How a Forest Carbon Offset is Made and Sold

Forest Carbon and Offset Projects

A carbon offset project is the process by which carbon credits are generated and that process is defined by the people, place, and protocols involved. To generate credits from a forest-based project, additional carbon is sequestered and stored on forestland and measured using set protocols. Forest carbon projects should use carbon measurement protocols or methodologies that are approved by standard-setting bodies, also referred to as carbon offset registries. Project developers are required to seek methodological certification from one of these organizations. In the United States, the bodies with the greatest market share (i.e., the most carbon offset projects) are the Verified Carbon Standard (VCS), the Gold Standard, Climate Action Reserve, and the American Carbon Registry (ACR). Standard-setting bodies seek to ensure transparency, quality, and integrity of carbon credits.

There are four types of forest carbon projects that meet established standards: afforestation, reforestation, avoided conversion, and improved forest management. Harvested wood products are typically not associated with forest-based offset projects, except in rare cases. Table 1. provides descriptions of the major types of forest offset activities used today.

Additionality and Credit Generation

Key to carbon offset credit generation is the concept of additionality. In forest carbon projects, additionality is typically a measure of additional carbon sequestered and stored on forested land. Additionality has to be quantified relative to a baseline condition in order to understand that the carbon storage was additional to what would have otherwise occurred under a business–as–usual scenario. The difference in carbon stored over time between a baseline scenario and a scenario where project activities increase stored carbon is referred to as the carbon benefit. Carbon benefit can come from increasing forest carbon sequestration and storage or by avoiding GHG emissions. For instance, a project developer can measure how newly planted trees in a reforestation project will generate a carbon benefit over time by subtracting the GHG emissions from the planting activities from the carbon sequestered due to new tree growth over time. This benefit is considered additional because it can be measured against a baseline scenario in which no new trees were planted. In carbon trading schemes, additionality created by carbon project activities provides the potential to generate marketable forest carbon credits.

What Does a Carbon Credit Represent?

Credits are measured and sold in metric tons of CO₂. Each credit represents one metric ton of CO_2, or its equivalent in other greenhouse gases (written as "tCO₂e"), that has been removed from the atmosphere or avoided (for at least 100 years) due to a change in behavior. Other GHGs include methane, nitrous oxide, and fluorinated gases. Because 1 tCO₂e stored or avoided is equivalent to 1 carbon credit, which can be used to offset 1 tCO₂e in emissions, the terms "credit" and "offset" are often used interchangeably.

One tCO₂e represents the global warming potential (GWP), or atmospheric impact, of GHGs in terms of the amount of CO₂ that would lead to an equivalent degree of global warming over a certain period. For instance, over a period of 100 years, methane would have a GWP that is 25 times more impactful than an equivalent amount of, while nitrous oxide would have a GWP that is 298 times more powerful. Therefore, a metric ton of methane removed from the atmosphere would be equivalent to 25 tCO₂e, and a tonne of nitrous oxide removed would be equivalent to 298 tCO₂e. In terms of carbon dioxide, 1 tCO₂e simply equals 1 tonne of CO₂. See the Greenhouse Gas Protocol for global warming potential values for the tCO₂e equivalencies of other GHGs. This standardization facilitates comparison as well as assessment of collective GHG impacts. Although CO₂ has the lowest global warming potential (GWP) of all GHGs, it represents the dominant GHG emitted—79% of total emissions in the U.S. are attributed to CO₂.

Project Development

Project development follows a multistep process. The first step revolves around assessing project feasibility. To satisfy feasibility, a landowner must be deemed eligible based on legal constraints and decision-making power. If landowners have already involved their property in a conservation easement or cost-sharing program, they may not be eligible to participate in additional projects.

Second, an initial inventory of carbon stocks will also be conducted. Project developers must follow all required guidance to quantify projected net GHG reductions and removals in a "business-as-usual" scenario. This determines the project baseline, against which additionality is measured. Considerations to ensure permanence are required—prior to the project, developers must measure and calculate projected GHG reductions for the first reporting period, assess risk for carbon loss, and create a plan for future project monitoring.

