Discover How Carbon Credits Work in Forestry

Hollywood has a long history of fascination with forests. From Disney’s Bambi, and Sleeping Beauty, to more scary thrillers like M. N Shyamalan’s The Village, and the Planet of the Apes series, forests have been a landscape of wonder, mystery, and adventure.

It’s no surprise that most people think about forests when they hear about carbon credits.

The demand for carbon credits, particularly in forestry, is on the rise. This is due to the awareness of the social and environmental benefits of forests as well as a healthy supply of Nature-based Solutions (NbS) projects and programs available from businesses, governments, and other holders of forestry-related assets.

Saving forests and the ecosystem it houses not only provides a backdrop for Hollywood. Forests provide nutrients for the soil, they absorb harmful CO2 while releasing O2, all while also serving as a natural aqueduct to prevent flooding. Let’s look at how carbon credits help the world’s forests.

Top Three Uses of Carbon Credits in Forestry

There are many examples of how carbon credits are used in forestry-related projects. The most common examples fall into three categories:

    1. Reforestation

The world has lost over a third of its forests in the last century. Most of the loss is due to the clearing of forests for agricultural purposes – grazing and crops for livestock. Clearing of forests for human consumption crops, wildfires, and the spread of urban living areas make up the rest.

Planting trees in deforested areas helps offset carbon emissions since trees absorb carbon dioxide from the atmosphere. Additional benefits include improving air quality, reducing erosion, and providing a natural habitat for wildlife. The recent Avatar movies have illustrated this point again and again.

Numerous companies offer businesses and individuals carbon offsets that form a way to pay for their CO2 consumption by supporting organizations that work to produce CO2 through reforestation.

• Forest Management

Projects in this forestry category can include planning for timber harvests, controlling pests and diseases, and preventing wildfires.  Forest Management also contributes to an increase in the amount of carbon that a forest can store and to ensure that forests are used sustainably. 

An example of Forest Management in practice includes selective logging, where young trees are allowed to mature, thus improving their value, instead of removing all trees at once. Managed or controlled fires are also sometimes done to remove dry brush and dead trees which can fuel a fire.

• REDD/REDD+

As a global program, REDD (Reducing Emissions from Deforestation and Degradation; the “+” signifies the role of conservation, sustainable management of forests, and enhancement of forest carbon stocks) uses carbon credits to offset emissions from other sources. 

These programs can include Reforestation and Forest Management activities. They can also take on a broader approach that includes helping communities that have typically relied on forest resources with alternative economic opportunities and protecting the flora and fauna that rely on forests as habitats.

The Value of Carbon Credits for Forest Assets

In this article, we discussed how carbon credits work and the difference between voluntary emissions reduction (VER) and certified emissions reduction (CER). In short, with CER, third-party bodies regulate the CER providing assurances for the carbon credit’s value.

In forestry, a carbon credit can be issued for every 1 tonne of CO2 emission reduction. However, not all forestry carbon credits are created equally, and the price can vary. Three criteria are evaluated to determine the fair market value: additionality, permanence, and measurability. 

Important to also note that different types of trees store carbon at different rates. Trees with large trunks and dense wood tend to be better carbon absorbers than others. Fast-growing trees store the most carbon in their first decade. Evergreen trees (Pine, Redwood) and Oak trees are good examples, however, there are many more.

The Importance of Data When Valuing Forestry Assets

As a government, land owner, business, or financial institution interested in monetizing forestry assets or investing in forestry projects, you must consider the accuracy and integrity of the data used to determine the value of carbon credits or “green” bond programs.

While many third-party verification bodies exist that rate and value forestry carbon credits, shining a light on the data used in these decisions can help properly assess monetary value. 

For a holistic approach to understanding the health and value of a forest, the forest must be evaluated in its entire environment beginning with data collection. To date, no single system has been able to collect and continually monitor environmental data. Laconic’s Environmental Intelligence platform, SADAR™, is the first and only comprehensive system that collects and analyzes environmental data providing the critical insights needed for strategic decision-making.

Data Sources

When evaluating forest assets, various sources and sensors are used. This includes satellites, drones, ground-based sensors, and ground survey teams. And because forests rely on water sources, data from aquatic surface and sub-surface sensors may be included. All in all, more than 24 monitoring domains, 54 environmental data inputs, 10 data pedigree elements, and 6 Ecosystem thematic accounts generate enormous amounts of real-time data with high fidelity. 

Data Integration, Cataloging & Analysis

These rich data sets can be integrated with additional data from other sensor or technology sources and be unified for cataloging and analysis, enhancing data quality and accuracy.

The key point in the data collection, integration, and analysis is to achieve comprehensive, accurate, and relevant data in today’s environment. With this knowledge and insights, you have a comprehensive baseline for understanding the forest environment when deciding how to competently monetize your forest assets or invest in a forest-related project. 

As our environment changes daily, continual monitoring and a verified data audit trail are required to ensure the monetary value of the forestry carbon credit.

Learn more about Laconic’s Environmental Intelligence platform, SADAR, and our Natural Capital Monetization service.