Climate Change

In 2006, we committed to reduce greenhouse gas emissions 40 percent by 2020 using a 2000 baseline. Our primary path to achieve this goal is by deriving more energy from carbon-neutral biomass to meet the needs of our manufacturing operations.

The result is a positive for shareholders and sustainability. Shareholders benefit from lower energy costs, and the environment benefits from lower emissions of greenhouse gases. Biomass fuel from sustainably managed forests is considered to have a neutral effect on greenhouse gases in the atmosphere because new forest growth absorbs the carbon dioxide released by burning the fuel. Therefore, by deriving the majority of our energy from biomass rather than fossil fuel, we avoid releasing additional carbon dioxide.

Our management strategies and processes in place guide progress toward our GHG reduction goal. They include:

• Evaluating the GHG emissions from proposed energy-related investments
• Optimizing both the use of biomass fuels and co-generation systems to meet mill energy needs
• Improving energy efficiency in our manufacturing processes

• Greenhouse Gas Reduction
• Forest Management Practices Contribute Positively
• Climate Change Policy
• Involvement in Policy Initiatives
• Financial Implications, Risks and Opportunities

Greenhouse Gas Reduction

Our efforts are reducing Weyerhaeuser's greenhouse gas emissions footprint. Our direct emissions include the sum of our emissions at all of our manufacturing facilities plus transportation fleets owned or operated by Weyerhaeuser. Direct emissions in 2008 were 1.7 million metric tons, which was 200,000 metric tons less than in 2000, our base year. This is a decrease of 10 percent. For 2008, the GHG direct emission reductions primarily came from the combined effect of operations consolidation in our higher efficiency mills, and lower levels of production. Our indirect emissions estimated from purchased electrical power have fluctuated since 2000. In 2008, our indirect emissions were approximately 5 percent less than in 2000.

At a 10 percent reduction compared to 2000, we have made real progress, but not on our original trajectory. When we adopted our greenhouse gas reduction commitment in 2006, we stated that it assumed a comparable business portfolio. Since that time, our business portfolio has changed significantly with the divestment of our fine paper operations and related assets in March 2007 and the sale of our containerboard, packaging and recycling business in August 2008. These businesses represented a significant portion of our manufacturing operations. While these transactions removed several high greenhouse gas-emitting operations from our manufacturing portfolio, they also removed several projects that had increased efficiency and utilization of biomass energy. Due to both our smaller operating profile and the economic downturn, it may be difficult for us to meet our current reduction commitment since reduction opportunities at our manufacturing operations often require significant capital investment. We reaffirm our pledge to reduce greenhouse gas emissions, but given this strategic shift in our company structure, we will reevaluate progress toward our original goal at the end of 2009 to determine whether adjustments are needed.

Measured in terms of intensity (GHG emissions per metric ton of production), our direct greenhouse gas emissions in 2008 increased compared to previous years, primarily due to the inefficiencies of mills operating at reduced capacity with lower production than in previous years.

Our greenhouse gas inventory process adheres to the guidelines published by the Greenhouse Gas Protocol Initiative's Greenhouse Gas Protocol, Revised Edition, and its associated calculation tools that are relevant to our operations. The initiative is a multi-stakeholder partnership convened by the World Business Council for Sustainable Development and the World Resources Institute. Following guidance in this protocol, adjustments to the baseline year and subsequent years’ data have been made on a whole-year basis for divestments and acquisitions affecting our greenhouse gas inventory. The absolute value (reported in metric tons CO₂e) of our entire GHG emission inventory can change as a result of these adjustments. In accordance with the Greenhouse Gas Protocol, emissions from divested facilities are removed from the base year and subsequent years. In 2008, the sale of our containerboard, packaging and recycling business was the most significant adjustment.

Forest Management Practices Contribute Positively

Because forests both sequester and release carbon in unequal amounts over time, forest carbon reporting has special accounting issues. The rate of forest carbon sequestration is subject to seasonal variation, annual variation due to climate and disturbance impacts, age-related variation due to the natural cycle of tree growth, and effects from forest management practices such as fertilization and harvesting.

Although these processes are complex, there are certain trends that can be estimated across a large landscape. We have taken a conservative approach to estimating the standing stock carbon sequestered on our lands. Only afforestation is included in our GHG inventory as areas that sequester carbon. The estimates we make for these sequestration activities are based on conservative assumptions of carbon growth on these lands and do not reflect field measurements. During 2008, these lands accounted for 650,000 metric tons of sequestered CO₂. In the past we have also estimated sequestration on our lands set aside from production in either conservation or riparian zones. Due to lack of adequate inventory information on these zones and continuous reclassifying of zone boundaries we felt it was more conservative to exclude any estimates for these set aside lands. This is consistent with the U.S. Department of Energy 1605(b) guidelines which do not distinguish between production and non-production lands but affirm that sustainably managed forests balance harvest and growth cycles over time and landscape and can be considered carbon neutral.

Forest Products Sequester Carbon

7.7

Million metric tons of product-sequestered CO₂ in 2008

Some of the carbon stored in trees harvested from sustainably managed forests is captured in our products, limiting the amount of carbon dioxide in the atmosphere. Wood products store carbon during their useful life. We use a third-party 100-year-decay method for quantifying this long-term forest-product carbon sequestration, which for 2008 indicates that we totaled 7.7 million metric tons of product-sequestered CO₂. The reduction in our product sequestration total compared to previous years is largely due to curtailments in manufacturing due to economic conditions.