Next, monitoring and reporting entities measure the GHG reductions during the reporting period and develop a plan for monitoring emissions reductions in the future. This monitoring and reporting plan will be reviewed and verified by a third party. Finally, the registry will complete a review of the verification results and will issue credits upon approval. Other entities seeking to offset their emissions can then purchase these credits. Protocols set by standard-setting bodies provide the transparency, guidance, and quality control required for development of verified forest carbon credits.

As part of the credit-generation process, all projects undergo third-party verification to determine the appropriate quantity of carbon credits generated. This determination considers additional carbon accrued while also setting aside necessary carbon buffer pools, which hold a certain percentage of carbon credits aside as insurance against possible future carbon losses due to unavoidable events (such as wildfire, pest, or disease disturbance) and avoidable events (such as additional harvest). The determined credits are then made available via registries that serve as publicly available platforms for reporting and tracking project documents, credits, ownership, sale, and retirement. Registries provide transparency and so increased trust for all parties involved in carbon trading schemes.

The project development process is a multistep endeavor that must meet standards to ensure forest management actions result in additionality, permanence, proper monitoring, reporting, and verification. Once project credits are registered, they can be used by a variety of actors within carbon markets.

Summary

Forest carbon projects that reduce the amount of GHG in the atmosphere, either by increasing forest carbon sequestration or by avoiding emissions, may produce carbon credits tradable in carbon offset markets. These credits are measured using a standardized unit of 1 metric ton of CO₂ or its equivalent in other GHG. Activities such as afforestation, reforestation, avoided conversion, and improved forest management are the primary project types with methodologies approved by standard-setting bodies. Project developers are required to adhere to established guidelines and methodologies that ensure that any carbon credits generated represent additional and permanent carbon stored or sequestered—over and above what would occur in a business-as-usual scenario, or baseline. These project guidelines also establish landowner eligibility; ensure that buffer pools are set aside to protect against potential future carbon losses; and require monitoring, reporting, and verification. Because eligibility requirements can present a common obstacle for many landowners, some programs have taken steps to reduce high up-front costs and make forest carbon projects more accessible.

This article was produced by the Forest Owner Carbon and Climate Education (FOCCE) program.

Related FOCCE Articles and Resources

• Forest Carbon Pools
• Methods for Estimating Carbon in Forests
• Carbon Accounting in Forest Management
• How Much Should I be Paid to Manage Forest Carbon?
• What Should I Think about Before Signing a Forest Carbon Contract?
• The Economic Value of Private Forests and Climate Change Mitigation

Information Sources

• American Forest Foundation [AFF]. Family forest carbon program. 
• Brooke, R. (2009). Payments for forest carbon: Opportunities and challenges for small forest owners. Northern Forest Center, Manomet Center for Conservation Sciences, and Coastal Enterprises, Inc.
• Butler, B., Caputo, J., Robillard, A., Sass, E., & Sutherland, C. (2020). One size does not fit all: Relationships between size of family forest holdings and owner attitudes and behaviors. Journal of Forestry.
• The Climate Trust. (2014). Methodology for determining the additionality of greenhouse gas offset projects.
• Diedrich, G. (2022, January 24). Carbon pricing: Carbon markets and carbon taxes.
• Gero, G. (2009). The role of carbon offsets in cap-and-trade, presented at the U.S. EPA SF6 Emission Reduction Partnership Meeting.
• Gold Standard. Gold Standard for the Global Goals.
• Greenhouse Gas Protocol. (2016). Global warming potential values.
• Meyers, S. (1999). Additionality of emissions reductions from clean development mechanism projects: Issues and options for project-level assessments. U.S. Department of Energy, Office of Science and Technical Information.
• Natural Capital Exchange [NCX]. America’s forest carbon market.
• US. Environmental Protection Agency [EPA]. Overview of greenhouse gases.
• The verified carbon standard program.