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Carbon Market Update 2009 From the Director of Ecosystem Services

Hello,
I hope this note finds you doing well! I’m writing you at this time to bring you up to speed on the status of the voluntary carbon market and developments here at FORECON EcoMarket Solutions LLC (EMS) in the area of forest carbon offsets.

2008 was a time of rapid growth in the area of forest carbon. Market growth in the first three quarters was substantial. Markets such as the CCX saw both record trading volumes and carbon prices as consumers forged ahead on climate programs with increased vigor in a year of political change. 2008 also saw the increase in the use of carbon standards and other programs such as the Voluntary Carbon Standard. For forestry, the growth was two fold. With rising prices and increased markets for offset credits more projects entered the existing markets. Another, more influential development in the area of forest carbon was the modification or creation of new forestry protocols in many programs such as RGGI and CCAR. Forestry (particularly managed forests) is slowly gaining a place in carbon policy on a wider scale.

Of course, the economic downturn since the beginning of the fourth quarter in 2008 has presented all of us with significant challenges. Many sectors are experiencing slow downs, and carbon has not escaped this downturn either. Carbon prices and trading volume have slowed somewhat to date in 2009. There are however, some bright points to be aware of. First, as advertised in his campaign, in his recent address to Congress, President Obama openly called out for a national cap and trade program for greenhouse gasses. This commitment on the part of the administration bodes well for the future of greenhouse gas trading, and hopefully the use of forests as offsets.

While market prices and the economic situation in general have slowed the development of new projects in some areas, opportunities to develop projects are growing. The emergence and development of new forestry rules under some programs and the growing support of the federal government bodes well for consumers and producers alike. The current economic situation and the low carbon prices have many forest owners taking a hold and wait position on entering the carbon market. While diligence in these times is a sound policy, it is important to realize that project development for forestry projects takes time. Deciding to wait for prices to increase before developing your project could significantly delay your opportunities to capitalize on prices when they begin to rise.

Over the past year, FORECON EMS has continued working with forest owners to match their interests with the most applicable forest carbon program and market. Some of our successes include the use of innovative LiDAR technology for carbon quantification on a forest owned by an ENGO in the US, the completion of carbon verifications in South America and the Southern US, the approval of our pooled private landowner carbon program, and the completion of many carbon feasibility studies. FORECON EMS continues to work with forest owners to develop projects for the voluntary market. This includes the collaboration with several highly regarded forestry consultants across the country through sub aggregation. The use of sub aggregation relationships allows consultants to provide carbon market access to their clientele through FORECON EMS while strengthening and growing their own business.

If you are interested in learning more about your options in the carbon market and/or how to move forward with a forestry project at this time, please give us a call. For more information please visit our website at www.foreconinc.com or www.foreconecomarketsolutionsllc.com. You can also call our carbon team at 716-664-5602. Thank you for your time and for your consideration of FORECON EMS.

Best,
Matthew S. Smith CF, ACF, EMS-A
Director of Ecosystem Services