Background on Forest Carbon Trading and Marketing

Market-based mechanisms are emerging as a more efficient means for addressing climate change. With market-based mechanisms come opportunities for increasing return on investments available to managed forests, as well as afforestation/reforestation projects. Voluntary and mandatory forest carbon markets are evolving in the United States for evaluating, registering, verifying, and trading carbon credits for offsetting Greenhouse Gas (GHG) emissions from manufacturers and utilities. As markets for ecosystem services like sequestered carbon develop globally, managed forests and reforestation projects will play an increasingly important role for addressing climate change.

The significant concern over global warming has sparked the development of many initiatives here in the states. Across the country, the federal government, state or local governments, NGO’s, not-for-profit organizations, and private enterprises have worked to develop various GHG registries, cap and trade programs, and other market mechanisms. Without over-arching requirements such as the UN Kyoto protocol or federal regulation, most of these initiatives have been developed independently of one another, resulting in differing ideologies, policies, and program requirements. Some of the more prevalent of these initiatives have been developed independently of one another, resulting in differing ideologies, policies, and program requirements. Some of the more prevalent of these initiatives include the U.S. DOE 1605b program (registry), the California Climate Action Registry (CCAR), the Regional Greenhouse Gas Initiative (RGGI), the Voluntary Carbon Standard (VCS), and the Chicago Climate Exchange (CCX). Registries provide entities with the means by which to calculate, track, and report changes in GHG emissions or increases in carbon storage over time. These bodies establish the technical accounting rules that standardize GHG and carbon accounting and ensure consistency in all participant accounting systems. Carbon markets are a combination of the rules set from a registry and the platform on which carbon offset credits (usually metric tons of CO2 equivalent or “MtCO2e”) are traded, or marketed to consumers.