Weyerhaeuser owns more than 10 million acres of timberland across the U.S. It owns more than a million acres of Western Oregon’s private forest land. The company says its trees remove about 14 million metric tons of carbon dioxide from the atmosphere each year, The Wall Street Journal reported. And the logging firm is using those numbers to venture into the carbon offset market while still planning to increase lumber production. Ryan Dezember has covered the company for The Wall Street Journal and joins us with details of his reporting.
The following transcript was created by a computer and edited by a volunteer:
Dave Miller: This is Think Out Loud on OPB. I’m Dave Miller. As the Wall Street Journal recently wrote, no American company has chopped down more trees in the last 150 years than Seattle-based Weyerhaeuser. At the same time, the paper noted the company is increasingly positioning itself as a force for environmental good, arguing that its trees remove about 14 million metric tons of carbon dioxide from the atmosphere every year. The logging firm is using these numbers to venture deeper into the carbon offset market while still planning to increase its lumber production. Ryan Dezember has been writing about Weyerhaeuser for the Wall Street Journal and he joins us now. Ryan, welcome to the show.
Ryan Dezember: Thank you for having me.
Miller: I want to start with a quote you got from Weyerhaeuser’s CEO Devin Stockfish. He said this, “I don’t think there are many companies in the world with a better environmental story than Weyerhaeuser.” What is he talking about?
Dezember: In recent years, the value of trees, we’re starting to think about trees differently in forests. For most of human history, the way to make money from a tree was to chop it down, whether you wanted the land it was on or the wood. Now, trees are, as modern current technology, the most economical way to pull carbon from the atmosphere. Of course, they do that naturally as they grow. And timber owners are in a unique position among corporate America in that they own a lot of trees. Which in the new math of Wall Street, and the way that companies and investors are looking at emissions, and emission reductions, and ways to offset emissions, that companies have doing business. Trees are about the only game in town. So there’s a booming business now, of essentially paying people not to cut down trees. In other words, leave the tree standing to suck up carbon. Not necessarily forever, but for years, decades, sometimes in some contracts, over 100 years.
Miller: But it takes fossil fuels to fertilize, and log, and mill, and fabricate, and transport wood products, things that Weyerhaeuser is still doing. So how does a company tally these things? And how does the tally of all that stuff, the logging and wood processing operations, compare to the sequestration of the trees that are not being cut?
Dezember: So in Weyerhaeuser’s case, being the biggest private landowner in the country, on the continent really. They are in a position where they have so much wood mass on their properties that those trees, every year that they grow, they’re pulling in an amount of carbon that is in excess of what the company emits running its mills, running logging equipment, executives flying to meetings, all these things that produce emissions that companies are responsible [for]. And down the supply chain: getting the lumber to the Home Depot, or to the building site, building the home, the builders driving to the building site.
This is all sort of abstract, and very extrapolated. There’s a lot of debate and thought going into the standards and the math that companies should use to calculate these things. But again, airlines only emit, really. They don’t have 10 million acres of forest absorbing carbon. So timberland companies, and Weyerhaeuser in particular is by and far the largest, are in a unique position to sort of make this claim that, look, our number one asset is pulling a lot of pollution from the atmosphere.
And now that there’s a system in place where timber owners are being paid, not just for the value of the wood but for the value of the carbon sequestration, the carbon storage in their properties. They want in.
Miller: Is Weyerhaeuser and, and other smaller companies, are they keeping trees in the ground specifically to sell carbon offsets, or are they getting offsets for tracts that most likely weren’t going to be logged anyway?
Dezember: Well, it’s a little bit of both. When the carbon offset market first emerged, it came out of California’s cap-and-trade system as a little sort of side thing, that the polluters could pay to have these offsets created, or generated, on land. And they could use it toward their bills, their emissions, their pollution tab, so to speak. One of the problems early on was people, companies were buying these offsets. And there was a complaint, critics would say, well, you know, this land trust sold you these offsets. They had no intention to clear cut anyway. They bought the land to preserve it. This native tribe sold you offsets, but the trees are on very remote mountains or islands in Alaska that couldn’t economically be logged and taken to market anyway.
So the market, the buyers, for fear of being accused of greenwashing, and sort of skirting the spirit of the system, have pushed back and said, ‘we want stricter standards. We want you to show us and to prove that you are sequestering additional carbon, that these trees had economical value, and that you’re really subtracting from the global emissions balance, the carbon balance.’ And that’s really gummed up the market lately because landowners say, well, ok. If you want that, well then you have to pay more for the offsets.