Our Net 2008 Inventory

We sequestered approximately 8.4 million metric tons of carbon dioxide in our forests and products in 2008. We reduced this amount by our direct emissions and by 0.04 million metric tons of CO₂ reflecting a GHG emissions debit for the sale of 89,388 "Green Tags.” In sum, during 2008 we sequestered about 5 times more carbon dioxide than we directly emitted and accrued by green tag trades, effectively removing approximately 6.6 million metric tons of CO₂ from the atmosphere.

These estimates of emissions and sequestration represent our corporate net carbon inventory. Our inventory does not include upstream or downstream emissions not owned or controlled by Weyerhaeuser. Although some of these amounts may be eligible as carbon credits under future regulation, they should not be considered so at this time. Weyerhaeuser has not yet to date engaged in any forest or wood product carbon offset projects. In 2008, Weyerhaeuser generated about 150,000 Emission Performance Credits (EPC) in Alberta after our Grande Prairie cellulose fibers mill surpassed their legislated greenhouse gas reduction requirements.

Our manufacturing and forestry operations sequestered more than they emitted in direct emissions by about 6.6 million metric tons CO₂. Indirect emissions are also shown for reference.

Climate Change Policy

We believe that public policies that are based on sound science, set forth clear objectives and standards of performance, and leverage free market economics can achieve beneficial change with respect to energy security and greenhouse gas emissions. We support a long term, economy-wide framework that harmonizes with other regional and international climate change initiatives.

Weyerhaeuser believes that the best way to reduce greenhouse gas emissions is legislation that regulates and values carbon using market based mechanisms that include cap-and-trade. Future policies should include these key components:

• Expand the definition of “renewable biomass” to broadly recognize renewable biomass feedstock resources, including energy crops grown on forestlands.
• Recognize the carbon dioxide emissions resulting from the combustion of biomass and biomass derived fuels as carbon neutral.
• Distribute carbon emission allowances to covered sectors at no cost to ensure that energy intensive manufacturers are not at a competitive disadvantage in international markets.
• Include a robust domestic and international offset program which recognizes and allows credits for the sequestration and storage of carbon through reforestation, afforestation, avoided deforestation, harvested wood products, and forest management projects.
• Incent and recognize combined heat and power cogeneration facilities for their inherent energy efficiency capacity.
• Recognize the forest products industry’s existing investment in renewable energy in a federal Renewable Electricity Standard.
• Provide credit for early actions that reduce GHG emissions or increase sequestration of atmospheric carbon dioxide taken over the past decade.

Involvement in Policy Initiatives

Weyerhaeuser supports and is actively involved in national and international climate change policy initiatives, including:

• The American Forest & Paper Association's commitment to the U.S. Department of Energy's Climate VISION program
• The Forest Products Association of Canada's discussions with Canadian officials to develop equitable, balanced approaches to meet Canada's commitments under the Kyoto Protocol
• The Business Environmental Leadership Council for the Pew Center on Global Climate Change
• The World Business Council for Sustainable Development Energy & Climate focus area core team
• The U.S. Business Roundtable's Climate Resolve and S.E.E. Change programs
• The Washington State Climate Action Task Force
• The Forest Climate Working Group
• The Western Climate Initiative
• The Forest Carbon Standards committee, accredited by the American National Standards Institute (ANSI)

Financial Implications, Risks and Opportunities

We recognize that climate change poses both potential risks and opportunities, and we have strategies in place to address these challenges and capture future opportunities. We closely monitor developments in the area of carbon markets and are developing our capability to assess the opportunities and risks of participating in those markets in the future. Given our commitment to reduce greenhouse gas emissions 40 percent by 2020 relative to our 2000 emissions, we anticipate that we will be well positioned to respond to and comply with future governmental requirements to reduce emissions.

At present, our operations are largely based in countries that have yet to implement mandatory programs for reducing greenhouse gases. Some countries, such as Canada and Uruguay, have adopted the Kyoto Protocol; the United States has not. But in all cases, public policy is moving toward adopting a mandatory approach to address the challenges of climate change through programs that will likely require the reduction of GHG emissions. We have designed our climate change strategy to meet likely future regulatory obligations. There are, however, other risks that may be related to climate change.

Adaptability of Forest Operations

Severe weather or other natural events capable of affecting the company's assets—standing timber and manufacturing facilities—have long been at the core of our business risk management practices. We manage our timberlands for a variety of risks, including losses from storm blow-down, pest infestation, fire and drought. We locate our forestlands in geographies which experience manageable incidence rates of storms, drought and fire. We use regionally-adapted sustainable forest management practices to reduce the effects of drought on regeneration, and we use thinning to reduce the potential effects of drought and insect attack. We also plant our forest lands with tree species and varieties that are best able to withstand the regional extremes in climate that can occur over the multidecade growth period for forests.

We continue to build on over five decades of long-term growth and yield research to understand growth trends over time and their relationship to local and regional climate. This information forms a basis for adaptive management planning tools to address possible shifts in our growing environment. We have invested in on-going monitoring of our plantations that can provide an early indication of change in adaptation and reforestation success. Our bio-mathematical models of tree growth in response to growing environment, climate, and cultural practices enable us to assess possible vulnerabilities to shifts in climate that may affect our forests.

We regularly update our forest timber inventories, growth projections, harvest schedules and planting activities to account for potential and actual annual losses from extreme weather. Logging and replanting schedules are also adjusted to account for weather-induced conditions that could delay either activity. In making these adjustments, we are able to draw on more than 100 years of silvicultural research and experience, as well as the most up-to-date statistical methods to quantify these risks by region.