FAQ: Forest Carbon Projects

By Christine Yankel, The Climate Trust
August 1, 2014 [Updated February 8, 2018]

Carbon markets can provide a new source of income for forest owners implementing practices that increase or retain forest carbon. With encouraging developments in the California cap-and-trade system and innovations in voluntary carbon market standards, many forest managers are re-engaging in carbon markets as an option to diversify revenue and support sustainable management. However, land managers face a myriad of questions as they weigh the opportunity and risks of integrating a carbon project in their forests.

What is a forest carbon offset?
As forests grow, the trees absorb CO2 from the atmosphere through photosynthesis and store it within their growing biomass (trunk, branches, leaves and root systems). A “forest carbon offset,” is a metric ton of carbon dioxide equivalent (CO2e)—the emission of which is avoided or newly stored—that is purchased by greenhouse gas emitters to compensate for emissions occurring elsewhere. Offsets may be developed under voluntary market standards or compliance market standards, each of which has specific carbon accounting and eligibility rules.

In general, three types of forest management activities may produce carbon offsets:

• Afforestation/Reforestation (A/R): carbon is sequestered and offsets generated through the creation or re-establishment of forests.
• Avoided Conversion (AC): forests with a demonstrably high likelihood of tree and carbon loss (usually from conversion to agriculture or development) commit to retain forest as forest, and the avoided carbon dioxide emissions through this conservation effort yield offsets. Under the Verified Carbon Standard, Reduced Emissions from Deforestation and Degradation (REDD) is similar to AC.
• Improved Forest Management (IFM): better, sustainable forest management increases carbon in the forest and in durable, harvested wood products. Improved forest management for carbon offset projects may include:

– Increasing overall age of forest by increasing rotation ages
– Increasing the forest productivity by thinning diseased or suppressed trees or managing brush and other competing vegetation
– Improving harvest practices
– Maintaining stocks at a high level

Because buyers want to ensure that offsets produce genuine climate benefit and are of high quality, most offset projects are developed and certified using a recognized voluntary or compliance carbon standard (see “Carbon Standards and Programs of interest to U.S. forest owners).

Is a carbon project a good match for my forest?
This is a complex question, and before deciding, you should consider the required commitment period; costs of developing a project and managing its obligations throughout the full project life; offset volume and price trends; potential; and your past management practices and future forest management objectives. You should carefully consider how your short- and long-term management objectives will be impacted by enrolling your land in a forest carbon project to ensure alignment. Each program has its own rules and requirements, but some general points to consider include:

• Carbon projects require a commitment to maintain or increase carbon stocks for the long-term
• Carbon projects work best when they fit overall land management goals
• Ensure forest can meet all eligibility requirements of the carbon Standard and project type
• Enter carbon markets with realistic expectations of carbon revenue potential & costs over the full project life

How many offsets will my forest produce? How much are carbon offsets on my property worth?
The number of offsets will depend in part upon the methodology chosen, specific management practices implemented, and many other factors. It is important to note that timber stocks are not equal to carbon stocks (since carbon stocks may also include dead wood, harvested timber, and other carbon pools), and that carbon stocks are not equal to carbon offsets, since offsets are calculated as the difference between the project and a modeled baseline scenario of carbon stocks in the project absence. Baseline definition and modeling differ from standard to standard and are a critical component of carbon offsets because the baseline establishes the reference condition against which the project activity is compared.

Carbon revenues and project feasibility depend not just on offset volume, but also on timing of when offsets can be verified and sold, and on offset price. Forest carbon offsets prices are dynamic and can vary from compliance market to voluntary market, from project to project, and over time. The choice of standard directly impacts a project’s ability to access particular markets and buyers since compliance buyers can only use offsets verified under compliance market standards to offset their emissions. Voluntary buyers assign higher value to projects based on the perceived quality or charismatic appeal. Many are interested in projects close to their areas of operation, related to their supply chain of raw materials, or otherwise connected or proximate to their operations. Voluntary buyers also focus on projects with strong and easily communicable social or environmental outcomes beyond carbon reductions. Given these factors, forest projects in the voluntary market that can clearly demonstrate and measure co-benefits may be able to achieve a higher offset price than voluntary projects that are perceived as of lower quality. Compliance carbon markets are fundamentally driven by the demand for allowances and offset credits by regulated GHG emitters. In contrast to voluntary markets where buyers are price-setters and demand is inherently variable, compliance markets offer a more even playing field where offset demand and prices are relatively more predictable. Forest managers should enter with realistic expectations of price.

