Tierra Resources’ new carbon methodology could help close the financing gap for wetlands restorations projects on the Louisiana Gulf Coast, offering an extra push for private landowners. Entergy, the major utility in the region, sees more than one reason to be involved.
| Charlie Broussard, a shrimper on the docks in Cocodrie, Louisiana, has seen the wetlands he paddled through as a kid shift dramatically – literally. In fact, the Louisiana coastline is changing so quickly that fisherman and oil rig workers who have spent their lives navigating the bayou by boat sometimes get lost as familiar landmarks are drowned. In Louisiana, 1,880 square miles of land has vanished since the 1930s, and the current rate of land loss is equivalent to a football field every 38 minutes
“The state almost views land loss as an existential threat,” says Alex Kolker, a coastal geologist at the Louisiana Universities Marine Consortium, a research center located ‘at the end of the Earth’—or, more specifically, at the end of LA Highway 56 in Cocodrie.
Charlie Brussard, a shrimper in Concodrie, Louisiana, has seen the coastline change dramatically in his lifetime.
Wetlands restoration ‘at the end of the Earth’
Many Gulf Coast residents—especially those who lived through Hurricane Katrina in 2005—are acutely aware of the fragility of ‘hard’ infrastructure, such as the levee that broke and the floodwalls that failed to stop inundation during the storm. ‘Soft’ natural infrastructure, such as wetlands, can absorb flooding, break waves, and slow storm surge, taking some of the pressure off of levees and other ‘hard’ structures. Without wetlands, coastal areas are much more exposed to hurricanes.
To begin to address these vulnerabilities, Louisiana’s 2012 Coastal Master Plan prioritizes 109 coastal restoration projects, at a price tag of $50 billion. But, with 85% of Louisiana’s coast controlled by private landowners, others are looking to the private sector to support wetland restoration.
A ‘less optimistic’–but plausible–scenario of land loss from Louisiana’s 2012 Coastal Master Plan.
“There is a lot of potential for large-scale impact by working with industry,” says Sarah Mack, the founder and CEO of wetland restoration project developer Tierra Resources.
Wetlands sequester carbon both in life and in death. Like forests, they build carbon as they grow. When the plants die and decay, organic material compacts into soil, permanently storing carbon belowground. In September 2012, the American Carbon Registry approved a wetlands methodology—authored by Mack and two contributors from Louisiana State University—that will allow landowners to quantify the carbon sequestered by restoration projects and then sell verified emissions reductions (i.e. carbon offsets) to voluntary offset buyers.
The first pilot project using the wetlands methodology is now underway at the Luling Oxidation Wetlands Assimilation Pond, a 950-acre wetland 20 miles west of New Orleans that is threatened by subsidence (regional sinking) and saltwater intrusion. To restore the wetland, the project diverts treated municipal wastewater that once flowed into a canal into the wetland, which is thirsty for nutrients and freshwater. Thus, the project turns municipal trash (wastewater) into treasure (wetland food).
With the influx of nutrients, wetland plants will grow, and Tierra Resources estimates that the Luling project will sequester 1,000 to 7,000 metric tons of carbon dioxide (MtCO2e) annually. They are planning to transact offsets in one to two years.
A utility builds its resilience
Entergy, a utility with 2.8 million customers in the Gulf and the company that invested $150,000 to help develop the wetlands methodology, has the right of first refusal on the Luling project and is planning to purchase some of the carbon offsets produced by the restoration work. The company sees wetlands as a kind of natural insurance that will buffer their infrastructure in an uncertain climate future.
“We’re uniquely at risk due to the geographic location of our company and our customers,” says Brent Dorsey, director of corporate environmental programs at Entergy. “Every few years, taking a direct hit from a hurricane is difficult to recover from. Our customers can’t afford for us to keep rebuilding the system.”
In 2010, Entergy hired McKinsey to quantify climate risk across the company’s assets. They used a statistical model by the reinsurance company Swiss Re to simulate 10,000 possible hurricane ‘years,’ looking at the multitude of different pathways that hurricanes could take across the Gulf and how the likelihood and strength of storms might change under different climate scenarios.
Drivers of land loss in the Louisiana Gulf
The largest driver of land loss in coastal Louisiana is subsidence–or sinking due to:
(1) natural sediment compaction and
(2) oil and gas drilling, which sucks out pockets of liquid offshore, creating space for the land to settle.
(3) The channelization of the Mississippi River also means that about 50 percent less sediment is reaching the Gulf, therefore slowing the only process that naturally builds land.
(4) On top of that, climate change is leading to rising sea levels globally and more intense storms, both of which eat away at the Gulf Coast.
