Climate Change

In 2006, we committed to reduce greenhouse gas (GHG) emissions 40 percent by 2020 using a 2000 baseline—the most aggressive target in our industry. We will do this primarily by deriving more energy from carbon-neutral biomass to meet the needs of our manufacturing operations. As a result, by 2020 we expect to:

• Make our pulp mills essentially energy self-sufficient
• Significantly reduce our purchased-energy costs
• Reduce our annual greenhouse gas emissions by 1.8 million metric tons

The result is a win-win 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 the regenerating forest 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

Most of these types of changes require multi-year funding and timelines. Our plans could be affected by business decisions that change the company’s portfolio and types of operations. For 2007, the GHG direct emission reductions primarily came from the combined effect of operations consolidation in our higher efficiency mills, and lower levels of production.

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

Greenhouse Gas Reduction

15%

Reduction in direct GHG emissions in 2007 from year 2000 levels

Our efforts are reducing Weyerhaeuser's greenhouse gas emissions footprint. Direct emissions in 2007 were 3.9 million metric tons, which was 680,000 metric tons less than in 2000, our base year. This is a decrease of 15 percent. In comparison, our indirect emissions estimated from purchased electrical power have fluctuated since 2000, but have not changed significantly overall.

Measured in terms of intensity (GHG emissions per metric ton of production), our direct greenhouse gas emissions were approximately 10 percent below the 2000 baseline.

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. When these adjustments affect the baseline year, the absolute value (in metric tons) of our 40 percent reduction goal can change. In 2007, the divestiture of the fine paper mills 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 by:

• Reporting carbon sequestration only on lands owned by Weyerhaeuser.
• Not including our sustainably managed forest rotation acreage, in which the harvest and growth cycles are carbon-neutral over time and landscape, with no appreciable gain or loss of carbon stocks. This carbon-neutral approach is reaffirmed in the U.S. Department of Energy 1605(b) guidelines for voluntary greenhouse gas emissions reporting.
• Including only afforestation, conservation zones and riparian areas 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 2007, these lands accounted for 2.6 million metric tons of sequestered CO₂.

Forest Products Sequester Carbon

11.2

Million metric tons of product-sequestered CO₂ in 2007

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 2007 indicates that we totaled 11.2 million metric tons of product-sequestered CO₂.

Our Net 2007 Inventory

We sequestered approximately 13.8 million metric tons of carbon dioxide in our forests and products in 2007. 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 75,000 "Green Tags.” In sum, during 2007 we sequestered about 3.6 times more carbon dioxide than we emitted and accrued by green tag trades, effectively removing approximately 9.8 million metric tons of CO₂ from the atmosphere.

Our operations sequestered more than they emitted in direct emissions by about 9.8 million metric tons CO₂. Indirect emissions are also shown for reference.

Climate Change 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

Financial Implications, Risks and Opportunities

We recognize that climate change poses both potential risks and commercial opportunities, and we have strategies in place to address these challenges and capture future opportunities. For example, we keep current with 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, Uruguay and more recently, Australia, 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 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.