Carbon Markets Make Timberland More Profitable When Trees Aren’t Cut

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With the advent of markets for carbon offsets, companies are looking for ways to earn credits to sell. Timberland owner Manulife Investment Management is looking to buy up timberlands in order to sell carbon credits by allowing those trees to grow rather than harvesting them. Ryan Dezember reports for The Wall Street Journal:

One of the country’s largest timberland owners is branching out into forest-offset markets, raising a pool of cash to buy properties where sequestering the carbon in standing trees will be prioritized over cutting them down to make wood products.

Manulife Investment Management, which manages on behalf of big investors about 6 million acres of timberland in the Americas and Oceania, said it is aiming to raise a $500 million fund with cash from its parent company, Toronto insurance and financial-services firm Manulife Financial Corp., MFC 2.39%increase; green up pointing triangle and other institutional investors.

The idea is to buy forests with good potential for conservation deals and manage them to maximize how much carbon is accumulated. Logging less and allowing trees to absorb carbon as they grow is rewarded with offsets, which companies use to make up for their emissions of greenhouse gases.

Offsets are criticized for enabling companies to pay a relatively small amount to avoid reducing emissions, and certain carbon projects have been singled out for not actually resulting in any fewer trees being cut down.

Nonetheless, markets for offsets have boomed in recent years as more companies promise to reduce emissions without many economical ways to do so. Buyers have lately pressured sellers to ensure that offsets represent actual changes in harvesting, as opposed to reductions that are merely theoretical.

“We believe that high integrity, verified carbon credits will continue to be viewed as premier decarbonization instruments and that, in time, such carbon markets will eventually come to resemble that of more traditional commodities,” said Tom Sarno, Manulife’s global head of timberland investments.