Alaska is getting into the carbon market. What does that mean for the budget – and the climate?

A man signs a piece of paper at a table, surrounded by men and women.
Gov. Mike Dunleavy signs SB 48 into law, opening the door for Alaska to enter the carbon offset market. (Kavitha George/Alaska Public Media)

Can Alaska make money by protecting its state lands? Gov. Mike Dunleavy and state legislators hope so.

Surrounded by lawmakers and staff at the Alaska Sustainable Energy Conference in Anchorage, Dunleavy on Tuesday signed legislation directing the state to explore what he billed as a potential major new revenue source: carbon storage.

“Just like oil, just like gas, just like our timber, this is a commodity that can be monetized now, and Alaska is going to play a big role,” Dunleavy said.

The bill was a major priority for the governor. Ahead of this legislative session, he pitched it as a way to help solve Alaska’s budget crisis, calling it “a new revenue source that could actually rival the revenue we get in some cases from oil.”

The framework is now in place, but questions remain about what a carbon storage industry in Alaska might look like, how much money it would actually bring in and whether there’s any real upside for the climate.

What is carbon storage?

Carbon emissions, caused by everything from burning fossil fuels to wildfires, drive climate change. And as efforts to combat climate change ramp up, there’s a growing market that will pay landowners to keep carbon out of the atmosphere. One way to do that is by protecting ecosystems that naturally hold carbon, like forests or tundra. 

Alaska has a lot of forests and tundra, and Dunleavy believes, a lot of ways to store carbon.

“The scale that Alaska has to offer on this is unprecedented,” he said in December.

Dunleavy originally proposed two plans to get Alaska started in the carbon business. One proposal, dubbed the “hole bill” by lawmakers, pushed a plan to store carbon dioxide underground in a process called carbon capture and sequestration. That bill did not pass this session. But last week, hours before the regular session ended, the legislature did pass SB 48, dubbed the “tree bill.”

It authorized the state Department of Natural Resources to establish a legal framework to sell carbon offsets primarily based on protecting Alaska’s state forests.

What is a carbon offset?

The idea behind carbon offsets is fairly straightforward: Most companies have a carbon footprint. They burn fossil fuels to transport goods or employees, or to manufacture their products. And with growing pressure to act on climate change, many companies are looking for ways to cut down on those carbon emissions.

One way to do that is to pay someone else to remove carbon from the atmosphere – in other words, to offset the carbon their operations emit.  

The basic idea is this: “Someone else has done something good for the climate, and it can compensate for my ongoing emissions,” said Freya Chay, program manager for the nonprofit Carbon Plan, which analyzes climate solutions. 

Chay said the point of a carbon offset is to generate a real benefit to the climate. 

“When we’re talking about compensating for the act of burning fossil fuels, we have to be taking carbon back out of the atmosphere and storing it somewhere, effectively, permanently,” she said.

One way to store it is in natural “carbon sinks,” like forests. Trees pull carbon dioxide from the atmosphere and store it, through photosynthesis. 

The governor and state lawmakers hope that Alaska can get paid to protect its forests. Some Alaska Native corporations have already had success selling offsets. And as more companies look to shrink their carbon footprint, the demand for carbon offsets is expected to grow.

How would carbon offsets benefit Alaska?

The Department of Natural Resources has identified at least three state forests it believes could generate offsets in the Mat-Su, the Tanana Valley and near Haines. 

In an interview, Commissioner John Boyle called it a new way to think about Alaska’s forest land.

“We see it as a way to monetize state resources that are currently not being monetized,” Boyle said.

The plan approved by lawmakers won’t generate anything close to the scale of oil revenue the state brings in —  at least, not yet. (The governor’s estimates included revenue from his other proposal, which didn’t pass this year.)

A DNR consultant estimated that selling carbon offsets would generate only about $82 million in the program’s first ten years. 

Boyle is more optimistic.“We’re quite confident that it will be a significant revenue generator, but we don’t have the information right now to make a great guess on what that may be,” he said.

One key question is who would buy Alaska’s offsets. Boyle said he’s not aware of any specific companies who have expressed interest yet. But as demand for offsets increases, he believes Alaska can be the supply. 

Are there climate benefits?

As the state moves forward with the process, Carbon Plan’s Freya Chay identified one big concern: will Alaska’s plan actually benefit the climate? 

Carbon offsets aren’t supposed to be sold out of just any forest. To serve its purpose, the revenue from an offset should enable landowners to save that forest land from some threat, like timber harvest or development, or somehow improve forest management to store more carbon. 

Chay said so far, Alaska seems more focused on the revenue potential than the climate benefits.

“I find it very plausible that Alaska could make money with a forest carbon offset program,” Chay said. “The real question for me is what does that program actually achieve? And what are the costs not to Alaska’s budget, but to bigger systems that we care about?”

DNR Commissioner Boyle said the Department is exploring a range of options to store carbon effectively, including more active land management to mitigate wildfire threat or replant trees. DNR also plans to explore ocean-based opportunities for carbon storage like kelp farming, he said. 

But all of these ideas are in their infancy. Many of the details governing the proposed carbon market are yet to be worked out.

DNR estimates it will take six months to a year to write the regulations to govern the offset market. The state will need to work with outside auditors to verify potential offsets and then place them on registries.

The offset legislation passed with overwhelming support in both the Alaska Senate and House – even from lawmakers for whom climate is not a priority.

“Whether you believe in climate change or not, this is how the operations are being played around the world,” Rep. Tom McKay, R-Anchorage, chair of the House Resources Committee, told colleagues just before the bill’s final vote last week.

“It’s good that Alaska gets involved, because a lot of other states are doing this, and we’re missing the boat if we don’t get on board,” McKay said.

Sen. Cathy Giessel, R-Anchorage, chair of the Senate Resources Committee, stressed that this legislation is just the first step.

“Not all the questions have been answered about this particular — I’ll call it an industry,” Giessel said in an interview with Alaska Public Media. “There’s still a lot of unknowns.”

Kavitha George is Alaska Public Media’s climate change reporter. Reach her at Read more about Kavitha here.

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