Forestry

This work is preliminary, and subject to change. Questions and comments are welcome at givinggreen@idinsight.org.


Summary


Preventing deforestation is a key part of fighting the climate crisis, but forest carbon offsets suffer from a number of problems that make it difficult to know their true impact. It is difficult to measure the contribution of any forest offset project, as there is limited rigorous evaluation of the effectiveness of forest interventions. Of particular concern is “permanence”, which refers to the fact that in order to keep CO2 out of the atmosphere, trees must stay alive for many years. This adds an additional layer of uncertainty to any forest project that is very difficult to resolve. At this moment, we have not found any forest offsets that we feel confident recommending, but we continue to search for high-quality projects that can resolve these difficulties.



Given the limited evidence on the effectiveness of forestry interventions and concerns over leakage and permanence, we have not yet been able to find any forestry offsets we can recommend with confidence. But we are continuing to look for high-quality forestry offset projects.

Overview


Forest conservation, improved forest management, and afforestation/reforestation projects have gained popularity in recent years as “nature-based” solutions to fighting climate change. This makes sense, as deforestation contributes around 8% of the world’s annual CO2 emissions, and revitalization of forests can be a key carbon removal solution. Nature-based projects have received notable financial support from companies like Apple (launched a $200 million Restore Fund in 2021), Amazon (recently launched a $100 million restoration fund), Netflix, and others to help achieve their net-zero climate goals. Globally, a recent initiative out of the World Economic Forum has even been established to plant 1 trillion trees by 2030.


This frenzy to support forest conservation and tree-planting comes as the world’s tropical forests lost 12.2 million hectares of tree cover in 2020, a 12% increase from the year before. An area roughly the size of the Netherlands (4.2 million hectares) was lost within humid tropical forests in 2020 alone, and the rate of tropical forest loss looks like it will remain on pace in 2021. The stunning rate of ongoing deforestation, leading to many degraded forests becoming carbon sources instead of carbon sinks, and the increased global attention to address this challenge warranted a deeper look into forest carbon offsets.


Forestry as a carbon offset


An analysis by Carbon Direct found that forest offset projects made up roughly 60% of carbon credits available in voluntary markets between 2015-2020. Forest offset projects generally fund NGOs working to protect or increase forest cover. There are three types of projects. The first type – avoided conversion or reducing emissions from deforestation and forest degradation including conservation and enhancement of forest carbon stocks (REDD+) – identifies forested land that is under threat of deforestation and takes specific actions to prevent deforestation from happening. REDD+ is a United Nations backed framework to stop the destruction of forests (the “+” in “REDD+” signifies the added importance on conservation and enhancement of forest carbon stocks). REDD+ helps countries value forests on the basis of the carbon and ecosystem benefits they provide and establishes financial incentives for countries to not cut down forests. The second is improved forest management (IFM) projects that involve working with local communities to use improved land management techniques to maintain or increase carbon stock in a forest. The last type of project involves increasing forest cover by planting trees in previously non-forested areas (also known as “afforestation” or “reforestation”).


Mechanism


Forest projects have the potential to both remove CO2 and avoid CO2 emissions. For live trees, photosynthesis pulls and water from the environment and produces oxygen and glucose in return. Much of this CO2 is stored in the wood of the tree (but is also found in other above ground biomass as well as in the soil), sequestering it from the atmosphere as long as the tree is alive. Alternatively, once a tree dies its biomass eventually decomposes, releasing some carbon back into the atmosphere.


Projects that claim to avoid deforestation or maintain existing carbon stocks in forests are considered avoided emissions, because they prevent the release of greenhouse gas (GHG) emissions from a forested area. Alternatively, IFM projects that claim to increase carbon stocks in a forested area may be considered carbon dioxide removal, as they attempt to enable a forested area to remove more GHG from the atmosphere than they did previously. Carbon Direct estimates 75% of IFM projects on voluntary carbon markets are avoided emissions projects and the rest could be considered both avoided emissions and removals.Finally, afforestation and reforestation projects also claim to remove carbon dioxide (CO2) from the atmosphere by planting trees where they were previously cut down or did not exist before.


