[StBernard] Writing the Rule That Will Rebuild the Bayou - With Carbon

[Westley Annis]

Writing the Rule That Will Rebuild the Bayou – With Carbon
American Carbon Registry opens public comment on methodology for restoring
Mississippi Delta

19 January 2012 | When Hurricane Katrina’s storm surge – the highest in
recorded history at 27.8 feet – hit New Orleans’ St. Bernard Parish in
August, 2005, the floodwaters breached levies and poured in first from the
north and the east. And then from the west. Homes filled with water up to
their 10 foot ceilings in fifteen minutes. In a few hours, the once bustling
New Orleans suburb was wholly inundated.

Meanwhile, in the days before and after the category five hurricane left its
historic mark, residents of the entire US south would cede their roadways to
military-esque convoys of Entergy electric utility trucks headed single file
to and from the heart of an infrastructural and humanitarian nightmare.  

Days later, over 26,000 homes in the parish were destroyed in a toxic soup
of floodwaters and oil. Years later, Entergy would account for millions of
dollars in losses of “substantial assets” it described in 2010 as being
“damaged, lost or totally destroyed.” And that’s after employing one of the
region’s most advanced emergency management systems.

By now it’s well understood that many of these losses – of lives, homes and
infrastructure – could have been prevented with greater attention to New
Orleans’ aging infrastructure and emergency management. 

But what about shoring up the “disappearing coastline” itself – where
now-degraded wetlands were once the region’s first line of defense against
storm surge and flooding?  

Enter the American Carbon Registry’s (ACR) proposed methodology for the
Restoration of Degraded Deltaic Wetlands of the Mississippi Delta, written
by Tierra Resources and contributors, and released Wednesday for public
comment. Assuming it passes technical muster, the methodology could guide
the United States’ first approaches to coastal wetlands restoration.

“Wetlands help with flood protection by slowing down the surge,” explains
Sarah Mack, Tierra Resources founder and CEO, and former Technical
Administrator at the Sewerage & Water Board of New Orleans. “If it’s a
forested wetland, the tress or the bushes take the waves off of the surge –
the kind of waves that tended to destroy the levies.”

“And in New Orleans, 80 percent of flooding was due to levy breaches,” she
concludes.

The Challenge

As if being the “first” anything isn’t stressful enough, any future projects
and resulting revenues are anticipated to chip away at the colossal cost of
the Deltaic coast’s wetlands restoration – an effort that Louisiana’s
Comprehensive Master Plan for a Sustainable Coast  last week priced at $50
billion or more. And that’s just the cost of priority projects that State
thinks it can actually fund – higher estimates for coastal restoration reach
into the $100 billion range.

On top of that, Restoring America’s Estuaries recently estimated that
coastal habitat restoration could create more than twice as many jobs as the
oil and gas and road construction industries – combined. The report
specifically cites restoration efforts underway in New Orleans’ Central
Wetlands Unit.   

And don’t forget the aims of companies like Entergy, which financed the
methodology’s development and intend to one day purchase credits from the
projects. Not only do they see the project as having a positive impact on
the communities where they operate, but hope they can better insulate their
own infrastructure from future natural disasters.

Job creation? Flood prevention? Infrastructure risk mitigation? No pressure
or anything.

But in fact, despite the Delta region’s tall order and insufficient
resources, methodology developer Mack is optimistic. “The price tag for
restoration is so high and the state won’t be able to come up with it all,
so carbon finance can play a critical role,” she explains.

Demand: From Coast to Coast

Can carbon finance really generate the billions of dollars sufficient to
tackle Deltaic wetlands restoration costs, given that the value of all
voluntary carbon transactions worldwide was valued at $424 million in 2011? 

Not entirely, Mack says, but explains that their 40-year project model –
which assumes that the credits could command $12 to $25 – estimates
potentially $5 to $15 billions of dollars in funding over time. 

That’s assuming that a future project encompasses even ¼ of the four million
acres of eligible Deltaic coastal zone. Mack says the projects’
sequestration potential ranges from five to 15 tons of carbon dioxide or the
equivalent in other greenhouse gasses per acre – or more, if the methodology
eventually expands to include the prevented loss of carbon from wetland
soils.

The above-average modeled price takes into account the value that buyers may
place on the healthy wetlands’ community-based benefits, and ecosystem and
economic services that extend to the broader U.S. 

The expected above-average demand for the credits could come from purely
voluntary buyers, but Mack – and ACR, too – are also quick to point out that
the California Air Resources Board (ARB) has included the methodology on a
short list of project approaches to potentially revue for future use in the
state’s cap and trade program. 

Hence the compliance program-friendly performance benchmark approach to
additionality and modular methodology elements that in the future can be
applied to coastal wetlands across the U.S. 

However, market participants point out that the methodology involves some
land use activities, which are penalized in the California regulation’s
buyer liability policy. Compliance-grade forestry credits currently incur a
price discount – at $7.5 to $8.5, trading at around $2 lower than other
eligible offset types – to which other land use credits like these may not
be immune. 

Putting Entergy Into the Effort

Whether or not the US-based compliance program will bear the torch for
regional restoration, some purely voluntary buyers like Entergy have already
come around to the value in valuing wetland services.

“Entergy has billions of dollars in assets, millions of customers and
thousands of employees along the gulf coast,” says Entergy’s Mike Burns, “so
it’s really no surprise that we’ve been a strong advocate for an aggressive
approach for saving the gulf’s coastal wetlands.”

Entergy provided a total of $150,000 in two grants to support the
methodology’s development. Not the first time the utility has been an early
actor in the carbon markets, Entergy made its first GHG reduction commitment
in 2001 and reports 69 MtCO2e reduced or offset in two 5-year periods ending
in 2010. 

“Entergy has long been an advocate for public policy to combat climate
change and I don’t expect our position to change any time soon,” he
continues. “And using the local wetlands as a carbon sink to combat climate
change fits perfectly with Entergy’s beliefs.”

Burns says Entergy is now “in the process of coming up with a new
environmental goal that will obviously include some level of GHG
reductions,” but is still in the works.

In the mean time, Tierra Resources and others will continue their work that
started soon after the Katrina disaster. Mack founded Tierra resources in
2007, which initiated the methodology development several years before
Entergy stepped into the ring. Currently under contract with the St. Bernard
parish government, part of her scope of work has been to look at
environmental finance and carbon credits as a way to fund restoration
projects. 

Mack is by now well versed in Louisiana’s risky wetland dilemma, but the
methodology’s several modules for different project, baseline and other
scenarios could one day be applied to coastal wetlands beyond Louisiana
borders – which encompass most but not all of the Mississippi Delta.

These modules will be available for public comment through February 15th,
and ACR aims to publish the methodology in spring 2012.