Time value of carbon
On whether offset permanence matters
In 2023 I’ve been asked the same question over and over by friends and colleagues.
“Can you store carbon forever by growing trees?”.
The short answer is no. The long answer is not-really. The reasons why are fascinating.
*A quick science recap*
Through photosynthesis trees convert carbon dioxide out of the air into sugar, oxygen and water. It’s these carbon filled fibrous sugars we see stored in the tree as wood.
Trees contain a truckload of water (around 35% of their overall mass). Excluding the water content, around 50% of the dry mass of a tree is carbon.
So as long as a tree is growing, it's storing carbon as wood. This carbon is only released back to the atmosphere when the wood is burned or it decays.
Put simply, during bushfires or tree rot - carbon is being released back into the atmosphere. What if the trees are cut down and used as timber? Technically this doesn't release emissions back into the atmosphere (although obviously the tree has stopped storing new carbon in its wood).
*How carbon offsets account for project risk*
When starting a tree planting offset project, most accreditation standards require the project owner to sign up to a ‘permanence period’. This is a commitment for how long the trees are going to be looked after and left in place. People are often surprised to hear that the permanence period isn’t ‘forever’ and instead is normally a few decades.
Normally, a longer permanence period receives more favourable treatment when it comes to offset crediting. Under the ACCU scheme, if you choose the shorter permanence period of 25-years rather than 100-years, there is a 20% reduction in the number of ACCUs issued for the project.
The Clean Energy Regulator notes that the 20% buffer is “to cover the potential cost to the Government of replacing carbon stores after the project ends”.
*So is it a cop out if the trees aren’t going to be around forever?*
There’s a few ways to think about it:
Firstly, soils and vegetation are always changing on a multi-century time scale. Therefore it's not feasible each individual offset project will store carbon ‘forever’. Sooner or later, it is likely there will be a fire, flood, or disease event that will cause vegetation to perish.
Secondly, even if a new natural capital carbon project has a permanence period of only 25-years, with the carbon potentially released back into the atmosphere in 2048, the ‘time-value’ of carbon (i.e. the 25-years of CO2 reduction) is incredibly valuable.
Even temporary carbon sequestration buys time in our global transition to net zero - though there will be more permanent carbon removal to do in the future.
Importantly, the time value of carbon is mostly valuable if the cost of reducing emissions (through technology) are lower in the future than they are today. There’s a lot of good evidence that this may be the case - however innovation is needed in just about every sector of the economy to make it happen.