Causality


Unfortunately, it is hard to know the net contribution of any tree or forest to global carbon dioxide or global warming. This recent article in the journal Nature discusses the difficulty of assessing the effect of trees on climate change. While direct carbon capture likely has a cooling effect, trees emit other gases (including methane) into the atmosphere, some which may have warming effects. Additionally, trees can affect warming through changing the earth’s reflectivity of sunlight (known as an “albedo” effect). For example, conifers with dark leaves in far northern forests tend to absorb a lot of heat relative to highly reflective snow cover, reducing or even eliminating the positive effects of their carbon capture.


This research is highly controversial, and many climate scientists believe that increasing forest cover is a key tool in fighting climate change. However, it is safe to say that our understanding of the relationship between trees and climate is still evolving and will improve with more direct measurement.


Even under the assumption that increasing the number of trees unambiguously fights warming, establishing the causality of any given forest project on carbon sequestration benefits that qualify as additional (beyond business as usual) can be difficult. For example, some forest offset projects aim to prevent deforestation by paying landowners to not cut down their trees - but how can you really know that they would have cut down the trees without the credit? Organizations like Verra and Gold Standard that sell offsets set detailed standards and require projects to document the history of the land and suggest what would have happened in the absence of credits. But there is limited rigorous evidence using valid counterfactuals on the effect of forest interventions. In fact, it was recently discovered that many forested areas that were never under threat of being cut down were sold and marketed to major offset buyers. In another investigation, systematic over-crediting of forest offsets under California’s forest offset program was uncovered and was estimated to amount to 30 million tons of CO2 worth $400 million. The over-crediting was the result of project developers overstating the climate benefit by creating faulty counterfactual baselines. Without a convincing counterfactual it is hard to trust claims of the amount of change in forest cover.


Forest projects can also suffer from “leakage” – the concept that preventing deforestation in one area may just cause it to increase in other areas. This is likely true if the underlying demand for non-forested land is not addressed. For example, a project in Brazil might seek to protect a certain forested area from being converted to pasture land, but if the ranchers’ demand goes unmitigated they will likely just shift their activities to another forest where the project is not operating. Whether or not there is leakage in a given project depends heavily on the underlying reason for deforestation, as well as the outside options for the people who are demanding the deforestation.


Forest carbon offset projects do not try to directly measure greenhouse gas emissions or quantify other contributions to warming, presumably because doing so would be prohibitively expensive. Instead, program staff model carbon capture based on the number and type of trees planted, managed, or conserved. But project developers face the incentive to exaggerate claims about the number and type of trees, as well as various forest management practices that affect net carbon reduction. Agencies such as Verra address this by requiring periodic audits, but these are generally contracted by the program implementer, which presents a conflict of interest.


In the public policy literature, there are few rigorous impact evaluations of forest interventions. One exception is a recent RCT by Jayachandran et. al. (2017) published in the journal Science. This RCT studied a program in Uganda in which farmers were paid to not cut down their trees. They indeed found decreased deforestation compared to control areas, and established that leakage was unlikely to be occurring. Another study of a government-run payments for ecosystems (PES) program implemented in Mexico that compensated communities for protecting ecologically valuable land resulted in a reduced rate of tree cover loss in areas enrolled in the program compared to areas that were not. Some areas at particularly high risk of deforestation saw reductions in tree cover loss by 40%, though overall rates of observed forest cover change were low. A more recent study mapping over 400 tree plantations in India planted between 1980 and 2017 raised serious questions about the success of tree planting and forest restoration campaigns, finding no change in tree canopy cover across the plantations studied. Potential reasons for this could be low survival rates of planted trees and tree planting where canopy cover is already dense. A review of 12 localized REDD+ (Reduced Emissions from Deforestation and forest Degradation, and enhance carbon stocks) projects found mixed outcomes in terms of increased carbon stocks, with the diversity of interventions across projects making it difficult to understand the drivers of differential effects.


Overall, it is difficult to validate the causality of any given forest project and for that reason, causality is assessed as low (or at least uncertain)for many forest projects. Companies have emerged to better track forest activities, estimate CO2 levels, and identify leakage using satellite imagery, LiDAR imaging, and artificial intelligence, but it is still too early to determine whether these technologies can address causality concerns successfully at scale.


