The risks wildfire poses to the operation of California’s forest offset program are bigger than you might think — because the same place can burn more than once. In 2021, the Bootleg Fire burned through more than 400,000 acres of Southern Oregon, including nearly 100,000 acres of a California forest offset project called Klamath East (ACR273). The damage was so severe that the entire project was terminated, resulting in the retirement of 1.14 million offset credits from California’s buffer pool. The buffer pool is meant to insure California’s cap and trade program against the loss of offset projects and, to date, the Bootleg reversal represents the second largest withdrawal from the buffer pool in program history.
You might think that a major fire, followed by a project’s termination, would mark the end of the story. But just a little over a month after the California Air Resources Board (CARB) approved the termination of Klamath East last March, the project’s owner re-listed 87 percent of the same land as four brand new offset projects: Longbell (ACR1025), ORO North (ACR1026), ORO East (ACR1027), and ORO South (ACR1028).
CARB has not yet approved this plan. But, to our knowledge, the potential re-enrollment of Klamath East’s forests marks the first time a previously terminated project has sought re-enrollment under California’s forest offset program. We think CARB should be extremely cautious about this approval, because re-enrolling risky forest projects will likely accelerate the depletion of California’s buffer pool.
Re-enrollment is a straightforward process. California’s forest offset program explicitly allows terminated projects to re-enroll, so long as the cause of their termination was “unintentional.” And re-enrollment does not result in “double counting,” a situation where the same trees are used more than once to justify fossil emissions. When a project enrolled in California’s offset program suffers a carbon loss, the buffer pool steps in to insure those losses. In this case, you can think of the credits retired out of the buffer pool as a replacement for the damaged Klamath East credits. The carbon liability once shouldered by the trees in that project has been passed on to still-good buffer pool credits generated by trees located somewhere else. Having passed its liabilities to the public buffer pool, the land that was once enrolled as Klamath East is available to offset more emissions.
But the practice of re-enrollment does raise serious concerns. While the trees aren’t being double counted, project developers can end up being double paid. The loss of Klamath East was covered by the buffer pool, so the project owner got to keep the credits and money that their now-terminated project generated. Klamath East received a net 0.93 million offset credits, which, if we assume those sold at market average prices for the period 2018 through 2021, works out to around $14 million. And nothing about the re-enrollment process requires them to pay any of that back.
This presents an additionality issue. If California already paid a forest owner significant amounts of money to change their management practices, does paying them again produce new climate benefits? Project termination releases the landowner from the previous obligations imposed by the offset project. But most projects receive the majority of their credits in the first year of enrollment. How likely is it that new payments will generate new climate benefits? The specifics will vary from project to project, but re-enrollment significantly complicates the ability of projects to credibly prove their additionality.
What’s more, the practice of re-enrollment intersects with ongoing concerns about how California’s forest offset program calculates wildfire risk. Dry, arid forests like those of Southern Oregon will experience more frequent and severe wildfires as the climate continues to change. That makes it inherently risky to use any of these forests for long-duration carbon storage. Re-enrollment just doubles down on a risky arrangement.
Worse, re-enrolling vulnerable forests, without at least adjusting their wildfire risk buffer pool contributions upwards, would heap new liabilities on an already vulnerable buffer pool. Klamath East, for example, was issued 1.14 million credits, and only had to put 0.21 million of those credits into the buffer pool as loss insurance. When it was terminated, it cost the California buffer pool a net 0.93 million credits. Taken to its logical end, the ability to profit from re-enrolling demonstrably fire-prone forests introduces a nearly unlimited liability to the buffer pool that, if left unresolved, could bankrupt the program.
Re-enrollment of risky offset projects poses a threat to the integrity of California’s offset program. As California starts to think about revising its forest offset protocol, it’s worth taking a more critical look at how the practice of re-enrollment can be revised to more closely align with the state’s climate goals.