ECO2 Forests Inc. (Pinksheets:ECOF), a Sacramento, California-based company focused on sustainable forestry, reforestation and carbon sequestration projects, announced it has reached a "multi-million dollar" agreement for the sale of carbon credits created through its global forestry projects.
ECO2 has entered into contract with CarbonX Trade, Inc., a subsidiary of Lakewood, CO-based Green Ventures Future Fund, for the sale of all generated carbon credits through the first seven years of planting from the company’s recently announced Vanuatu venture and its ongoing projects in the Eastern states of Australia where the planting of 150,000 initial Kiri Trees has been completed. The planting creating approximately 375,000 carbon credits at an initial price of US$10.00 per credit from these trees, the company said in a release.
The inclusion of carbon credits in sustainable forestry allows the
company to generate cash flow from the beginning of a forests’ life
cycle. Forestry has traditionally relied solely upon revenue from
harvests, often decades after initial planting. The generation and sale
of carbon credit sales changes the business model dramatically.
Green Ventures Future Fund will begin making payments for those carbon credits over a 12-month period beginning in April of 2010, creating ongoing cash flow for ECO2 while allowing the company to incrementally build income. An additional 150,000 trees are on schedule to be planted by the end of 1Q10 in Vanuatu, following the anticipated land closing in mid-January, with their initial payments then commencing 90 days after completion. ECO2 plans to have a minimum of 3 million trees planted by the end of the seven year cycle per the contract with Green Ventures.
Other key components of the contract with the buyer include the first right of refusal to carbon credits from any future forestation projects initiated by ECO2 during the total ten year contract period; a purchase price based upon the 90 day trailing average price of the European Emissions Trading Scheme, less a 20% discount in price, a 5% increase per year in the price of each carbon credit with a base starting price of US$10.00.
"The Kiri Tree is an intrinsic element of the Global Forestry Plan; it is a high carbon sequestering (absorbing), fast growth tree ready for mature harvest in just seven years. Once harvested, it regenerates from the stump and goes through the carbon sequestration and fast growth cycle again. This cycle is designed to be sustainable and should allow ECO2 Forests to generate up to 2.5 carbon credits every harvest per tree between each harvest cycle. The resulting forests create a consistent supply of environmentally friendly lumber. One of our next steps is to focus on securing the forward orders for our lumber sales," ECO2 CEO Collie Christensen said today.
The ECO2 Forests Global Forestry Plan is specifically designed to meet the company’s E4 Philosophy which aims for positive outcomes from an environmental, economic, employment and educational perspective.
"The demand for lumber is still expected to increase for decades to come but as a society, we cannot continue to log old forests like they have been in the past. Reforestation and the generating of revenue from carbon credit sales highlights how a move to sustainable forest creation can generate a positive cash flow years before a single tree is harvested and all done while creating a positive environmental outcome," Christensen said.
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