Project-level additionality


In general, forest conservation programs are run by NGOs dependent on outside funding or private sector project developers. For NGO-run projects, it seems reasonable to assume that income from offsets are directly fueling project operations, allowing more activities than without them. For these projects, we assess project-level additionality as high. However, sometimes forest offsets are related to enterprises hoping to make a profit by selling lumber. In these cases, it is possible that the enterprise was profitable without offsets, and therefore may not satisfy project-level additionality.


Marginal additionality


Forest projects generally need continual revenue flow to keep operating, and can use additional funding to expand their operations. We therefore believe that a well-functioning forest project is likely to satisfy marginal additionality. A well-functioning forest projects would, however, need to demonstrate that offset revenues resulted in protection of areas that would have been deforested or resulted in new carbon stocks added each year. Long-running project may claim continued credits since without the project, more and more of the forest would have been degraded each year. But this is very difficult to verify.


Further, the vintage of the forest offset project must be taken into consideration as well. Vintage refers to the year the emissions reduction actually took place. For forest projects where emissions reductions actually took place many years in the past we would assess the marginal additionality as low.


Permanence


Trees capture and store carbon as biomass as the tree grows. This carbon is not eliminated, but converted into tree matter and fixed to the soil, and if the tree dies and decays (or burns) it will be released back into the air. The ability of trees to reduce atmospheric carbon depends on their survival over decades.


If trees that are planted or conserved end up getting destroyed in the future, most benefits of the project are lost (except a delay in GHG emissions). Risks to permanence can be unintentional (such as fires and pests), or intentional (such as logging). To address the risks of such “reversals”, voluntary certifying agencies such as Verra assigns risk score to forest projects and require a risk-related proportion of credits to be put into a risk buffer pool. However, it is unclear whether future monitoring of reversals will be adequate, and if the buffer pool will be enough to account for them. For instance, a recent report by the non-profit CarbonPlan calls into question whether the buffer pool in forest offsets in California’s cap and trade market is sufficient given increased susceptibility to forest fires. Meanwhile, over 150,000 acres of forested areas along America’s West Coast previously used as forest offsets have burned to the ground this past summer alone.


Additionally, a recent article by the investigative journalism organization ProPublica looked into a myriad of forest conservation offset projects, and came to the following conclusion:

“In case after case, I found that carbon credits hadn’t offset the amount of pollution they were supposed to, or they had brought gains that were quickly reversed or that couldn’t be accurately measured to begin with. Ultimately, the polluters got a guilt-free pass to keep emitting CO₂, but the forest preservation that was supposed to balance the ledger either never came or didn’t last.”


The conservation program studied in Jayachandran et al (2017) only lasted two years, so they address permanence questions in their article. The authors do not make a claim of permanence- instead they assume that deforestation will likely resume once the program ends, and therefore the benefits of project come from delaying the deforestation. While they do find that the program is cost-effective even when only considering a delay in deforestation, this conclusion comes from a complicated calculation relying on an assumed discount rate and evolution of the social cost of carbon over time. The parameters chosen in this calculation are controversial, and therefore we don’t have a high degree of confidence that a short-term program would be cost effective. To permanently offset carbon emissions the program would have to be run in perpetuity, making the cost of the offset prohibitively high.


Permanence is an important consideration because, once emitted, CO2 can remain in the atmosphere for anywhere between 300 and 1,000 years. It is therefore questionable for forest projects to credibly claim long-term climate benefits if there is a high risk of reversing advertised benefits within a timespan of a few years or even a few decades. Overall, permanence is a persistent issue in forest projects, as it is very difficult to permanently guarantee an emissions reduction with a temporary project. As a result, we assess permanence of many forest offset projects as low.