Miller: If you want to buy something that’s worth something to me, then I’m gonna actually charge you more for it.
Dezember: Right, because they’re gonna lose money by logging less frequently, and less volume.
Miller: How much has that, as you say, gummed up these markets?
Dezember: Well, it’s hard to tell because these markets, unlike stocks and bonds and just about every other security we have out there, the market for carbon offsets is kind of a black box. They’re individually negotiated deals, almost exclusively. There’s some brokers out there that do the same thing. There’s no real way to track prices. There’s some data on the offsets that are involved in California’s very tightly and very closely monitored system. But it doesn’t really get down to the prices, per individual deal. But, oil companies, big tech companies, they’ve been known to pay like tens of millions of dollars for some of these bigger offset projects that they then put on their books.
One of the issues is, all the offsets are sort of different. It’s sort of the wild west. There’s offsets you can buy that defer harvest for one year. There’s some that are for 20 or 40 years, some for 100 years. So it’s really hard to tell, but right now, the landowners that have studied this, and done the math and balanced, done the sort of tradeoff analysis. If I sell carbon credits, how much do they have to be to make up for the lost income from logging? I mean, you’re talking multiples. Five to 10 times the current rate.
Miller: Is it possible then to even know how big a part of Weyerhaeuser’s overall business is connected, at this point, to carbon offsets?
Dezember: Well, they’ve been very transparent about it. They’re doing the first project, they haven’t sold any yet. Now they’re in the process of creating the offsets on a 50,000 acre tract in Maine. So they’re sort of dipping their toe into this market. But it’s important, beyond the income they’ll make from selling those offsets, assuming they do. Because they kind of look at their whole portfolio and they say, ‘well, look. If this property can generate this much from logging, and this much from carbon sequestration, you, investors and our shareholders, should reevaluate how you value the entirety of our land and our holdings.’ So there’s sort of a dual benefit. There’s the income stream that they can generate. But there’s also the value, the non-lumber and non-wood product value, that they’re trying to promote, and get investors to think about for their properties.
Miller: Why Maine? I mean, Weyerhaeuser, as I noted, they’re based in Seattle. They’ve got huge tracts of land in the Pacific Northwest, in the Northeast, in the South. Why Maine?
Dezember: Well, Maine has a couple of things going for it. One, the market for the timber isn’t great there. You know, that used to be a big center for pulp and paper production. As I can tell you, newspaper, print newspaper sales are way down. We don’t need as much paper. Many people are reading the news on their phone, or their computer. So the paper business has gone sort of south, and that means that to get value for a lot of those trees up in Maine and New England, where they used to go to a pulp mill. Now the biggest market up there is lumber mills, and now it takes a much bigger, fatter tree to make two-by-fours than it does to be ground into pulp for newsprint. And that means in Maine, where trees grow very slowly, just a couple of months out of the year, you’re talking several decades. In theory, Weyerhaeuser can capitalize and sell carbon offsets, in that time period that those trees need to get bigger to be commercial for the new customer that they’re selling to.
The other thing that Maine has going for it that the Northwest and the South really don’t have as far as Weyerhaeuser properties go, is those woods they allow to regrow naturally. They sort of tailor and promote different species by cutting down certain things, and allowing light in certain areas, and shade in others. But that’s about it up there. They just let those hardwood mix forests reseed naturally. Now in the Northwest, they plant Doug fir, mostly. In the South, it’s a Loblolly pine, right? If you look at Google Maps, and look at the South, and you look and it looks like it’s covered in a giant forest. But if you zoom in, and zoom in, you start to notice that most of those trees are planted in rows, and it’s essentially a crop that takes decades to grow.
Miller: Well, along those lines, I’m just curious, but you know, we’re not just talking about carbon storage, now, broadly. I mean, that doesn’t take into account everything. For example, could a market put a price on biodiversity, the kind of biodiversity that would not be found in a monoculture tree plantation?
Dezember: Yeah, exactly. And there’s a lot of investors, particularly in Europe, some of the big long-term investors, insurance funds, pensions, who are considering that. And there’s a lot of analysts on Wall Street trying to sort of get their head around, how do you value something like that? We’re in the early stages of valuing carbon and carbon markets. But then there’s other things: water quality, biodiversity. And there are a lot of big investors with very long time horizons and decades and such, like that, trying to get their head around, on how do you value that? How do you promote it? How do you pay for it? How do you get paid for it?
Miller: Ryan Dezember, thanks very much.
Dezember: Thank you.
Miller: Ryan Dezember, a reporter for the Wall Street Journal.
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