Assessing the Market Potential for Urban Forest Carbon Credits

Transcription

1 Assessing the Market Potential for Urban Forest Carbon Credits Neelam C. Poudyal & Jacek P. Siry & Matt Armstrong Warnell School of Forestry & Natural Resources University of Georgia Athens, GA J. M. Bowker & Dudley R. Hartel USDA Forest Service Southern Research Station Athens, GA Society of Municipal Arborists 45 th Annual Conference and Trade Show Savannah, GA, October 4-7, 2009

2 Background Rising concern about climate change 1.4 degree rise every year since 1990 Last decade: hottest in the past 1.5 century Concerns Frequent weather shocks Forest, farm, biodiversity i Public health

3 Policy Responses ses and Market Initiatives Global UN Framework Convention on Climate Change (Kyoto Protocol) Regional European Union s GHG Trading schemes (EU ETS) Mandatory cap & trade 25 member countries National/Local Chicago Climate Exchange (CCX) Voluntary legally binding

4 Initiatives tat in USA Regional Green House Gas Initiatives 8 NE states California Climate Action Registry 302 members Mayors Climate Protection Agreement Climate Protection Center More than 500 members Relevant for urban carbon

5 Emerging g Market Annual Registration of Offset Projects at CCX (Million Mt CO2e) Source: CCX Offset Report, Vol 1 (1), 2009)

6 Forest Carbon Offsets A major source of Carbon Offset at CCX registry Project types with the most tons registered in 2008 Project Mt (Million) Coal Mine Methane 9.37 Forestry Agricultural Soil 4.63 Landfill Methane 2.29 (Source: CCX Offset Report, Vol 1 (1), 2009)

7 Urban Forestry Potential t Resources 4 billion urban trees in USA Another 70 billion growing in metro areas Urban 3.5% US area 3% US tree cover Offset potential (based on a 2005 study) Urban trees store 700+ million tons = $ 1.43 $2 Annual sequestration roughly 23 million ton/year = $ 46 million Interests (potential sellers) Mayors Climate Protection Agreement (> 500 members) CCX (3 counties, 8 municipalities, and 2 states) Revenue source Interests (potential buyers) Improved public image Hedge for future regulations Advertising potential

8 Urban Carbon Sequestration Advantages Permanent- not harvested Leakage-less of an issue Baseline and Additionality-easier to establish Provide other external benefits Aesthetics, water quality, air quality, recreation

9 Approach Previous studies Focus on private forests Overlook the potential role of urban forests Objectives Objectives To assess knowledge, awareness, motivations and interests of local governments in participating in carbon sequestration market To assess buyer interest in urban carbon and price premiums

10 Methods - Sellers e Nationwide survey of SMA affiliated cities Local governments (cities, municipalities etc.) 27 questions (urban forest management, initiatives and activities in climate change mitigation, city characteristics) 54% response rate

11 Respondents 150 valid Regional Distribution NE 6% MW 37% South 27% West 31% Population size More than 100,000 = 21% 50,000 to 100,000 = 27% 20,000 to 50,000 = 31% Less than 20,000 = 21%

12 Technical and Managerial Capacities Urban Forester Management Plan 43% 57% 44% 56% Yes No Yes No Inventory Risk Management Plan 23% 31% 77% 69% Yes No Yes No

13 Climate Change Awareness, Interest and Initiatives GHG Reduction Goal 26% 26% 20% 17% 11% Yes, It is a priority No, but it has been discussed Not sure Yes, but not a priority No, it has not been discussed

14 Climate Change Awareness, Interest and Initiatives Knowledge about Carbon Sequestration, trading etc Familiarity with Carbon sequestration and trade (Very (Not at all Not sure familiar) familiar) 1 (Very familiar) (Not at all familiar) Not sure

15 Climate Change Awareness, Interest and Initiatives Familiarity Familiarity with the with Chicago the Market Climate Institution Exchange (CCX) (CCX) 44% 34% 1% 21% Not familiar Familiar Currently using Not sure