Cost


The average price of forest offsets within voluntary carbon markets was $4.73 per ton as of August 2021. However, most forest projects are avoidance-based, so this price mostly reflects the price of avoidance projects. Projects that provide carbon removal tend to be much more expensive as they require significant effort to plant and maintain new trees. According to Forest Trends Ecosystem Marketplace, afforestation and reforestation projects that claim carbon removal benefits have an average price of $8.10 or roughly twice that of the average forest offset. While these prices are low relative to other forms of emissions avoidance and carbon removal, their true cost is difficult to assess given questions about causality and permanence. On causality, most projects establish buffer pools that are not sold as offset credits to account for a percentage of trees dying during the life of a project. Recent reports suggest that typical buffer pools put in place (10-20% of the total project) are straining as wildfires, disease, and pests multiply. Increasing these buffer pools would significantly increase cost.


On the permanence front, CarbonPlan recently developed a tool to estimate the equivalent cost of making a temporary project’s carbon removal benefits permanent. Assuming the temporary project (e.g. afforestation/reforestation) lasted 20 years which was subsequently renewed by another 20-year project and repeated for 1,000 years, with a 10% annual risk of project failure (e.g. due to forest fires), and applying a 3% discount rate on future costs, buyers should budget around $37/ton for a project that costs $8/ton today in order for it deliver carbon removal benefits on a 1,000 year basis. In practice, delivering those permanent benefits by sequentially implementing projects for 1,000 years each with a 20-year duration would prove to be difficult. Assuming after 60 years of renewing 20-year long projects, the project is replaced by a direct air capture project with permanent carbon removal at a cost of $200/ton (well below today’s average cost for our recommended permanent carbon removal providers), the budgeted price increases to $65/ton (plus or minus $9), much higher than the advertised $8/ton price.


Buyers should be aware that challenges with the permanence and causality of forest projects are not reflected in their cost.


Co-benefits


Co-benefits to forest projects may include ecosystem conservation, biodiversity, and recreation. Some projects can increase income-generating opportunities, while others can hinder these opportunities from local inhabitants, depending on land tenure and other considerations. Co-benefits can vary widely from project to project, meaning that co-benefits will need to be assessed on a project to project basis.


Assessment of forestry projects


Overall, our assessment of forest projects puts us in a difficult situation. Conserving forests is a clear necessity in the fight against climate change, and there is no reason to believe that this conservation will happen based on market forces. Therefore, there is a need for additional funding for conservation, and the offset market could be a good way to achieve this funding. For a high-quality project, it’s likely that funding conservation is one of the most cost-effective ways to lower GHG emissions.


However, assessing the causal impact of any offset on GHG reduction is extremely difficult, and we do not believe that the certification procedures put in place by the offset certifiers give a high enough level of certainty to trust any specific project. We are not the only ones to come to this conclusion on forest offsets. For instance, a guide to assessing the validity of carbon offsets by Broekhoff et al (2019) categorizes forest offsets as being “higher risk” of being low quality due to concerns about additionality and permanence.


While quality forest projects certainly deserve funding, it may just be that the offset market is not the correct mechanism to deliver this funding. Offsets require high standards of certainty that it is very difficult for forest projects to meet.


Finding the right forest project


Forest offsets are one of the most popular offsets available in voluntary carbon markets. The numerous projects behind these offsets vary significantly in terms of quality, cost, and co-benefits. The popularity, variety, and challenges associated with forest offsets prompted us to think about what features we would expect to see in a forest offset project that would make us confident in recommending it. We determined such a forest project would need to demonstrate the following:


1. Causality: The project would need to show a clear causal impact, meaning:

a. A clearly identified counterfactual that shows deforestation happening without the project, or lower carbon stock in the forested area without IFM or afforestation interventions

b. Sophisticated analysis demonstrating that leakage is not happening

c. Takes place in geographies where albedo affect is not a concern (e.g. tropics)


2. Marginal Additionality: The project is currently active and the funding received is applied towards continued advancement of the specific climate benefits claimed.


3. Permanence: The project demonstrates low risk of reversal, and has means of monitoring reversals. Specifically, the forested area would need a track record of low risk of forest fire or widespread disease. Permanence risks are addressed by a strong buffer pool.


4. Cost: Acknowledging there will always be limitations to permanence with forest-based projects, the costs would have to be low enough to demonstrate that over a 1,000 year period, it would still be more cost-effective than methods of permanent carbon dioxide removal (tools like Carbon Plan’s permanence calculator can help calculate this).


