Corporate Climate Solutions

Forestry Carbon Offsets

This report was last updated in September 2022.

Preventing deforestation plays a key role in reducing climate change, but forest carbon offsets suffer from two main problems that make it difficult to know their actual impact: permanence and leakage. For example, trees must stay alive for many years to keep CO₂ out of the atmosphere but face numerous threats (e.g., wildfires, tree disease). Additionally, some forestry offset projects may shift where deforestation occurs and thus have no net effect on avoided emissions and carbon removal. This leakage adds a layer of uncertainty to any forest project that is very difficult to account for. Therefore, reliable measurement, reporting, and verification of greenhouse gas mitigation are highly important for forestry offsets. However, we have not found any forest offsets that we feel confident recommending. We would consider searching for high-quality projects that can resolve these difficulties.

There is uncertainty on how much forests impact cooling.

Many climate scientists believe that increasing forest cover is a critical tool in fighting climate change. However, there are challenges related to accurate measurement, reporting, and verification of GHG emissions. For example, there is considerable uncertainty on how much carbon is stored in forests and how much carbon they gain and lose. Sources of uncertainty include the following (Petrofsky et al., 2021):

Difficulties accessing remote forests
Limited inventory (e.g., field measurements limited to small areas)
Forests’ large extent

Additionally, the impact of trees on the climate is complex because trees release a variety of gases into the atmosphere and also impact the earth’s reflectivity (albedo) (Popkin, 2019).

Emitting other gases into the atmosphere – Although direct carbon capture has a cooling effect, trees emit other gases into the atmosphere (Pearce, 2019), some of which may have warming effects. For example, trees can be a methane source by (1) acting as a conduit for methane produced by microorganisms in the soil and/or (2) releasing methane from its decomposing parts. Additionally, trees also release volatile organic compounds such as isoprene, which has both warming and cooling effects.
Impacting albedo – Trees can affect warming by changing how much solar radiation the earth reflects. For example, conifers with dark leaves in far northern forests have a lower albedo than their surrounding snow cover, which is highly reflective. Planting dark trees in this area would increase the amount of solar radiation absorbed, which could reduce or even eliminate the positive effects of their carbon capture. Forestry projects that are based in the tropics are less likely to be impacted by the albedo effect.

Ultimately, projects focused on improving forest cover likely increase carbon storage on average but there is uncertainty on each project’s mitigation potential. Furthermore, each project must be appropriate to the local context.

It is challenging to compare forest projects against their counterfactuals.

Even when we assume that increasing the number of trees unambiguously fights climate change, establishing the causality and additionality of any forest project on carbon sequestration benefits can be difficult. For example, some forest offset projects aim to prevent deforestation by paying landowners not to cut down their trees - but how can you know that they would have cut down the trees without the credit?

Third-party voluntary certifying organizations like Verra and Gold Standard try to address concerns related to causality and additionality by (1) selling offsets that meet detailed standards and (2) requiring projects to document the history of the land and suggest what would have happened under the counterfactual (e.g., in the absence of credits). However, there is limited rigorous evidence of valid counterfactuals. For example, CarbonPlan uncovered systematic over-crediting of forest offsets under California’s forest offset program (Badgley et al., 2021). The difference between how much CO₂ was supposedly and actually offset was about 30 million tons of CO₂, at a cost of $400 million. This over-crediting happened because project developers created faulty counterfactual baselines and therefore overstated the projects’ climate benefits. In addition, a study that examined 12 projects in the Brazilian Amazon found that the projects overstated carbon emissions reductions partly because the baselines they used were based on historical trends of deforestation that were no longer realistic (West et al., 2020). Without a convincing counterfactual, it is hard to trust claims of how much forestry projects avoided CO₂ emissions or removed CO₂ from the atmosphere.

Forest projects can lead to leakage.

Forest projects can suffer from leakage when projects that prevent deforestation in one area cause tree destruction to occur in a different location. Leakage is likely to happen if projects do not address the underlying demand for non-forested land. For example, a project in Brazil might protect a specific forested area from being converted to pasture land, but shift deforestation to another forest if the ranchers’ demand for agricultural land and income goes unmet. Leakage can also occur under afforestation projects when people are incentivized to cut down mature forests to have clear land for planting new trees. Leakage risks depend heavily on the underlying reason for deforestation and the outside options for the people demanding deforestation.

Difficulties in measuring carbon removal and avoidance can lead to exaggerated claims.

