oasting no fewer than 125 million forested acres (approximately 35 percent of the state’s territory), Alaska has supported a robust timber industry for more than 100 years. The forests are concentrated primarily in Southeast, home to the Tongass rainforest. However, since the ’90s, the timber harvest volume in Alaska has dropped, challenged by volatile global markets, logistical challenges, and lack of producible timber. Now, landowners across the state, particularly Alaska Native corporations (ANCs), have identified a new means of using timber resources for economic benefit.

With renewed focus on combatting climate change with new technology, Southeast is favorably positioned to reap the benefits of carbon programs and initiatives. Here are four things that Southeast ANCs and landowners need to know.

One area of focus has been investment in the development of carbon credits and sale to competitive markets, most notably the state of California. California implemented a mandatory carbon credit program in 2006 targeting power plants, natural gas utilities, and other large industrial facilities or production sites. As of 2019, approximately $370 million worth of carbon credits have been sold by Alaska landowners or ANCs into the California market. For example, Sealaska, Ahtna, and Chugach Alaska Corporation have piloted successful carbon credit programs since 2016.

However, the mandatory carbon credit economy is not a panacea for Alaska landowners or ANCs. There are limits on the generation of carbon credits and their sale, and the number of mandatory regulatory systems that Alaska carbon credits can be sold to is finite. Similarly, there is risk and substantial financial commitment. As a condition of creating the carbon credits, the landowner must agree to largely preserve their timber resources for up to 100 years and must conduct expensive timber surveys. Moreover, some carbon markets require participants to contribute “buffer credits” to a self-insurance pool designed to insure against loss of forest resources. Due to the marked increase in the number of forest fires in the past years, some studies have identified a risk. For example, the self-insurance pool for the California carbon credit program is depleted and may not have enough credits to cover future losses. If a landowner sells carbon credits and then loses all or part of their forestry resources, the landowner may be required to obtain new carbon credits to cover the loss. It is a financial uncertainty that landowners will have to accept.

Not only that, but there is a limited market for mandatory carbon credits. While carbon credit systems have been in place in Europe and California for many years, they haven’t been adopted at the federal level. Nor does the United States appear likely to implement one any time soon, as federal and state initiatives have been stymied. For example, Pennsylvania’s participation in the Regional Greenhouse Gas Initiative (RGGI) was blocked in 2022, when a state court determined there was a possibility that participation in the RGGI may result in the levy of an unlawful tax.

That being said, the United States and other countries have seen a marked rise in the last ten years of environmental, social, and governance (ESG) considerations and policies at national, state, and municipal levels. ESG policies encourage companies to consider the impact of their actions on a variety of stakeholders, including the global environment. Significant debate remains over the efficacy of ESG programs, but their impact is clear in the increased interest of companies in adopting voluntary carbon credit programs. This is either for community goodwill or because third parties provide economic incentives to companies that are “net zero.”

Accordingly, some Alaska entities are exploring the sale of carbon credits for use with voluntary carbon credit programs, known as carbon offsets. These carbon offsets are purchased to meet self-imposed goals, such as by airlines and oil producers, to reassure consumers of the entity’s commitment to reach “net zero” emission status. Voluntary carbon credit purchase has become so widespread that services such as Terrapass allow individuals to purchase carbon offsets to “neutralize” their air travel, commutes, and even home energy consumption.

Landowners benefit from carbon offsets by having more opportunities to generate revenue from forest and other resources, such as peat. Landowners also have more freedom to structure their agreements with better terms compared to selling carbon credits into state-regulated systems.

Southeast could especially benefit. While some of its forests are eligible for sale in the California market, the voluntary carbon credit market is more flexible in terms of the type of land that can be used and the agreements that can be used to generate the credits. Companies operating in Southeast, such as cruise lines, may find it appealing to buy “local” carbon credits as part of a voluntary carbon credit offset program. For example, Carnival Cruise Line and Norwegian Cruise Line have announced corporate policies aimed at reducing their carbon emissions through a variety of means, including the purchase of carbon offsets. They might be interested in purchasing voluntary carbon credits from Southeast landowners to reduce their carbon impact where they operate locally.

However, while both types of carbon credits offer opportunities to Alaska landowners, there are significant questions about the actual utility of carbon credits that are generated through agreements not to harvest forest resources. There is little to no net benefit to the environment in paying landowners to not harvest their timber if it wasn’t going to be harvested to start with. Carbon credits also pose the risk of de-incentivizing carbon-intensive industries from pursuing alternative energy sources, such as hydrogen, solar, wind, and optimized electricity. Accordingly, the utility of carbon credits for landowners may face an uncertain future.

Companies and governments are looking at a new opportunity called “carbon sequestration” to address carbon emissions. Carbon sequestration is the capturing of carbon from an industrial source and injecting it into porous rocks or other geological formations. This is an expanding field of science and potentially offers more effective and permanent means of reducing carbon in the environment. It also avoids the risk of programs that compensate landowners for doing something that they were already doing. Rather than paying a landowner not to do something, carbon sequestration leases carbon storage from the landowner.

This technology poses a potential new opportunity for landowners in Southeast who do have access to the carbon credit markets or, like some ANCs, have rights to a subsurface estate that cannot be economically developed for natural resource extraction. Carbon sequestration operations are already underway in Iceland, where Carbfix’s Coda Terminal project is on track to reach full annual capacity, mineralizing 3 million tons of greenhouse gasses from mainland Europe by 2031.

The State of Alaska is also looking to be on the cutting edge of carbon sequestration. This year, Governor Mike Dunleavy proposed legislation that he hopes will further monetize state-owned oil and gas basins by offering them for carbon sequestration. The governor’s proposed legislation, HB 49 and HB 50 and their companion bills, SB 48 and SB 49, would authorize the state to license and lease the state’s subsurface property for carbon storage. The bills would also create a regulatory regime for injection wells, carbon storage facilities, and transportation of captured carbon to geological storage facilities. If passed into law, this legislation could put Alaska on the forefront of carbon sequestration using geological formations and provide a potential model for landowners to generate economic return.