5. Co-benefits: The project does not harm or disrupt the livelihoods of individuals living in nearby communities.


Closing the quality gap


Recently, new approaches and technological innovations have been leveraged to improve on some of the challenges underlying many forest projects. The following organizations are on the leading edge of addressing some of these problems:


  • Pachama is a broker of existing forest avoidance and removal-based offset projects that uses LiDAR imaging and satellite imaging to estimate biomass volume and carbon stock in a project’s forested area. The company uses machine learning models to estimate counterfactuals (if there were no carbon offset project) and uses radar data to monitor changes in forest cover to detect instances of deforestation. The company also monitors leakage risk for forested areas surrounding a project. Based on these analyses, Pachama identifies certified forest carbon credits where it believes the underlying assumptions are particularly credible and resells them on its marketplace. Pachama’s technologies could help improve measurement of the causal impact of a forest project, but gaps still remain in accurately measuring carbon stock, fully eliminating counterfactual concerns, and addressing permanence issues.

  • Jurisdictional REDD+ (reducing emissions from deforestation and forest degradation) builds on previous REDD+ initiatives that were designed to offer incentives to developing countries to reduce emissions from forested lands and improve sustainable management of forests. Jurisdictional REDD+ refers to an accounting framework that establishes consistent baselines and carbon crediting approaches across forest projects within a jurisdiction like a state or country. Proponents believe that taking a jurisdictional approach to REDD+ reduces the risk of leakage, so that efforts to preserve forests in one area do not lead to increased deforestation in another. Initiatives like Architecture for REDD+ Transactions (ART) are developing standardized procedures to improve the integrity of crediting emissions reductions and removals in REDD+ projects, and enhancing comparability across jurisdictions. Project developers like Emergent serve as an intermediary between tropical forest countries and the private sector to facilitate transactions that meet ART’s verification standards.

  • NCX utilizes forest mapping techniques to make an accurate prediction of carbon stock across US forests, and then facilitates an exchange between landowners and offset buyers to defer timber harvests. NCX’s key technological innovation is a detailed “basemap”, that provides estimates of predicted deforestation for every plot of forested land in the United States. These predictive estimates of deforestation provide the estimates of avoided emissions from landowners who join NCX. Aside from claiming to quantify carbon stock more accurately, NCX has a unique approach to permanence. Their projects only delay tree-cutting by one year, and they sell a guarantee of this delay to credit purchasers. They then claim that delaying tree-cutting on 31 acres for one year is equivalent in terms of avoided emissions to permanently avoiding tree-cutting on one acre. NCX attempts to address leakage concerns by requiring landowners to enroll their entire properties on their platform and makes their platform available to small landowners. While all of these advances are laudable, we still have concerns about the project attracting landowners who were not going to cut down their forests, market-level leakage, and the actual value of one-year contracts.


Each of the above organizations and initiatives attempt to address different challenges, from causality and additionality to leakage and permanence. Giving Green intends to dive further each of these solutions, and follow their progress as they continue to improve. We hope that advances in technology will eventually allow the market to produce reliable forest offsets.



References


Broekhoff, Derik Gillenwater, Michael Colbert-Sangree, Tani Cage, Patrick “Securing Climate Benefit: A Guide to Using Carbon Offsets”, November 2019, http://www.offsetguide.org/wp-content/uploads/2019/11/11.15.19.pdf


Jayachandran, S., De Laat, J., Lambin, E. F., Stanton, C. Y., Audy, R., & Thomas, N. E. (2017). Cash for carbon: A randomized trial of payments for ecosystem services to reduce deforestation. Science, 357(6348), 267-273. https://science.sciencemag.org/content/357/6348/267


Popkin, Gabriel (2019) How Much Can Forests Fight Climate Change? Nature 565, 280-282 (2019) https://www.nature.com/articles/d41586-019-00122-z


Song, L., & Moura, P. (2019). An (even more) inconvenient truth: why carbon credits for forest preservation may be worse than nothing. ProPublica. https://features.propublica.org/brazil-carbon-offsets/inconvenient-truth-carbon-credits-dont-work-deforestation-redd-acre-cambodia/