Forest carbon offset projects typically neither measure GHG emissions directly nor quantify other contributions to warming, presumably because doing so would be prohibitively expensive. Instead, people often model avoided emissions and CO₂ removed based on the number and species of trees planted, managed, or conserved. However, project developers are incentivized to exaggerate claims about the number and type of trees in their forests, as well as the benefits of their forest management practices. Third-party voluntary certifying agencies address this by requiring periodic audits, but the program implementers generally contract these themselves, which presents a conflict of interest.

There are few rigorous impact evaluations of forest interventions.

There are few rigorous impact evaluations of forest interventions in the public policy literature. We describe a few examples below:

Payments for Ecosystem Services (PES)‍
- In a randomized controlled trial for a PES program in Uganda, farmers were paid not to cut down their trees (Jayachandran et al., 2017). The researchers found decreased deforestation compared to control areas and established that leakage was unlikely to occur.
- A separate study of a government-run PES program, this time implemented in Mexico, found a reduced rate of tree cover loss in areas enrolled in the program compared to areas that were not (Department of Applied Economics, Oregon State University et al., 2018). Although overall rates of observed forest cover change were low, some areas at an exceptionally high risk of deforestation saw reductions of 40 percent in tree cover loss.

Afforestation/reforestation – A study published in 2021 mapped over 400 tree plantations in India planted between 1980 and 2017 and raised serious questions about the success of tree planting and forest restoration campaigns, finding no change in tree canopy cover across the plantations studied (Coleman et al., 2021). Potential reasons for this could be low survival rates of planted trees and tree planting where canopy cover is already dense.

Our assessment of causality

Overall, it is challenging to validate the causality of any given forest project, and for that reason, we assessed causality as low (or at least uncertain) for many forest projects. Companies have emerged to track forest activities better, estimate CO₂ levels, and identify leakage using satellite imagery, LiDAR imaging, and artificial intelligence. However, it is still too early to determine whether these technologies can address causality concerns successfully at scale. For more information, please see the section, “Closing the Quality Gap.”

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According to Forest Trends Ecosystem Marketplace, the average price of forestry and land-use offsets within voluntary carbon markets was $4.73 per metric ton of CO₂-equivalent (CO₂-eq) as of September 2021 (Donofrio et al., 2021). However, most forest projects are avoidance-based, so this price mainly reflects the cost of avoidance projects. Projects that provide carbon removal tend to be more expensive as they require significant effort to plant new trees and, ideally, maintain and monitor their growth. In 2018, afforestation and reforestation projects claiming carbon removal benefits had an average price of $5.70 per metric ton of CO₂-eq (Donofrio et al., 2019). While these prices are low relative to other forms of emissions avoidance and carbon removal, their cost per actual ton of CO₂-eq is difficult to assess, given questions about causality and permanence. For example, increasing buffer pools to compensate for trees dying during the life of a project would significantly increase the cost. Additionally, to permanently offset carbon emissions, the program would have to be run in perpetuity, making the offset cost prohibitively high.²

CarbonPlan recently developed a tool to estimate the equivalent cost of making a temporary project’s carbon removal benefits permanent via continued renewal. We applied the below conditions for a tree-planting program to determine the cost of ensuring its carbon removal benefits over 1,000 years:

The project costs $6 per metric ton of CO₂-eq today
The project lasts 20 years and is renewed every 20 years for the next 1,000 years.
The project has a 10 percent annual risk of failure due to risks such as forest fires.
There is a 3 percent discount rate on future costs.

After entering these conditions into the tool, we found that buyers should budget around $29 per metric ton of CO₂-eq for a project that only costs $6 per metric ton of CO₂-eq today to deliver carbon removal benefits on a 1,000-year basis. However, implementing 20-year projects repeatedly over 1,000 years would be challenging.

In another scenario, we assumed that after 60 years of renewing 20-year-long projects, we would replace the project with a direct air capture project that permanently removes carbon at the cost of $200 per metric ton of CO₂-eq, which is well below today’s average cost for our recommended permanent carbon removal providers. In this scenario, the budgeted price increases to $110 per metric ton of CO₂-eq (plus or minus $6), much higher than the advertised $6 per metric ton price.

Ultimately, buyers should be aware that forest projects’ costs do not reflect their permanence and causality challenges.

