Mr. Silva was until recently head of R&D at Pachama.
Even under the most optimistic assessments, the market for forest carbon has yet to become a climate solution. Although forest conservation and reforestation could mitigate an estimated 10 billion metric tons of carbon emissions, transaction volume for forest carbon credits in 2024 was less than 1% of this potential. What’s more, forest loss continues unabated with 2024 seeing the second highest loss on record since 2002.
Despite the advances of recent years, the market remains an amalgam of disjoint, often opaque, efforts that have yet to meet the basic expectation of an offset market: consistent, reproducible credit issuance without arbitrary variation depending on the issuing entity. It should then be no surprise that market trust, and in turn, demand remain far below the level required to meaningfully impact climate change.
The idea of a carbon offset for forestry – borrowed directly from cap and trade markets – is elegant in principle. From a theoretical perspective, it has always been straightforward to define emissions reductions with quantities such as, baselines, leakage, and carbon change within a project or jurisdiction. The question is and remains: how precisely can these quantities be estimated?
Of course, an unattainable standard of precision must not stymie progress. But, at a minimum, buyer expectations must be met. Buyers are seeking to cancel their own emissions. No buyer can afford to have a sizable chunk of their credits (i.e., investment) rendered null and void due to newly surfaced inconsistencies in crediting calculations – an outcome that carries real monetary loss for the buyer.
The market is now at a juncture with three possible paths forward. The burden of precision for quantifying emissions reductions depends on which the market takes. On the current path – an offset market – this burden is highest.
Carbon maps used to compute core crediting quantities can vary non-trivially, even across expert research groups, for a range of reasons, including which satellites are used, how the satellite data are processed, and which equations are used to convert tree height to carbon. Such non-trivial variation can also be found when computing baselines by mapping deforestation risk or selecting control areas. These sources of uncertainty cannot be swept under the rug.
To be clear, this does not mean that satellite-derived maps cannot quantify real impact from forestry projects. To the contrary, the market’s steady adoption of satellite data has brought empirical rigor to crediting calculations that had hitherto been based on weak, data-poor assumptions.
But if the market is to succeed as an offset market, the core quantities used to compute issuance must be validated against independent, 3rd party datasets. This requires centralized accounting and validation infrastructure to tie crediting calculations to a data repository of “ground-truth” measurements (e.g., lidar, drone imagery, field measurements, and pseudo-projects). The limiting factor today is not science, but market coordination and policy to audit satellite-derived maps and the crediting quantities derived from them.
There is a second, often overlooked, path for the market – a fee or payment on residual emissions. On this path, a buyer does not claim to cancel their emissions by purchasing an offset. They pay a contribution based on the emissions they could not reduce with a cap on eligible emissions. The fee per ton could be based on a social cost of carbon, a marginal abatement cost, or the carbon price from a cap and trade market.
This second path relaxes the standard of precision without sacrificing climate integrity. The objective becomes computing aggregate market-wide emissions impact – a far more tractable challenge – to ensure payments go to effective projects and jurisdictions. Crucially, estimates of market-wide impact can be continually updated with new data and methods without calling into question past market transactions.
An evolution toward this path requires a slight adjustment in buyer net-zero claims. These claims would stipulate that residual emissions were not offset, but addressed with a payment to forest-based carbon storage.
This shift is already, de facto, under way. The Net-Zero Standard of the Science Based Targets Initiative (SBTi) allows residual emissions to be addressed through a finance contribution, specifying a minimum carbon price for determining the size of the contribution. And some buyers are now purchasing credits without the intent of ever claiming them as offsets.
The market must decide which path to pursue – remain an offset market and quickly develop the required accounting and validation infrastructure, or formally dispense with offsets and evolve into a contribution mechanism.
If it does not decide, the market’s current trajectory puts it on a third path – elevated philanthropy – with all of its attendant limitations. Corporate giving has limited scale (relative to the climate challenge) and limited additionality (it occurs whatever the market’s fate).
Read more: Opinion: Unlocking the VCM’s Secret Weapon: How Cutting Super Pollutants Can Deliver Real Impact
