The California Effect

Winter 2017

With the U.S. government backing away from climate commitments, states are now taking the lead—none more profoundly than the Golden State. California’s pioneering carbon market is reforming industry while fueling conservation across the nation.

by Brendan Borrell

Illustrations by The Heads of State


In early May, the dogwood trees in the Clinch Valley of far southwestern Virginia are in full bloom, looking like puffballs of white confetti bursting amid the tree canopy. Situated on the western side of the Appalachian Mountains, the Clinch is a special place, home to more than 100 species of trees with evocative names like sourwood, bitternut hickory and shagbark hickory that were coined back in the pioneer days when the place was Daniel Boone’s stomping grounds.

Greg Meade, a Nature Conservancy forester, is driving his pickup from the valley’s bottomland cattle pasture up into the steep hillside woodlands. “The complexity of our forests is unmatched in the lower 48,” Meade says. He can start his day in a yellow pine forest and be tromping through a fern-filled, moss-covered spruce rainforest by lunchtime.

Meade’s job isn’t so much about deciding which trees to cut but which ones to leave standing. Big ones, mostly.

He is promoting a reversal of the way that privately owned forests in Appalachia have been managed for the past century. Landowners once saw their forests as emergency piggy banks that they could tap into in times of need, bringing in loggers to chop down the most valuable hardwoods, such as black cherry and oaks, with no thought given to which trees would repopulate. This shortsighted approach led these forests to lose the diversity that sustains their economic and ecological value. Having forests with trees of different ages helps facilitate regrowth, while maintaining a mix of species can protect these forests from diseases.

The Clinch Valley Conservation Forestry Program launched in 2002 and now protects 22,000 acres, thanks largely to California’s new carbon market. The Clinch Valley program established partnerships between TNC and private landowners to better manage these working forests and ensure they remain intact rather than being developed. With the last free-flowing tributaries to the Tennessee River, the Clinch Valley boasts the nation’s highest concentrations of endangered fish and freshwater mussels, which depend on the clean water that healthy forests provide by reducing erosion.

As it happened, at the same time on the other side of the country, California’s government was confronting the state’s substantial role in contributing to climate change. If California were a separate country, it would have ranked as the world’s 12th-largest emitter of greenhouse gases, falling between Spain and Poland. In 2006, implementing new state law, California created a cap-and-trade system designed to first freeze and then reduce the greenhouse gas emissions of  power producers, transportation and manufacturers in the state.

That system has had profound effects on climate emissions and conservation in California. “When I started working on this,” says Louis Blumberg, the head of TNC’s California climate program, “California was the eighth-largest economy in the world and the 12th-largest emitter of greenhouse gases. Today California is the sixth-largest economy and the 19th-largest emitter.” And California’s program is also having a dramatic impact throughout the U.S. and Canada.

The cap-and-trade program opened up a new chapter in Virginia’s Clinch Valley. The forests that Meade manages act as a sponge for carbon dioxide. With each growing season, the trees lock away climate-warming gas in their swelling trunks. Under California’s cap-and-trade program, California polluters could offset a portion of their emissions by paying forestry projects like Meade’s to keep their forests intact.

“California recognizes that nature is a powerful tool to address climate change,” says Blumberg. “Their cap-and-trade program is catalyzing forest conservation programs across the United States.” California’s successful comprehensive program makes it one of the leading government entities to tackle climate change in a serious way.

The program is supporting scores of forest conservation projects from Virginia to Alaska, including several led by TNC. It is also demonstrating that, even as President Donald Trump withdraws the United States from the Paris Climate Accord, American states, cities and businesses can not only take action on climate change on their own, they can do so in ways that generate economic benefits and grow economies.


Climate Map 640 x 400

Growing Change: Offset credits from California’s cap-and-trade program are supporting conservation across the country, providing funding for forests and other projects that sequester carbon or reduce ozone-depleting substances. Arkansas alone has 59 conservation projects that receive funds from this program. © The Heads of State


California’s efforts to tackle greenhouse gases date back to 2001, when it started a voluntary carbon market now known as the Climate Action Registry. Five years later, the state went much further when its legislature enacted the compulsory cap-and-trade market.

