One of the largest wildfires in California history has burned nearly 430,000 acres, putting millions of carbon credits that offset greenhouse gas emissions at risk.
Park fires that broke out in Northern California in late July have destroyed nearly 45,000 acres of forest for the state’s carbon offset program, according to nonprofit climate tracker CarbonPlan.
Under California’s cap-and-trade program, the state issues carbon credits (equivalent to one ton of carbon dioxide) to owners of so-called offset projects, which consist of forested land set aside to reduce greenhouse gas emissions. The owners of these projects can then sell these credits to polluters in the state to offset their carbon emissions.
At least four projects were destroyed by the Park Fire, which collectively cost millions and may now be in flames. All are owned by Sierra Pacific Industries, the second largest lumber company in the United States
For the CAR1382 project, 97% of its listed acreage has already been burned, according to CarbonPlan’s analysis. The packages include more than 2,500 credits purchased by California refiner Tricor Refinery and energy trading group Rainbow Energy Marketing.
To be sure, California’s compensation program has a mechanism for insurance against various disasters. Each project contributes 10%-20% of its credit to the “buffer pool” – a cache of credit that does not trade.
But the amount of credit devoted to fires represents only a small portion of the total pool, which must also cover other issues such as drought and plague. Over the past few years, the state has experienced some of the worst wildfires on record, depleting the pool’s reserves and raising questions about its long-term viability.
According to CarbonPlan’s analysis, the California buffer pool lost more than 4 million points in the final quarter of 2023 and the first quarter of 2024, while only gaining 2.74 million points in all of 2022 and 2023.
Resources in the buffer pool are fungible, so credits allocated to other disasters can still be used for wildfires if needed. But demand for fire credits has outstripped supply, according to CarbonPlan.
A 2022 analysis completed by the nonprofit found that the state has used 95%-114% of the approximately 6 million credit lines earmarked to insure against fire risk over the next 100 years. Since that analysis, usage has continued to surge. CarbonPlan researcher Grayson Badgley estimates the number of credits available for wildfires now stands at nearly 11 million.
“I’m concerned that the buffer pool vastly underestimates the risk of wildfires,” he told wealth. “Given that most projects are located in fire areas, the buffer pool may not be sufficient to replace credits over the next 100 years.”
He believes California should revise the way it calculates fire risk, a process the California Air Resources Board (CARB) began with researchers last year. Additionally, he advocated updating the total number of credits in the buffer to reflect the higher risk.
“if [projects] “Coming online during the current rule-setting period, where the numbers contributing to the buffer pool are so low, we only have concerns about the liability of this scheme, which will only make it more vulnerable in the long term,” he said .
A CARB spokesperson told financial times The current status of the fund pool is stable, with approximately 28 million points. CARB did not immediately respond of wealth Request to comment.
Eight of the 10 largest wildfires in California history have occurred in the past five years. The largest fire was the August Complex fire, which burned more than 1 million acres in 2020.
The Park Fire isn’t the only fire this year to destroy offset projects. In New Mexico, the South Fork and Salt fires burned nearly 13,000 acres of a project run by the Mescalero Apache Tribe, which has sold more than 1.5 million to Chevron integral.
