eaching a balance in Alaska’s natural resource-based economy means finding the point where sustainability meets profitability. The state Carbon Offset Program is one revenue source with the potential to contribute to Alaska’s economy while preserving natural resources and helping businesses accomplish carbon reduction goals.

After experiments with emission offsets in the ‘70s, a fully developed carbon trading system didn’t appear until the Kyoto Protocol, an international commitment to reduce greenhouse gas emissions, in 1997. Carbon offset programs have primarily been a tool for environmental management, with less focus on revenue potential. However, states with extensive natural resources, like Alaska, are looking to create a win/win scenario where they can increase revenue through carbon-creating projects and contribute to emission reduction.

The Carbon Offset Program, managed by the Alaska Department of Natural Resources (DNR) Office of Project Management & Permitting, is young. Governor Mike Dunleavy signed legislation that created the program in 2023. Until recently, DNR has been developing a legal and regulatory framework in addition to revising some land management plans. Department staff are now beginning the process of identifying and developing partnerships and projects that will meet program criteria.

“The governor was interested in finding a new way to use our natural resources so that it generates new revenue and diversifies the economy while benefiting Alaska,” says Carbon Offset Program Manager Trevor Fulton. “Resource development is in the state constitution, and this program is another tool to develop a program that is responsible, sustainable, and keeps our lands open for multiple use.”

The creation and sale of carbon credits can be somewhat nebulous. In a nutshell, carbon offset programs use registered emissions-reducing projects to produce tradable permits, or credits, that are sold to companies as permissions to emit an equal amount of carbon dioxide or other greenhouse gases. For example, multimedia entertainment conglomerate Walt Disney Company has implemented an internal carbon tax that it uses to invest in conservation and reforestation projects, then it “retires” the credits in a year-end accounting of its company-wide carbon footprint. Disney reported retiring $577,000 in carbon credits in 2024.

A single carbon credit represents one tonne of CO2 avoided or removed from the atmosphere. For reference, that amount approximately equals the emissions produced by driving a car roughly 2,500 miles or taking a round-trip flight from Anchorage to Los Angeles. The average American creates about 16 tonnes of carbon per year through direct and indirect consumption of fossil fuels.

Though some individuals do purchase carbon credits, Fulton says corporations, governments, and larger enterprises are the primary market. Purchasing carbon credits and retiring them allows these entities to reduce their emissions and meet sustainability goals.

Buyers might have other reasons to buy carbon credits, Fulton says. Consumers are increasingly choosing sustainable brands, paying more for greener products, and green businesses attract capital more easily, so financial institutions are favoring low-carbon companies as they factor climate risk into lending and investment decisions. Likewise, carbon credits allow companies to stay ahead of regulations elsewhere, avoiding last-minute compliance costs and gaining a competitive edge.

“In short, it’s good for business,” says Fulton.

Land ownership plays a vital role in carbon offset programs. In Alaska, land ownership is split between three primary groups. The federal government owns the largest portion, around 61 percent, followed by the State of Alaska, which owns around 28 percent. Alaska Native corporations own the remaining 11 percent, minus less than 1 percent owned by individuals and companies. Fulton says only state-owned land can be used for the DNR programs outlined in the carbon offset legislation.

Programs might include managing intact forests so that more trees can soak up carbon dioxide or so that woodlands can resist destruction by wildfires. Programs could also include reforestation or ecosystem restoration, or converting biomass into biochar, a solid form of carbon that cannot leak into the atmosphere. DNR calculates more than 100 million acres of state land has potential for carbon credits, especially by leaving forests untouched.

Fulton emphasizes that any carbon offset project that uses state land will remain available to the public for recreational activities. As with any other DNR project, proposals will be vetted through a public process to make sure that it is consistent with the public interest.

“This is not a land grab, and projects will not lock up any areas,” says Fulton. “Projects will be managed to allow for multiple uses.”