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² Jaychandran et al., (2017) found that its conservation program was lower than the social cost of carbon even when only considering a delay in deforestation. Its conclusion came from a calculation that relied on an assumed discount rate and the evolution of the social cost of carbon over time. However, we do not have a high degree of confidence that a short-term program would be cost-effective.

Forest offsets are among the most popular offsets available in voluntary carbon markets. However, the numerous projects behind these offsets vary significantly in quality, cost, and co-benefits. The popularity, variety, and challenges associated with forest offsets prompted us to consider what features we would expect to see in a forest offset project that would make us confident in recommending it. We would consider evaluating a forest project if it demonstrated the following:

Causality: The project would need to show a clear causal impact, meaning:
1. An identified counterfactual that shows deforestation happening or lower carbon stock without the project.
2. A sophisticated analysis demonstrating that leakage is not happening.
3. The project takes place in geographies where increased absorption of solar radiation is not a concern.
Marginal additionality: The project is currently active, and the funding received is applied towards the continued advancement of the specific climate benefits claimed.
Permanence: The project demonstrates a low risk of reversal and has the means to monitor setbacks. For example, the forested area would need a track record of low risk of a forest fire or widespread tree disease. Additionally, a strong buffer pool helps address permanence risks. We would also need to know how long the project will be funded for and whether it has a plan to be replaced with carbon removal purchases.
Adverse effects: The project does not harm or disrupt the livelihoods of individuals living in nearby communities.

Closing the quality gap

Recently, organizations have leveraged new approaches and technological innovations to attempt to address some of the challenges underlying many forest projects. These efforts include:

Pachama

Pachama is a broker of existing forest offset projects. It uses remote sensing tools (e.g., airborne LIDAR and satellite imaging) and artificial intelligence for each of its forest projects to estimate how much carbon they store and track whether they are losing trees. To determine additionality, the company uses historical remote sensing data to compare deforestation rates in unprotected versus protected areas. It also monitors for leakage in the unprotected areas surrounding a project. Based on its analyses, Pachama identifies certified forest carbon credits where it believes the underlying assumptions are credible and resells them on its marketplace. Pachama’s technologies could help improve the measurement of the causal impact of a forest project. However, some gaps remain in accurately measuring carbon stock, eliminating counterfactual concerns, and addressing permanence issues. For example, the cost of acquiring LIDAR data has made time series data on forest ecology relatively rare (Beland et al., 2019).

NCX

NCX utilizes forest mapping techniques to predict 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 “base map” that estimates the predicted deforestation for every plot of forested land in the United States. Aside from claiming to quantify carbon stock more accurately, NCX has a unique approach to permanence. Namely, its projects only delay tree-cutting by one year, and it sells a guarantee of this delay to credit purchasers. It claims 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 its platform and making its platform available to small landowners. However, we still have concerns about additionality (e.g., attracting landowners who were not going to cut down their forests), market-level leakage, and the actual value of one-year contracts. Additionally, CarbonPlan has published a critique of NCX’s carbon accounting methods and identified two primary issues related to the discount rate that NCX used in its ton-year accounting (Cullenward et al., 2022). As of May 2022, CarbonPlan noted that NCX has not yet engaged with the content of CarbonPlan’s critique.

Jurisdictional REDD+, Architecture for REDD+ Transactions, and Emergent

Reducing emissions from deforestation and forest degradation, plus the sustainable management of forests, and the conservation and enhancement of forest carbon stocks (REDD+) is a United Nations-backed framework that helps mitigate climate change. REDD+ helps countries value forests based on their carbon and ecosystem benefits and establishes financial incentives for avoided conversion, IFM, and afforestation/reforestation. Some carbon offsets build off of the REDD+ framework.

Jurisdictional REDD+ refers to an accounting framework that establishes consistent baselines and carbon crediting approaches across forest projects within a jurisdiction, such as a state or country. Some proponents believe that taking a jurisdictional approach to REDD+ reduces the risk of leakage because compared to project-scale interventions, jurisdictional interventions can take place over a larger area and address a broader range of deforestation drivers (Seymour, 2020). 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 intermediaries between tropical forest countries and the private sector to facilitate transactions that meet ART’s verification standards.

Common challenges that jurisdictional scale programs face include the following (Fishbein & Lee, 2015):

The need for government leaders and other stakeholders to see REDD+ projects as valuable and compelling enough to drive long-term changes in development (e.g., convincing ranchers to change their management practices)
The size and complexity of jurisdictional programs, which can lead to gaps in capacity and resources
Risks due to changes in government (e.g., new leadership from a different party)
Bureaucratic turnover
Lack of land tenure

Our assessment of attempts to close the quality gap

The above organizations and initiatives attempt to address different challenges, from causality and additionality to leakage and permanence. If these attempts result in projects that meet the criteria we outlined above, we would consider re-investigating the cost-effectiveness of forest offset projects.

