 2018, most of it from timber harvests.

One critical finding from the Trust Land Performance Assessment was that DNR should increase revenue opportunities.

The legislation would allow DNR to enter contracts of up to 125 years for these offset projects. The state Department of Ecology, which is overseeing the Climate Commitment Act, would provide technical assistance to DNR.

DNR anticipates selling credits will eventually add “tens of millions” to the agency’s annual revenue, which is currently upward of $350 million per year.

Nick Smith, spokesperson for the American Forest Resource Council, a timber advocacy group, argues the carbon credits would only generate a fraction of the revenue that’s provided by timber harvest.

The legislation would not end timber harvest.

“Goals are not enough,” said Sen. Joe Nguyen, D-White Center, on Thursday. “We have to have a plan and this is a significant step to make it all work.”

Cap-and-invest, the centerpiece of the climate legislation, sets a statewide cap on greenhouse gas emissions that gradually ratchets down over time with a goal of decarbonization by 2050. Emitters can purchase allowances, each equal to 1 metric ton of carbon dioxide emissions, at quarterly auctions. Over time, the number of available allowances will incrementally decrease.

Companies also can invest in carbon offsets as an alternative to cutting emissions. The idea is a company’s emissions would be canceled out by investing in conservation or restoration projects that absorb what’s assumed to be an equal amount of carbon.

Offsets have been scrutinized for where they fall short, like whether they actually reduce carbon in the atmosphere. Drought, extreme heat, invasive beetles and wildfires — all becoming increasingly common — threaten the success of these projects.

The California Air Resources Board that oversees California’s offset program requires sellers to demonstrate that carbon will stay locked in trees for 100 years. But according to the nonprofit organization CarbonPlan, at least six large carbon offset sites in California, Oregon and Washington burned from 2016 to 2021, reported Grist, a nonprofit news organization that covers climate.

Washington’s Climate Commitment Act requires that offset projects result in greenhouse gas reductions “that are real, permanent, quantifiable, verifiable, and enforceable,” and provide direct environmental benefit to Washington.

In Washington, if a business picks up an offset for compliance, an emissions allowance will be removed from the pool. In the first compliance period that ends in 2026, emitters can cover up to 5 percent of their emissions with offset credits, and can cover an additional 3 percent with credits from projects on federally recognized tribal lands. In the next compliance period, the offset limit drops to 4 percent.