ncx-gitbot
commented
1 year ago NCX response: We appreciate the detailed comments raised about the absence of HWP accounting in the initial draft of our methodology. The carbon stored in trees is released into the atmosphere when a tree dies, some of it almost instantaneously and sometimes over years to decades. We believe it is important to account for all reasonable pools of emissions related to a harvest, and our revised methodology takes the storage of carbon in, and subsequent release of carbon from, harvest wood products into account.
Commenter Organization: NCASI
Commenter: Steve Prisley
2021 Deferred Harvest Methodology Section: Additionality
Comment: The methodology is likely to result in carbon benefits that are not additional, thereby crediting behavior that would have happened anyway without payment.There is substantial literature about the harvesting behavior of private landowners, and many efforts have been made to reliably predict the willingness of landowners to harvest timber. Factors related to likelihood of harvesting include market price, landowner type, size of forested tract, family debt, landowner wealth, timber characteristics, and numerous others (Dennis 1989; Kuuluvainen et al. 1996; Conway et al. 2003; Joshi and Mehmood 2011). It remains very difficult to predict with any accuracy or precision whether a given landowner will be receptive to a bid for their timber, based only on publicly available data. But it is clearly known that landowners differ in their attitudes and expectations regarding their forest land, and these differences are important in understanding their aggregate behavior. To recognize the effect of landowner heterogeneity on aggregate behavior, researchers have attempted to characterize groups or classes of forest landowners based on their behavior (Finley and Kittredge 2006; Favada et al. 2009; Henderson and Abt 2016). Evaluating the actions of different classes of landowners provides valuable insights into the functioning of timber markets. For example, Henderson and Abt (2016) characterize private forest landowners in two types: those who own or manage their land primarily for economic benefits, and those who own their land primarily for amenity values3 . For simplicity, we refer to the first group as “income-seekers” and the second group as “amenity-seekers”. Results from the National Woodland Owner Survey (Butler et al. 2021) suggest that amenityseekers greatly outnumber income-seekers. For example, of family forest landowners with at least 10 acres of forest, only 21% indicated that timber harvesting was either very important or important to them (Butler et al. 2021, Appendix 1). On the other hand, amenity values were more important considerations for these landowners4 : beauty or scenery (81%), nature protection (72%), wildlife habitat (77%), and privacy (72%). Therefore, it appears there are three to four times more amenityseekers than income-seekers. It is reasonable to expect that these two classes of landowners would behave differently regarding a harvest deferral program. It is logical to assume that income-seekers are more aware of the market value of their timber, and of financial implications of harvesting decisions. They are more likely to be price-responsive; that is, their probability of harvesting timber increases with increased stumpage prices. Amenity-seekers, it might be assumed, are less concerned about market value and less likely to know or care about current market prices, and their management decisions are focused on other considerations. For example, amenity-seekers that are interested in recreational hunting may engage in timber harvesting because they know that certain silvicultural treatments result in vegetation conditions that can attract game species of interest to their land. While they may harvest timber, the price they receive for that timber is not the driving concern, nor the primary basis for their decision to harvest. The opportunity cost incurred by a landowner for deferring harvest will be quite different for income-seekers versus amenity-seekers. For these reasons, income-seekers would be expected to require a higher price for harvest deferral credits. They might only agree to delay harvest when the price they receive for deferral credits exceeds their opportunity cost for postponing harvest. Amenity-seekers, for whom income is less important, might be expected to accept much lower prices for harvest deferral credits, especially if they had no intention to harvest in the first place. Their opportunity cost would be near zero, so they would likely bid lower than income-seekers for those credits. The result of this differential behavior is that a bidding system such as currently defined by NCX is likely to result in more amenity-seekers than income-seekers receiving payments. When a system such as implemented by NCX awards contracts based on the price bid by landowners, those who bid low will receive contracts for deferral credits and the highest bidders will not. Therefore, a potentially high proportion of harvest deferral credits will go to amenity-seekers. In such cases, the carbon benefits of many of the NCX contracts would not be additional; they would have occurred, at least partially and perhaps substantially, regardless of the existence of the market. Furthermore, the structure of the NCX bidding process benefits low bidders. If a landowner faces no or low opportunity cost for harvest deferral and therefore sets their bid at $1 per credit, then as long as the market-clearing price determined by NCX is above $1, they will receive the marketclearing price. If they truly want to participate in the program and the deferral costs nothing, then they have a strong incentive to bid low (and therefore have a greater chance of receiving at least some payment). Furthermore, there is no cost to continue bidding, year after year, until the land no longer qualifies. As more and more amenity-seekers become aware of this characteristic of the auction, it will tend to drive down the price for credits, which would be a welcome outcome for the emitters who are purchasing these credits.
Proposed Change: No Proposed Change