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Giving Green is always willing to update our views and make changes to our recommendation as more information comes to light. This work is preliminary and subject to change. Questions and comments are welcome.

Badgley, G., Freeman, J., Hamman, J., Haya, B., Trugman, A., Anderegg, W. R. L., & Cullenward, D. (2021, April 29). Systematic over-crediting of forest offsets – CarbonPlan. https://carbonplan.org

Beland, M., Parker, G., Sparrow, B., Harding, D., Chasmer, L., Phinn, S., Antonarakis, A., & Strahler, A. (2019). On promoting the use of lidar systems in forest ecosystem research. Forest Ecology and Management, 450, 117484. https://doi.org/10.1016/j.foreco.2019.117484

Broekhoff, D., Gillenwater, M., Colbert-Sangree, T., & Cage, P. (2019). Securing Climate Benefit: A Guide to Using Carbon Offsets.

Buis, A. (2019, October 9). The Atmosphere: Getting a Handle on Carbon Dioxide. Climate Change: Vital Signs of the Planet. https://climate.nasa.gov/news/2915/the-atmosphere-getting-a-handle-on-carbon-dioxide

Calma, J. (2021, March 30). Netflix lays out plans to slash its greenhouse gas emissions. The Verge. https://www.theverge.com/2021/3/30/22353098/netflix-greenhouse-gas-emissions-climate-change-goals

Coleman, E. A., Schultz, B., Ramprasad, V., Fischer, H., Rana, P., Filippi, A. M., Güneralp, B., Ma, A., Rodriguez Solorzano, C., Guleria, V., Rana, R., & Fleischman, F. (2021). Limited effects of tree planting on forest canopy cover and rural livelihoods in Northern India. Nature Sustainability, 4(11), 997–1004. https://doi.org/10.1038/s41893-021-00761-z

Cullenward, D., Chay, F., & Badgley, G. (2022, January 31). A critique of NCX’s carbon accounting methods. CarbonPlan. https://carbonplan.org/blog/ton-year-ncx

Department of Applied Economics, Oregon State University, Economics Department, Environmental Studies Affiliate, Amherst College, Development Research Group, The World Bank, & Evaluation Department, National Forestry Commission of Mexico. (2018, June 17). Evaluating Mexico’s Payment for Environmental Services Scheme. https://www.profor.info/knowledge/evaluating-mexico%E2%80%99s-payment-environmental-services-scheme

Donofrio, S., Maguire, P., Merry, W., & Zwick, S. (2019). Financing Emissions Reductions for the Future: State of the Voluntary Carbon Markets 2019. Forest Trends. https://www.forest-trends.org/wp-content/uploads/2019/12/SOVCM2019.pdf

Donofrio, S., Maguire, P., Myers, K., & Daley, C. (2021). Forest Trends’ Ecosystem Marketplace. 2021. ‘Market in Motion’, State of Voluntary Carbon Markets 2021, Installment 1. Forest Trends Association.

Elgin, B. (2020, December 9). JPMorgan, Disney, Blackrock Buy Nature Conservancy’s Useless Carbon Offsets. Bloomberg. https://www.bloomberg.com/features/2020-nature-conservancy-carbon-offsets-trees/

Fishbein, G., & Lee, D. (2015). Early Lessons from Jurisdictional REDD+ and Low Emissions Development Programs. https://www.nature.org/media/climatechange/REDD+_LED_Programs.pdf

Gibbs, D., Harris, N., & Seymour, F. (2018). By the Numbers: The Value of Tropical Forests in the Climate Change Equation. https://www.wri.org/insights/numbers-value-tropical-forests-climate-change-equation

Griscom, B. W., & Cortez, R. (2013). The Case for Improved Forest Management (IFM) as a Priority REDD+ Strategy in the Tropics. Tropical Conservation Science, 6(3), 409–425. https://doi.org/10.1177/194008291300600307

Gupta, J. (2012). Glocal forest and REDD+ governance: Win–win or lose–lose? Current Opinion in Environmental Sustainability, 4(6), 620–627. https://doi.org/10.1016/j.cosust.2012.09.014

