Role of Public Capital in Afforestation and Reforestation Carbon Projects 

Afforestation and Reforestation (A/R) carbon offset projects offer compelling opportunities for meaningful long-term climate mitigation. The voluntary carbon market has embraced this project type wholeheartedly, but project supply lags as developers and landowners work to address the financial and operational challenges these projects bring.  

Afforestation and reforestation efforts are capital intensive. The significant costs of site preparation, tree seedlings, and planting labor create a challenging dynamic for afforestation and reforestation carbon projects seeking private investment. The time passing between the project start-up costs and issuance of significant credit volumes can range between 10 years for the fastest growing projects to around 22 years for large scale post-wildfire projects. The cash flow profile of A/R projects is unique in the nature-based solutions sector, where other project types such as Improved Forest Management provide meaningful credit issuances within 3 – 5 years of project start-up costs.  

It has become clear that low-cost capital, public or otherwise, has an essential role to play for many projects in addressing this challenging interplay between high capital costs and the long wait for project revenues. The Climate Trust (TCT) is piloting a variety of reforestation projects to exhibit the value of public-private partnerships for scaling high-quality projects. In these projects, TCT is deploying public funds, through its Enabling Reforestation and Afforestation Success (ERAS) program, as well as low-cost carbon-based investment capital to cover land restoration and reforestation capital costs. Without the high rates of return expected in private early-stage investments, these projects provide proof-of-concept models for public-private carbon market partnerships, establish important credit price signals for attracting additional investments to expand, and explore options for reducing project implementation risks to more effectively attract offset purchasers.  

What we have found is that a mix of public and private funds are critical to establishing large-scale reforestation projects that provide meaningful climate benefits in slower-growing forest types. The financial challenge of high capital costs has so far kept these projects out of the voluntary carbon markets. Public-private funding mechanisms can change that. To best leverage public investment, offset registries and project methodology developers must ensure that public funds are recognized for their catalytic impact without penalizing projects that put public funds to work in partnership with private investments.  

*The Climate Trust’s Enabling Reforestation and Afforestation Success (ERAS) program is funded by the USFS Forest Landowner Support Program, under agreement number 25-DG-11132544-048.