The Global Warming Solutions Act, commonly known as AB32, targets the largest emitters in the energy, transportation and manufacturing sectors, which produce approximately 85 percent of greenhouse gas emissions in the state. It sets an overall cap on annual greenhouse gas emissions, and then allocates or auctions permits, known as “allowances,” to polluters. Companies and utilities that reduce their emissions below their allowed level can sell their excess permits to those who exceed them.

The cap-and-trade program gives polluters flexibility to meet their reduction goals as economically as possible. Each year, the state reduces the cap by 3 percent. Progressively lowering the total number of permits available will make them scarcer and therefore more expensive, creating a financial incentive for emitters to work even harder to reduce their impact on the atmosphere. The overall goal is ambitious: By 2030, greenhouse gas emissions should be 40 percent less than they were in 1990.

Regulated emitters such as energy companies reduce their emissions by switching from coal to natural gas and investing in clean energy like wind and solar. Manufacturers can improve the energy efficiency of their buildings and operations. But all businesses can also off set up to 8 percent of their emissions by buying credits created by programs like the Clinch Valley Conservation Forestry Program.

Together with TNC Senior Climate Policy Analyst Michelle Passero, Blumberg spent more than a decade working with the state of California to design and implement a forest carbon program. “The Nature Conservancy had a seat at the table from the beginning,” says Blumberg, who worked on climate issues for former Gov. Gray Davis before joining TNC. In collaboration with the Conservation Fund, TNC ran one of two test projects in northern California to demonstrate how forestry projects could be used to off set carbon emissions. These data were crucial to the state’s Air Resources Board when it developed its rigorous protocols for monitoring and verifying emissions.

Initially, California only accepted forest projects that occurred in the lower 48 U.S. states, but it has since added Alaska. “Greenhouse gases are not localized pollutants,” Blumberg says. “The atmosphere doesn’t distinguish between a ton of carbon emissions avoided in Virginia and a ton avoided in Los Angeles.”


“The atmosphere doesn’t distinguish between a ton of carbon emissions avoided in Virginia and a ton avoided in Los Angeles.”

Back in the Clinch Valley, Meade walks through a section of forest that was logged nearly a decade ago. In a typical timber cut, large, more valuable trees would have been targeted. But over time, the logged forest would then be dominated by closely spaced, shade-tolerant tree species, mostly red maples, and would fail to replicate the diversity and the ecological benefits of a mature forest. “If you take the best each time, you’ll end up with nothing but inferior species of trees,” he says.

In contrast, this cutover section still contains 20-inch-diameter ash and oak trees. As these hardwoods age, they will end up sequestering more carbon than a forest dominated by maples. Meade also tries to create strategically sized gaps in the canopy that allow sunlight to reach the forest floor to aid in the forest-regeneration process. “To store carbon over time, we have to grow more wood than we’re cutting,” he says.

This is a new way of thinking about forest management in Appalachia. And it gives landowners new options.

One such landowner is Stuart Land & Cattle, founded in 1774 and one of the largest cattle farms east of the Mississippi River. The company owns some of the most expansive forests in the region, stretching from the valley floor up to the mountain ridgeline, and they are continuous with other protected lands. In the early 2000s, TNC approached the company with a proposal: The conservation organization would take over managing the forests and introduce practices that enhance their ecological health. The owners would receive an annual payment, which TNC expected to generate through limited sales of sustainably harvested timber.

Company President Lynda Stuart says that loggers she had previously worked with wanted only to get in and out as quickly as possible and often left the property a mess. “We have an obligation to the land,” says Stuart. “It’s nice to go in where the Conservancy has managed a timber sale and not have any cables or cans lying around.”