Can I harvest timber in my forest? Do I have to enroll my entire forest area?
Most types of improved forest management project methods permit timber harvest, as long as standing forest carbon increases above baseline over the project term. Most standards do not require that the full forest area be included in a project, but some do require that all land holdings can demonstrate sustainable harvest levels to ensure against leakage or the timber harvest simply moving elsewhere.

What is the role of sustainable forest management certifications?
Some carbon market Standards require that forests where timber harvest takes place also achieve sustainable forest certification (under FSC, The Forest Stewardship Council; SFI, Sustainable Forestry Initiative; or ATF, The American Tree Farm System) to generate offsets. Even when not required by a Standard, buyers of forest carbon offsets often prefer projects that have achieved this additional certification of sustainable management practices. It is important to check the requirements of each standard. For example, ARB requires that at the time commercial or regeneration harvesting is planned or initiated within the Project Area, Forest Owner(s) demonstrates sustainable long-term harvesting practices on all of its landholdings, including the Project Area that show that the harvest levels can be permanently sustained over time. Most of the protocols also encourage the management toward native species.

What is the process for developing a forest carbon offset project?
The process of creating a forest carbon project can vary, but in general, the process includes:

• Assess project feasibility
• Complete a carbon inventory of the forest
• Develop a project area forest management plan explaining management goals and practices to be employed
• Prepare and submit project plan and documentation to chosen carbon registry
• After project plan is accepted and registered, hire third-party project verifier
• Submit project verification to registry and, after reviewed and approved, receive carbon offsets verified
• Market and sell carbon offsets
• Ongoing monitoring and verification, as well as periodic re-inventory of the forest, required as per the carbon standard requirements, throughout project life

Where can I learn more about forest carbon offset projects?
The Climate Trust is very interested in seeing carbon markets work to support sustainable and improved forest management in Oregon and beyond. We partner with projects on a consulting basis and can also provide offset offtake or marketing. Additional resources of interest include:

ADDITIONAL RESOURCES
Carbon Standards and Programs of interest to U.S. forest owners

• Climate Action Reserve (CAR) www.climateactionreserve.org, and CAR Forest Protocol: http://www.climateactionreserve.org/how/protocols/forest/dev/
• Verified Carbon Standard (VCS) www.v-c-s.org
• American Carbon Registry (ACR) www.americancarbonregistry.org
• California Air Resources Board (ARB), Compliance Offset Protocol U.S. Forest Offset Projects www.arb.ca.gov/cc/capandtrade/protocols/usforestprojects.htm

Carbon market and offset trends and prices

• Ecosystem Marketplace (http://www.ecosystemmarketplace.com). Produces an annual State of the Forest Carbon Markets report, which tracks, reports, and analyzes trends in global transactions of emissions reductions.
• California Carbon Dashboard (http://calcarbondash.org/) provides market information and news from California’s cap and trade system.

Useful tools for forest managers considering a carbon project

• USDA Forest Service toolbox of basic calculation tools to help quantify forest carbon for planning or reporting at various spatial scales (http://www.nrs.fs.fed.us/carbon/tools/)
• Manomet Center for Conservation Science carbon pro-forma tool evaluates carbon market opportunities on private and public forestlands, guides through eligibility requirements for ACR and CAR forest methodologies, provides estimates of carbon project transaction costs (https://www.manomet.org/publications?combine=forest+carbon+forecaster)
• EcoTrust’s Forest Planner provides forest management scenario planning capacity for Oregon and Washington land managers, to visualize alternative management scenarios on lands and show how decisions might impact timber harvests and financial returns, as well as public benefits like carbon storage and ecosystem services (http://forestplanner.ecotrust.org/)