16 Model Willingness to supply urban carbon credits Which cities are interested in participating? What influences their interests/motivations? Conceptual model: Willingness to supply sequestered carbon is a function of: Knowledge about the carbon storage Priority in climate change mitigation Familiarity with the market institutions Importance of urban forest revenue Current participation in other GHG schemes City characteristics

17 Probit Model Variable Definition Expected sign Willingness to sell Dummy, 1 if city is currently interested in selling carbon, Dep. carbon 0 otherwise Variable Awareness Knowledge about the carbon storage before reading the survey (1-5) Revenue Importance of income from the expected sale of carbon + (1-5) Market information Familiarity with the market institution such as CCX (Dummy) GHG reduction City has a goal of reducing its carbon emissions i + (Dummy) Voluntary participation City s current participation in other voluntary actions to reduce GHG (Dummy) Population density Persons (in thousands) per square mile + Cost of living Median market value of owner-occupied house + Education Percentage of city residents with college education + Forest Amount of forest coverage within the immediate + surroundings of city + + +

18 Probit Regression Estimates Variable, N=144 Coefficients Marginal Effects Constant Awareness 023** ** 0.04 Revenue 0.50*** 0.09*** Market information 0.77** 0.17* GHG reduction Voluntary participation Population density (1000) 0.20** 0.03* Ln(med house value) -0.99*** -0.17*** Education 0.04*** 0.01*** Ln(forest) Area 0.29* 0.05 Water -0.05* 005* Wald Chi-Square (9) 49.5*** Pseudo R-Square 0.33 *** = Significant at 1% level, ** = significant at 5% level, * = Significant at 10% level White s robust standard errors were used

19 Predicted likelihoods of participating in carbon offset trading for selected US HL > 0.66; 0.66 L 0.50; LL<0.50 Region City Likelihood Northeast New York, NY Highly likely Midwest Chicago, IL Likely South Atlanta, GA Less likely Northeast Philadelphia, PA Highly likely South Blacksburg, VA Likely South Panama City, FL Less likely West San Francisco, CA Likely Midwest St. Cloud, MN Less likelyl Midwest West Lafayette, IN Highly likely Midwest East Lansing, MI Highly likely South Houston, TX Less likely West Santa Fe, NM Less likely

20 Discussion/Conclusions Local governments are fairly interested in selling carbon offsets Some of them have technical/managerial capacity Low marginal cost Easy to establish s quality offset criteria (e.g. additionally, a verification) Others are however unaware of how carbon storage and trading works Being aware of carbon sequestration, and having market information increased their willingness to participate p

21 Discussion/Conclusions City's willingness to participate was also driven by Degree of urbanization Awareness and interest t of their voting constituents t Desire for additional revenue Local governments would benefit from better understanding of costs, benefits and technical details associated with carbon storage and trading Urban forestry extension Designing protocol for urban carbon market

22 Future Steps Buyer s survey Interests in locally stored carbon Price premiums Market protocol Measurement/quantification Verification Trading platform

23 Buyer s Survey Respondents: 185 CCX Members Members: (offsetting their direct emissions) Associate Members: (offsetting their indirect emissions) Administration: Initial Contact (by telephone) Pretesting Survey Mail Survey Follow ups (2 weeks)

24 Survey Questions s Environmental policy Legal compliance Public relations/importance ratings Current emissions/offsets Targets Attitudes/preferences toward urban forestry credits Price premium for urban forestry credits Company characteristics

25 Pretest 6 out of 10 contacted responded Respondents understood the questions very well Comments were used to revise the survey

26 Pre-Test est Questions/Responses s/ espo ses Location preference for carbon credits LOCATION probably MATTERS For example, one company replied as follows:

27 Pre-Test Questions/Responses Do organizations have a preference for urban forestry credits? Probably YES For example, a public agency replied as follows:

28 Pre-Test Questions/Responses Can cities attract buyers by recognition/incentives? Probably YES For example, one company replied as follows:

29 Status of Final Survey 35 responses so far (out of 90) Mail survey is underway and few responses are just in (out of 70) Few others contacted chose not to participate

30 Next Steps Survey data analysis Estimate price premium for urban forestry projects (WTP) Economic recommendations for establishing market protocols to help local governments initiate carbon credit trading

31 Questions/Comments Thank You