Whatever those uses are, they must verifiably subtract greenhouse gases from the atmosphere. DNR doesn’t have a fully developed project yet, but the department is currently reviewing several proposals. Fulton says there are many small-scale, local examples, such as methane capture at landfills, renewable energy initiatives, and energy-efficient agricultural practices. Several Alaska Native corporations, such as Ahtna Inc., Sealaska, and Chugach Alaska Corporation, have well-established carbon credit programs on lands under their ownership, which the state could use as a model.

To ensure that state carbon offset projects provide the environmental, social, and economic co-benefits, proposals undergo an intense seven-step vetting process. In the first step, projects are identified by DNR or recommended by a project developer, member of the public, or another outside organization. If DNR decides to include a project development partner for services such as data collection, registration, marketing, et cetera, staff will request proposals and select a contractor as part of the second step. In the third step, DNR evaluates whether to proceed based on economic effects, revenue potential, and compatibility with other land uses. An evaluation must be completed before the fourth step: moving forward with any necessary land reclassification and management plan revisions; the fifth step would be issuing a best interest finding.

Once a best interest finding is complete, DNR can proceed to the sixth step: project registration with an independent carbon crediting program. Fulton says the registration process is extensive, taking eighteen to twenty-four months to complete. In this stage of the project, the registry ensures that emissions reductions and removals are real, measurable, and permanent—not just “business as usual” that would’ve happened without the project. Once verified, carbon offset credits are issued and tracked by the registry to prevent double-counting or any fraudulent activities.

“In this phase, the registry is a regulatory body that sets the rules,” says Fulton. “The state doesn’t have much say in the requirements.”

Though marketing and sales are listed as the seventh step in the project process, DNR can market a carbon offset credit portfolio to prospective buyers at any point in the development process. Marketing and sales can occur before credits have been issued in the form of an agreement to deliver a fixed number of credits to a buyer at a certain time and price, or credits can be sold after they are issued. DNR has several options for selling credits, either through an exchange, a broker, or directly to purchasers.

Separate from the Carbon Offset Program, the legislation allows for other methods of obtaining carbon credits. Fulton says the DNR Division of Mining, Land & Water oversees Carbon Management Leasing, which allows the department to lease state land to private parties for carbon management purposes. This allows independent third-party entities the opportunity to run their own carbon offset projects or other projects that mitigate greenhouse gases on state land. Any carbon credits produced by the project belong to the lessee. In this scenario, the lease to the third party, rather than the credit itself, generates revenue for the state.

The final revenue-producing component created by the carbon offset legislation is the Carbon Capture, Utilization, and Storage leasing option administered by DNR’s Division of Oil and Gas. Under this program, DNR receives and reviews applications for a five-year exploration license that grants an exclusive right to analyze a defined area for reservoirs suitable for underground carbon storage. The license holder must complete a thorough characterization of the subsurface before they can apply for a permanent carbon storage facility permit from the Alaska Oil and Gas Conservation Commission. Upon receiving a facility permit, the land under license is converted to a lease, which authorizes the use of the pore space for underground carbon storage.

“Subsurface leasing allows companies doing business in Alaska to decarbonize, and we get compensated for the use of the land,” says Fulton. As with the other program, it is the lease that generates state revenue.

As for the program Fulton runs, he listed several feasibility studies in the DNR Carbon Offset Program 2024 Annual Report to the Alaska Legislature. As of January, DNR was studying improved forest management in the Tanana Valley area. Additional feasibility studies planned for 2025–2026 assess the potential for improved forest management projects in the Matanuska-Susitna Borough and Kenai Peninsula and the Haines State Forest (pending the completion of an updated forest management plan that allows carbon offset projects).

The program has yet to generate revenue receipts, but DNR anticipates credit sales could occur in fiscal year 2027–2028. This report did not include any information on the Carbon Management Leasing program or Carbon Capture, Utilization, and Storage. Fulton’s report notes that a separate annual report on carbon management leases on state land would be included in the Division of Mining, Land & Water’s 2024 annual compiled statutory reports to the legislature.

In the next few years, these programs could monetize state land by, ironically, limiting resource development on it. Carbon offsets are almost literally money in the bank.