Stuart and her late husband, Alexander “Zan” Stuart, ultimately agreed to put approximately 10,000 acres of land into TNC’s program. Not long after, another large landowner, Arthur M. Smiley Ratliff Jr.—a local celebrity known for his attempt to found a new nation in the Pacific Ocean—began his own discussions with TNC. Ratliff, who died in 2007, had become wealthy from coal mining and, through his foundation, wanted to protect Virginia’s rural heritage. That put another 12,000 acres under sustainable management.

But for TNC, the economics of those deals were tough. The Conservancy did make some money selling sustainably harvested timber from those lands, but it wasn’t enough to cover payments to the landowners. “We were underwater in a pretty big way,” Meade says.

So in April 2015, Meade shed his forestry gear for a light blue business suit and stepped into the lobby of the Biltmore Hotel in downtown Los Angeles for the Navigating the American Carbon World conference. By the end of the conference, he would set into motion a deal with Praxair, an industrial gases company looking to offset its own emissions, and the Climate Trust, a nonprofit that specializes in conservation finance. The agreements would net TNC more than $1 million and not only allow it to make its payments to landowners but also to demonstrate that sustainable forest management could be profitable throughout the Clinch Valley.

“It was a godsend,” Meade says. “California’s program has really made it possible to begin restoring the forests of the Clinch Valley to their full potential.”

So far, the work on the Stuart and Ratliff properties has allowed TNC to offset more than 125,000 tons of carbon dioxide emitted in California. Meade also sold approximately 225,000 tons of carbon offsets to Delta Airlines, Disney, PriceWaterhouseCoopers and Pearson Publishing through the California-based voluntary carbon market.


Cap-and-Trade Graph 640 x 347

CO2 Cap-and-Trade System: Under California’s system, companies can comply by either reducing their emissions below the cap set by the state or by purchasing “allowances” or offsets from companies that are coming in under the cap. Proceeds from the sale of offsets create financial incentives for better forestry and other emissions-reducing initiatives. © The Heads of State


The Clinch Valley isn’t the only place where California’s cap-and-trade market is infusing money into climate projects. Across the country, more than 300 projects in 30 states are coming online and have already generated more than 69 million metric tons of verified offsets.

And the market is advancing several TNC projects across the U.S. In December 2016, the organization completed a three-way deal to protect biodiversity in Alaska’s Copper River Delta, a landscape of temperate rainforests and critical salmon rivers. Much of this land, which is owned by the Chugach Native tribes through their corporation, has faced a dual threat from logging and coal mining. As part of the deal, TNC helped broker the purchase of coal development rights on 62,000 acres of land in order to retire them, while the tribal corporation agreed to manage the forests for their carbon value and sell the credits to California businesses.

The Conservancy is also in the final stages of closing a deal to protect 6,000 acres of land on Michigan’s Upper Peninsula. The Baraga property, which is home to 15 lakes and is frequented by bear and moose, was potentially going to be subdivided and developed. By selling carbon credits into California’s market, TNC will be able restore the forest and manage it in a sustainable way while preventing an estimated 700,000 metric tons of carbon from entering the atmosphere.

In the past year, California’s cap-and-trade program has weathered a variety of legal challenges and looks as though it is here to stay. In November 2012, the California Chamber of Commerce and other entities sued the state over AB32, arguing that the program was a tax that had been approved by an insufficiently large majority. The plaintiffs lost their suit, and the California Supreme Court recently declined to take on the case. In July, in a huge victory for California’s program and TNC, which actively supported the effort, the state legislature voted to keep the cap-and-trade program in place through 2030.

The state’s success has demonstrated that local and regional leaders can band together to create a global climate solution in the absence of White House leadership. California has already linked its carbon market with Canada’s Quebec province, and Ontario joined the California-Quebec system in September. In June, Gov. Jerry Brown traveled to China to discuss a potential partnership with regional markets there. And legislators in Oregon have begun discussions of launching their own cap-and-trade program, following in California’s footsteps. “It’s a big victory,” says Blumberg. “California has proved that you can regulate climate change and grow the economy.”


Brendan Borrell is a correspondent with Outside magazine based in Los Angeles. His writing has also appeared in Scientific American, National Geographic and many other publications.

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