Dead cypress trees cover tens of thousands of acres in the Gulf. Without wetlands restoration, even more of the landscape will turn to open water.
The analysis found that Entergy’s infrastructure—which includes 500,000 miles of transmission lines and 300 generation facilities—is vulnerable to storms even without climate change. Under a moderate climate change scenario, cumulative losses from wind, sea level rise, and storm surge could cost Entergy $370 billion (in 2010 dollars) over the next two decades.
Entergy has already been adapting its infrastructure to the impacts of more intense and frequent storms: The company is elevating substations, replacing damaged wooden structures with metal and concrete, and strengthening transmission and distribution lines and conductors. But the severity of climate risks has changed Entergy’s calculus around some of the resiliency measures that might otherwise be considered too expensive.
For instance, wetland restoration comes out at 3.31 on the company’s cost-benefit analysis, meaning that for every $3.31 invested, Entergy would get $1.00 worth of ‘casualty loss reduction’ value. However, when all of the co-benefits of wetlands—water purification, fisheries, recreation, and carbon sequestration—are included, the true value of this natural infrastructure begins to emerge.
Companies such as Entergy are beginning to price out the true value of wetlands, which includes services like carbon storage and storm protection.
“If you can add an economic value, or ‘internalize,’ the environmental services that wetlands provide, then wetland restoration begins to pencil out a little better [on the cost-benefit analysis],” Dorsey says. “This is really the sweet spot to start to bring all of the co-benefits together.”
Entergy’s Environmental Initiatives Fund commits $1 million annually to greenhouse gas reduction projects such as wetland restoration, methane capture, nitrous oxide destruction, and landfill gas-to-energy. Projects such as Luling allow Entergy to invest in climate change mitigation and adaptation at the same time.
Acres to go before we sleep…
Entergy is now working to get other private sector actors interested in leveraging carbon financing for wetland restoration. Tierra Resources’ newest pilot project is a wetland planting initiative with ConocoPhillips. The company has 640,000 acres of wetlands to their name, making them one of the largest private wetland landowners in the United States.
Restoring an acre of wetland can cost up to $150,000—an expense “beyond the capacity of most private landowners,” Mack explains. While carbon financing may not be able to cover all of the per-acre costs for capital-intensive restoration techniques such as river diversions, it may leverage other financing, and ultimately make the difference in restoration decisions. Tierra Resources is also developing other types of restoration techniques that may be able to be fully funded using carbon finance.
Shrimpers in Cocodrie, Louisiana rely on coastal ecosystems for their livelihoods. Carbon finance could give a boost to restore wetland habitat important for shrimp fisheries.span>
Tierra Resources estimates that a healthy wetland sequesters as much as 15 MtCO2e per acre per year, and that 4 million acres of wetlands in the Mississippi River Delta are eligible for carbon-accounted restoration. If future carbon projects were to cover 1 million acres in the Gulf (a quarter of the potential), Tierra Resources estimates that carbon financing could leverage between $5 and $15 billion for wetlands restoration, based on modeling using an offset price of $12-25 per tonne.
The organization is pushing for the wetlands methodology to be included in California’s cap-and-trade compliance market, where wetlands offsets could fill a projected gap in offset supply. Inclusion of the wetlands methodology in the compliance market could mean a steadier demand for wetlands offsets, and higher prices. In 2012, the average carbon offset sold for $5.90 on the voluntary market, compared to an average price for California-bound offsets of $9.30/t, a 16% increase over the previous year. Though companies such as Entergy have stepped up to purchase wetlands offsets voluntarily, a wetlands protocol under California cap-and-trade would create a much larger market for the offsets—and the potential to leverage more financing for restoration.
Louisiana’s 2012 Coastal Master Plan recognizes for the first time that the state will not be able to save every acre.
“It’s a very big step to come out and say, ‘we can’t save the entire coast,’” Morgan Crutcher, a Technical and Policy Analyst at the Coalition to Restore Coastal Louisiana says. “We’re watching coastal communities go through the grieving process.”
A protest sign in the Louisiana bayou reads: “It’s worth saving.” Gulf residents are losing land at a rapid rate.span>
Kolker, the coastal geologist, views the reality in Louisiana as a precursor for the kind of tough decisions that other states may soon face as ice sheets melt and sea level rise accelerates: “In some ways, we’re already the climate future,” he says.
In the meantime, with every storm in the Gulf, the need for robust coastal wetlands becomes more apparent, the costs of inaction more devastating. The impacts of climate change and the efficacy of natural infrastructure in absorbing some of the impacts of storms have caught the attention of the private sector, and companies such as Entergy are beginning to take action. And on a coast that is disappearing before people’s eyes, (tempered) optimism may be the only way forward.