Growing a forest can be a profitable business

The drive towards carbon neutrality will increase companies’ interest in climate projects in the near future. In particular, this is due to the FZ-296 on Limiting Greenhouse Gas Emissions adopted last year, which provides for appropriate reporting for organisations. In addition, the law stipulates the possibility of creating projects aimed at reducing greenhouse gas emissions or increasing their absorption.

The law introduces the concept of carbon units and the possibility of trading them. On 1 September 2022, the Registry of Carbon Units of Russia was launched, and the first deal took place on 26 September. One promising area for the creation of carbon units could be the cultivation and management of forests.

“Forest-climatic projects may differ in terms of profitability or payback period, but they are adaptable to any conditions and almost any region,” said Roslesinforg director Pavel Chashchin.

These projects can be divided into several groups.

First and foremost, we are talking about afforestation. This is the most capital-intensive and long-term project, but it is also quite simple to implement. As Pavel Chashchin points out, growing white acacia trees on 3,000 hectares would yield 3.3 million carbon units over the entire project period, which would be at least 70 years. The first carbon units will be generated after 8–10 years.

It is also possible to generate carbon units through the project on improved forest management by thinning the pine plantations and establishing a high-yield forest. However, from the area of 1 thousand hectares you can get only 56 thousand carbon units in 70 years, but they will have a minimum cost. The first units will be formed in five to six years.

Another type of project would help to preserve valuable, highly productive forests when building oil infrastructure. This can be achieved by bypassing forest plantations. Of course, there will be additional costs for relocating construction and difficulties in building on swampy land. Costs are difficult to predict, but 120 thousand carbon units can be obtained from 1 thousand hectares in 10 years.

Climate projects can be implemented even in forests under lease. For example, the tenant of a plot may cut down low-yielding larch, leaving high-yielding cedar. In such a case, an agreement must be made and the lessee must be compensated for the costs. This is particularly relevant in regions with a large proportion of forest leases for timber harvesting. The first carbon units can be obtained after one or two years, but only 40,300 from 1,000 hectares within 10 years.

Cover photo: Gfed / iStock