Selling carbon credits
- Thread starter BenAllgood
- Start date
Got 320 credits and submitted.
My son worked for AGCO for 8 years, in the area of machine to machine communication. Began managing app development and eventually taking a 6 month intensive coding class through Georgia Tech. Floated his resume and now works for PWC. Needless to say, the work culture in the financial industry is a bit different than that in the ag industry! His day "ends" around dinner time and starts back with overseas calls about 11pm. He said it's not in his DNA (50% mine
) to quit for at least 2 years, but I'm guessing he'll find the right balance. He just had a baby, so now has the "provider pressure" on him. Great training though
Hoytvectrix
5 year old buck +
Do you mind if I ask what your bid price was?
At one time, they had a ‘blog’ post on their site recommending how to go about setting a minimum bid. My link to the article is no longer live. For its example, it used a 4% discount rate (unfortunately very low). It directed interested parties to multiple their total stumpage value by this rate and divide by number of assessed HDCs. When I do so, I get a bid of over $25 per HDC.
If this is a valid approach and I’m to expect bids only around $8-14/ HDC, something isn’t adding up. It appears they either underestimate their made-up HDC or are misrepresenting $/HDC their investors are truly paying.
In full transparency, my 85 acres were assessed as 94 HDCs. Stumpage was recently cruised at $70k. This is timber country, flush with mills.
Curious what others saw after bidding, compared to the approach described above. I even exchanged emails with one of their support personnel but not enough to understand where the gap was (ie. did their tools drastically underestimate my timber value?).
If this is a valid approach and I’m to expect bids only around $8-14/ HDC, something isn’t adding up. It appears they either underestimate their made-up HDC or are misrepresenting $/HDC their investors are truly paying.
In full transparency, my 85 acres were assessed as 94 HDCs. Stumpage was recently cruised at $70k. This is timber country, flush with mills.
Curious what others saw after bidding, compared to the approach described above. I even exchanged emails with one of their support personnel but not enough to understand where the gap was (ie. did their tools drastically underestimate my timber value?).
If you are weighing ngx’s offer against doing an actual harvest in the next 12 months, then I think harvest is going to win easily from a financial perspective. I am guessing that most of us were not planning on doing a harvest in the next 12 months so the ngx money seems like a good idea. Nobody else is offering to pay me not to do something I wasn’t going to do anyway. Ha.
Not saying you’re wrong, but that invalidates their entire premise. If I can’t trust them…
If they aren’t paying you a fair rate NOT to cut your timber for a year, then they’re liars.
Howboutthemdawgs
5 year old buck +
I may be wrong but is that what they are claiming? Is there any universe where $8-$20 a carbon unit would ever offset a timber harvest? I was never under the impression it was meant to replace a harvest, rather subsidize you to wait for a year if you were considering. Now I could be wrong, I felt like I read it but in full transparency my mind wanders from time to time!
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I said 10
Basically they pay you interest in the neighborhood of 5% on what you would get if you cut the timber and put it in an investment paying 5% for 1 year. Sort of like depositing your timber in a savings account for a year. It's a deferral of harvest, not a replacement.
roosterstraw
5 year old buck +
I feel like NCX set a guaranteed minimum price to receive lower starting bids to entice these companies to use NCX to buy their carbon credits. The lower the bid, the more credits companies can buy, the more money NCX makes. I wonder who NCX main competition is.
Hoytvectrix
5 year old buck +
The bidding aspect of carbon credits definitely allows NCX to capture more of a spread. From what I understand, there is no shortage of demand for carbon credits across the several platforms that exist. NCX is unique in that they are for harvestable timber and they have a relatively simple process.
Yep. I mentioned the 4% discount rate above. That’s why I was curious how the bids aligned with this. $10/HDC corresponds to less than 1.5% for me.
For one or two landowners that don’t really intend to harvest anyway … no big deal. For a broad population of landowners, this absolutely is bad economics that can’t work. Orrrr they shafted me on the HDCs they assessed based on my timber value. That’s what I’m trying to figure out.
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The Fishman
5 year old buck +
I saw this article today and felt it was worth sharing. It will be interesting to see how states handle the tax designation on forested land if you choose to join some of these programs. From the article "Shirley noted that State Tax Commissioner Matthew Irby had determined that if a carbon credit lease agreement imposes restrictions on harvesting timber from a property, the property should no longer receive preferential tax treatment under the state Division of Forestry’s managed timberland program, which significantly lowers the valuation of managed timberland for property tax purposes."
Hoytvectrix
5 year old buck +
That totally makes sense. People shouldn't be able to double dip. The way NCX is currently structuring their agreements, you can't also be participating in other state or federal programs.
Is the broad population of landowners intending to harvest timber every year? I know a bunch of folks around me who own timberland. Only one that I know of is even slightly considering selling timber this year - and that is only because he wants to clear it for additional pasture. Doesnt seem like that bad of a deal for most of us who have no intention of cutting our timber THIS year.
I guess this is why their offer doesn’t come close to actually offsetting a harvest deferral in today’s economy, the way they claim.
And by “offsetting a harvest deferral,” I’m talking about one year of interest on stumpage value, not actual stumpage value.
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Hoytvectrix
5 year old buck +
Just got notice that our bid of $8 bucks a credit was accepted on NCX. Going to work through the process and report back here what that's like. I think we had 160 potential credits.
Howboutthemdawgs
5 year old buck +
Same here. Wonder if anyone got higher
BenAllgood
5 year old buck +
My $12 bid wasn't accepted. Oh well, I was trying to see if going higher than what they were expecting would pay off. There's always next round. I believe everyone that put in a bid of $8 or less got in this round. If someone bid $5 as their highest, then they would have gotten the $8 that this round went for. At least, that's the way I took it.