Herbert, C., Stapp, J., Badgley, G., Anderegg, W. R. L., Cullenward, D., Hamman, J., & Freeman, J. (2020, September 17). Carbon offsets burning. CarbonPlan. https://carbonplan.org/research/offset-project-fire

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://doi.org/10.1126/science.aan0568

Lyons, K. (2021, April 15). Apple launches $200 million fund for climate change. The Verge. https://www.theverge.com/2021/4/15/22385552/apple-200-million-fund-climate-change-environment

Mitchell-Larson, E., & Bushman, T. (2021). Carbon Direct Commentary: Release of the Voluntary Registry Offsets Dataset. Carbon Direct. https://carbon-direct.com/wp-content/uploads/2021/04/CD-Commentary-on-Voluntary-Registry-Offsets-Database_April-2021.pdf

Murphy, Z., & Mooney, C. (2019, January 29). Gone in a generation: Montana’s forests have swung from pulling carbon dioxide out of the air to putting it back again. - Washington Post. https://www.washingtonpost.com/graphics/2019/national/gone-in-a-generation/forest-climate-change.html

Palmer, A. (2020, April 21). Amazon invests $10 million to help conserve forests as part of climate change plan. CNBC. https://www.cnbc.com/2020/04/21/amazon-invests-10-million-for-forest-conservation-in-climate-change-plan.html

Parajuli, R., Megalos, M., Ruseva, T., Chizmar, S., & Fisher, M. (2019, July 10). An Introduction to Forest Carbon Offset Markets. NC State Extension Publications. https://content.ces.ncsu.edu/an-introduction-to-forest-carbon-offset-markets

Pardikar, R. (2021, August 31). California’s Forest Carbon Offsets Are Burning Amid Record Fires. Gizmodo. https://gizmodo.com/climate-progress-is-on-fire-1847591945

Pearce, F. (2019, June 24). Scientists Zero in on Trees as a Surprisingly Large Source of Methane. Yale Environment 360. https://e360.yale.edu/features/scientists-probe-the-surprising-role-of-trees-in-methane-emissions

Petrofsky, G., Kanamaru, H., Achard, F., Goetz, S. J., Joosten, H., Holmgren, P., Lehtonen, A., Menton, M. C., Pullin, A. S., & Wattenbach, M. (2021). Comparison of methods for measuring and assessing carbon stocks and carbon stock changes in terrestrial carbon pools. How do the accuracy and precision of current methods compare? A systematic review protocol. Environmental Evidence. https://doi.org/10.1186/2047-2382-1-6

Popkin, G. (2019). How much can forests fight climate change? Nature, 565(7739), 280–282. https://doi.org/10.1038/d41586-019-00122-z

Roesinger, A. (2021, August 4). What Happened to Global Forests in 2020? Global Forest Watch Blog, Global Forest Watch Content. https://www.weforest.org/newsroom/latest-news-worlds-forests

Samuels, B. (2020, January 21). Trump announces the US will join 1 trillion tree initiative [Text]. The Hill. https://thehill.com/homenews/administration/479087-trump-announces-the-us-will-join-1-trillion-tree-initiative/

Seymour, F. (2020). INSIDER: 4 Reasons Why a Jurisdictional Approach for REDD+ Crediting Is Superior to a Project-Based Approach. https://www.wri.org/insights/insider-4-reasons-why-jurisdictional-approach-redd-crediting-superior-project-based

West, T. A. P., Börner, J., Sills, E. O., & Kontoleon, A. (2020). Overstated carbon emission reductions from voluntary REDD+ projects in the Brazilian Amazon. PNAS. https://doi.org/10.1073/pnas.2004334117

White, J. C., Coops, N. C., Wulder, M. A., Vastaranta, M., Hilker, T., & Tompalski, P. (2016). Remote Sensing Technologies for Enhancing Forest Inventories: A Review. Canadian Journal of Remote Sensing. https://doi.org/10.1080/07038992.2016.1207484

Wolfe, D., & Yellin, T. (2021, July 22). Bootleg Fire is burning up carbon offsets. CNN. https://www.cnn.com/2021/07/22/weather/bootleg-oregon-fire-carbon-offsets/index.html

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Forestry Carbon Offsets

Overview

Mechanism

Causality

Additionality

Permanence

Cost-effectiveness

Co-benefits and adverse effects

Assessment of forest projects

Finding high-quality forest projects

References

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