Frequently Asked Questions
Q. What does carbon exchange mean?
A. Carbon trading has emerged recently as a means of reducing carbon dioxide emissions into the atmosphere. Through the Chicago Climate Exchange (CCX), greenhouse gas “credit” are traded. One carbon credit is equal to one metric ton of carbon dioxide. Companies looking to voluntarily regulate their carbon emissions can purchase credits to offset their carbon emissions; these credits come from landowners who can see the carbon that has been sequestered on their land through either forestry or agricultural means.
Q. Where do this funds come from?
A. Companies who are regulating their carbon emissions can purchase carbon credits in order to offset their own emissions.
Q. What advantages do companies have in join the Chicago Climate Exchange?
A. Participation in the CCX is voluntary in the US; however, in the European Union, and other nations currently participating in the Kyoto Protocol, carbon exchange is an important aspect of meeting emission limits that are enforced by law. This may soon be the case in the US as well, and companies may benefit legally from taking early action. By voluntarily following emission limits, companies can enhance the environmental sustainability of their business, an aspect that many consumers are looking to support as environmental awareness grows.
Q. How does reforestation reduce carbon in the atmosphere?
A. Growing trees remove carbon dioxide from the air and release oxygen through the process of photosynthesis. While trees can also release carbon dioxide through decomposition, healthy growing forests usually have a positive impact in carbon.
Q. How will the land meet carbon credit qualifications?
A. A qualified aggregator will confirm the enrolled land meets all criteria and the actual amount of carbon reduction.
Q. What is an aggregator?
A. An aggregator is an organization that projects from multiple landowners so they can be sold on the open market.
Q. Do landowner pay fees to the aggregator?
A. Yes, aggregator generally take 10%, of the payments earned from the sale of carbon credits before the landowner gets paid out.
Q. Is their a minimum of trees to plant per acre?
A. No, but 400 to 750 trees per acre will yield the most carbon credits.
Q. Does it matter when I planted these trees?
A. Yes, The Kyoto Protocol was established to lower emissions from the 1990 level, only trees planted, or regenerated, after 1990 are eligible.
Q. What are vintage credits?
A. Carbon credits for forestry projects are retroactive. This means that any forest planted or regenerated since 1990 can be enrolled for vintage carbon credits. Currently, the CCX allows landowners to claim credits all the way back to 2003.
Q. How much land do I need to own to qualify?
A. There is no minimum to qualify. There are landowners enrolled with as little as ten acres.
Q. What amount of money would you make with various types of land use?
A. Forested land, on average, earns nearly four times as much carbon credits as land planted with just grass.
Q. How do I apply?
A. People interested in participating must sign a contract with a CCX approved aggregator.
Q. How much revenue can I expect?
A. The amount of land that is participating, geographic location, species, age of trees, and market conditions. For every one metric ton of carbon dioxide equivalent that your forestland is sequestering annually, you will have earned one carbon credit. Currently (May 2008), carbon credits are trading for $3.50. Landowners, on average, can expect $10 -20 per acre in revenue from the sale of carbon credits.
Q. How will I get paid?
A. Payments will be multiple yearly payments. Carbon credits are sold by the aggregator. On average, aggregators make payments at least once per year.
Q. How often will you receive a check?
A. This is dependent upon the aggregator, but at least once per year.
Q. Will the amount of money change?
A. Yes. Just as the stock market values fluctuate due to demands, the carbon exchange functions in a similar manner.
Q. Will this program change my taxes, subsidies or other government funding?
A. Carbon credits is an additional form of income, and must be report as income.
Q. Is there any maintenance involved?
A. No.
Q. Is there a contract? Do I need to keep land forested for a certain amount of time?
A. Currently, contracts require that forests be maintained for fifteen years. After this, contracts can be renewed. These contracts can’t be broken once signed. During the years that the land is in contract, the CCX will retain 20% of carbon offset in the reserve pool. If the contract is not broken, and no other losses occur, then at the end of the contract, the credits will be sold and moneys will be paid out to the landowner.
Q. Why does CCX retain 20% of carbon offsets?
A. This is done to project for potential losses in stored carbon due to natural disasters (tornadoes, hurricanes, wildfire, insects, etc.).
Q. Can I, as a forest landowner harvest timber?
A. Projects enrolled in the managed forests protocol are allowed to harvest timber. However, losses in carbon credits from timber harvested must be reported.
Q. Can any species of tree qualify, or will some species earn more money than others?
A. Faster growing species, will accumulate carbon faster, thus increasing the amount of carbon credits; however, having diverse carbon crops is not only more ecologically sound, but will bring other benefits as well as buffer from losses due to disease or pests.
Q. How long is the landowner commitment to the program once enrolled?
A. The commitment period is fifteen years.
Q. Does the credit amount increase for the landowner as the stands of trees enrolled in the program mature?
A. Yes. As the trees grow older, they are able to sequester more carbon up to a certain point, and then it levels off before declining.
Q. What types of trees qualify for the carbon credit program?
A. Most native trees species qualify for the carbon credit program. To date, all verified land has consisted of pine trees.
Q. What is the market price for carbon credits?
A. As of May 2008, the price is $3.50 per credit. It has been as high as $7.50 per credit.
Q. How is carbon credits measured?
A. Carbon may be measured by using reference tables that are based on the species, age, and land location to determine the acre rate. Computer models can also be used to determine carbon storage based on a forest inventory.
Q. Who does the calculations?
A. An aggregator or consultant working for the landowner.
Q. How are carbon credits verified?
A. The measurements are audited and the paperwork that is submitted by aggregators to confirm that the enrolled land meets all eligibility criteria, carbon has been correctly quantified, and supporting documentation is present. Site visits are also conducted to confirm species, acreage, age, and the accuracy of forest inventory data.
Q. Who can participate?
A.All owners who manage land sustainably and meet certain other conditions are eligible to participate in the program.
Q. Is their a acre minimum for participation?
A. There is no minimum number of acres. In the last pool of applicants that TFS verified, some landowners with a s few as ten acres were enrolled.
Q. How do landowner enroll?
A. Landowner should contact an approved carbon aggregator or consultant to assist with this process.
Q. Is this program a result of global climate change or global warming?
A. It is difficult to disprove the increasing emission of carbon dioxide in the atmosphere, so it is important for landowner to recognize that there are programs out there that can offset these emissions. Regardless of one’s view on climate changes, landowners can be paid to grow trees to offset human caused carbon dioxide emissions.
