Forests Contribute to the Carbon Credit Exchange
Forests contribute to the global carbon cycle by absorbing and storing carbon, while releasing carbon dioxide back into the atmosphere through photosynthesis. The net carbon balance is the basis of a tradable commodity called a carbon credit, which can be traded in compliance or voluntary markets. The value of a carbon credit is based on its measurement and conversion to standardized units of avoided or reduced greenhouse gas (GHG) emissions, most commonly expressed in terms of a tonne of CO2 equivalent.
The largest compliance carbon credit exchange is the Regional Greenhouse Gas Initiative (RGGI), which includes 10 northeastern states that require electricity producers to reduce their GHG emissions by 10% by 2018. Another major carbon market is California’s trading scheme, which began in 2013 and has a mandated emission reduction target of 40% below 1990 levels by 2050.
While both RGGI and California’s schemes have carbon credit requirements, they differ in eligibility and verification standards. Both programs have requirements for landowners to participate, establish project guidelines and procedures, verify compliance with a standard, issue credits and ensure that credits are “owned unambiguously.”
How Do Forests Contribute to the Carbon Credit Exchange?
Carbon projects need to demonstrate their ability to generate a specific amount of carbon benefit over a baseline condition to earn a credit. In the case of forest projects, this is measured through an estimate of aboveground biomass—or total tree volume—that can be converted to carbon. Traditional methods for estimating biomass involve field plot measurements, sending surveyors into forests to collect samples and then using equations derived from those measurements to calculate the total biomass of an entire stand. New technology, such as light detection and ranging (LiDAR) combined with machine learning models, significantly lowers the cost of biomass estimation and improves accuracy.
Forest carbon projects can earn credits in both compliance and voluntary markets by meeting a range of quality criteria set out in the relevant standard. The most common criteria include establishing a baseline condition; measuring and reporting emissions reductions and carbon storage activities; and demonstrating additionality, a measure of the extent to which the project’s GHG reductions and/or sequestration is above business-as-usual conditions.
The durability of a carbon project—or its ability to maintain or increase carbon stocks over time—is an important consideration as well, and is sometimes referred to as permanence or longevity. This metric is highly dependent on the ecosystem and is difficult to quantify for forests, which are vulnerable to wildfires, insect infestations, droughts and disease. To mitigate this risk, forestry carbon projects are required to set aside credits in a buffer pool to cover potential future losses in the carbon stock.
Despite the growing demand for carbon credit trading, forest landowners need to be aware that the value of their credits will not necessarily grow over time and may even decline. In addition, participation in a VCM program may conflict with existing restrictions and requirements on the land, such as conservation easements or timber harvest agreements. New technologies for estimating forest structure, and for quantifying leakage and durability, can help address these concerns, but are only effective if they are shared with the community.
