Environmental Impact Bonding to Improve Forest Health

Fire in the San Juan National Forest

The SW Climate Hub recently met with Ellen Roberts to learn about environmental impact bond funds for forest health projects to minimize catastrophic wildfires, generate electricity and produce high-grade biochar. The San Juan National Forest (SJNF) suffered two wildfires in 2018, the 416 fire and the Burro Fire.

Durango, CO

To the people living in southwestern Colorado, one thing is clear to most. Colorado’s forests and watersheds are in trouble.  A deadly combination of drought, warmer temperatures, forest insect infestation and disease, coupled with unnatural fire suppression have disarmed Mother Nature’s ability to self-correct the high-altitude forests’ health.  These tinderbox conditions are coming up against increasing population densities in forested areas (and accompanying watershed and flood zones) that span federal, state, tribal and private lands, increasing the risk of wildfire and accompanying watershed impacts on communities in Colorado.

A significant part of this challenging landscape is that reducing the risk by reducing fuels and improving forest health management can be complicated and expensive, particularly in cross-boundary areas, and there is a lack of markets for woody biomass and small diameter timber that is pulled off the land. To meet these challenges, the US Forest Service and other partners are exploring creative financing through an environmental impact bond (EIB) in the SJNF area to inject a new revenue stream that could supplement current federal funding to accomplish what’s needed on the ground in a timely manner. In an EIB, repayments for projects are made based on the outcomes they deliver, allowing multiple beneficiaries to share in project costs, and risk of the project’s performance to be transferred to investors. The goal is to create a funding structure that would increase the scope and pace of forest health treatments to restore the forests to a more natural and resilient ecosystem, while accounting for the interconnected benefits of these treatments.

One component of the EIB project being considered is a public/private partnership to build a woody biomass facility in the area to utilize the biomass produced from forest health treatments in an economically and environmentally beneficial way.  Electricity generation at a small scale (likely 3-5 megawatts), as well as production of high-grade biochar that can be sold commercially, are two uses for the woody biomass that would be much more beneficial than leaving this fuel in the forests, only to be consumed in the next catastrophic wildfire.

The local project team, led by Mountain Studies Institute and the SJNF, is working with Quantified Ventures, a consulting firm experienced in establishing EIB financing, in the information gathering stage to assess the opportunity, and has held numerous meetings and interviews with key stakeholders in the SJNF area. The feasibility study is expected to be completed in 2019 and may point the way to an innovative and impactful approach to improved forest health in the region and a road map for other communities to consider.

Ellen Roberts, Attorney, former Colorado State Senator.