Additionality and Baselines for Improved Forest Management Projects

Additionality and Baselines for Improved Forest Management Projects

By Kurt Krapfl, PhD – ACR Director of Forestry

Demand for voluntary carbon credits is expected to grow in response to the urgency of climate change. Much of this demand is driven by the increasing number of companies seeking to decarbonize their supply chains and use high-quality carbon credits to offset residual emissions. To address questions we receive, ACR developed this blog post focused on additionality and baselines in Improved Forest Management projects.

ACR IFM Additionality and Baselines

Some of the questions ACR is frequently asked are about “additionality” and baseline setting for Improved Forest Management (IFM) projects.

How do we ensure that project actions or policies exceed those that would have occurred in the absence of the project activity and without carbon market incentives? How do we ensure a credible baseline scenario from which to measure performance?

The following explains ACR’s approach and how our IFM methodology addresses common questions around assessing additionality and establishing a conservative baseline.

IFM Background

In the U.S., the number of IFM projects in development is growing because standards bodies like ACR have published methodologies that are applicable to a variety of landowner types, including private industrial, private non-industrial, tribal, public non-federal, and non-governmental organizations. By attaching a monetary value to carbon sequestration, the carbon market presents an opportunity for different types of landowners to achieve a higher standard of forest management, while still supplementing their revenue goals and helping to combat climate change.

It is important to note that enrollment in an ACR IFM project initiates an immediately effective, legally binding, and public-facing 40-year commitment to grow trees older and larger, and/or to harvest less frequently or intensely. The projects quantify and credit carbon stored on the landscape as a result of this new long-term management commitment. IFM offers a cost-effective and scalable opportunity to sequester carbon now, as we pursue a transition to a net-zero economy by 2050.

Additionality

Key to ensuring the credibility of carbon credits is the concept of additionality. This assumption is a central tenet of all carbon crediting programs and projects, not just IFM. It is important because there needs to be a high level of confidence that project actions or policies exceed those that would have occurred in the absence of the project activity and without carbon market incentives.

The ACR IFM methodology contains specific requirements for project proponents to demonstrate additionality. As a first step, all ACR IFM projects must be verified to meet a 3-prong additionality test, requiring demonstration that they: 1) exceed all currently effective laws and regulations; 2) exceed common practice management of similar forests in the region; and 3) face at least one of three barriers to their implementation (financial, technical, or institutional).

The regulatory surplus test involves evaluating all existing laws, regulations, statutes, legal rulings, deed restrictions, donor funding on allowable management activities, contracts, or other regulatory frameworks relevant to the project area that directly or indirectly affect GHG emissions associated with a project action or its baseline candidates, and which require technical, performance, or management actions. The project action cannot be legally required.

The common practice test requires an evaluation of the predominant forest management practices of the region and a demonstration that the management activities of the project scenario will increase carbon sequestration compared to common practice. This involves evaluating and describing the predominant forest management practices occurring on comparable sites of the region and demonstrating that the project activities will achieve greater carbon sequestration than in the absence of the project.

Finally, the implementation barrier test examines factors or considerations that would prevent the adoption of the practice or activity proposed by the project proponent. IFM projects often demonstrate a financial implementation barrier because carbon projects are generally expensive to implement and coincide with harvest deferral and forgone potential revenues. This results in a low internal rate of return in comparison to the land potential that dissuades many landowners from implementing carbon projects. Technological and institutional barriers associated with carbon projects may also be proposed.

Determining Baselines

Enhancing carbon stocks above a baseline scenario is the basis of carbon credit generation. Ensuring a reasonable baseline is equally important for ensuring credibility. Under ACR’s IFM methodology, determining the baseline involves a comprehensive assessment of site characteristics and constraints to forest management, as well as an analysis of predominant forest management practices occurring in the region, to develop an alternate forest management scenario that could reasonably be expected to occur in the absence of the project.

ACR baselines consider all legalconstraints to forest management, as well as operational constraints such as site access, mill capacities, hauling distances, and any other potential third-party approvals necessary to perform such activities. Baseline silvicultural treatments must be substantiated by attestations from regional professional foresters, peer-reviewed or state/federal publications, or written attestations from an applicable state or federal agency. Baseline harvest intensities (i.e., rate of baseline harvest) must be substantiated by geospatial analysis of harvests occurring on similar nearby lands, an approved forest management plan, or by demonstrating ability to harvest and setting a “removals-only” baseline. In other words, they need to be substantially vetted and validated by independent sources as both possible and plausible.

Finally, to systematically address the various management objectives and considerations confronting ownerships of different types, ACR IFM leverages a financial analysis considering recent forest inventory data from within the project area, timber prices, logging and management costs, and the time value of money in determining the baseline harvest schedule. NPV discount rates, in addition to the suite of baseline constraints identified above, add another layer of conservatism in setting the intensity and temporal distribution of the baseline on specific characteristics and motivations of an ownership.

The ACR approach is a consistent, replicable, and verifiable approach upon which to assess the various operational and feasible management decisions and trajectories facing U.S. forestland ownerships. Its method provides a transparent and systematic process by which landowners, project developers, verifiers, and offset purchasers can set and assess the ACR IFM carbon project.

As a leading carbon crediting program, ACR takes pride in ensuring projects using our methodologies generate carbon credits that are additional to business-as-usual and meaningful to the climate, both in the near and long-term.

We also recognize the complexities of this space and provide responses to commonly asked questions below:

Why Not Use Historical Baselines?

Historical harvesting activity does not necessarily represent a future management trajectory. This is because in the absence of an abrupt paradigm shift, silviculture and forest management occurs and evolves over long timeframes as trees grow and forest conditions change. Forest management is long-term and cyclical, and decisions are based on financial needs, market conditions, landowner and agency priorities, and other factors. Land can be sold and harvested and plans for how a forest is intended to be managed can, and invariably do, change.

Recent harvests on properties of similar site conditions and merchantability can, however, be indicative of the degree to which a given landowner could reasonably manage their forestlands. ACR terms this “Harvest Intensity” and leverages this information to set a conservative maximum baseline harvest threshold. Existing forest management plans may also be used to determine harvest intensity where they have been prepared by a qualified professional forester and contain explicit harvest thresholds.

Shouldn’t Project Proponents Justify the Baseline?

Yes. In addition to the requirement for ACR IFM projects to verifiably demonstrate that they exceed all currently effective laws and regulations, exceed common practice management of similar forests in the region, and face at least one of three implementation barriers, project proponents must also develop a baseline through a comprehensive assessment of site characteristics and predominant forest management practices relevant to the project area.

ACR baselines must consider all legal constraints to forest management, as well as physical constraints such as site access and operability, mill capacities, and hauling distances. They must justify plausible forest management practices that would occur in the absence of the project, including silvicultural prescriptions and harvest intensities. ACR requires the details of these analyses to be included in the GHG Project Plan and all baseline assumptions are third party verified and approved by ACR prior to each issuance.

Isn’t it possible that the forests in question would be managed the same way with or without carbon crediting?

Enrollment in an ACR IFM project represents an immediate change from previous practice because it initiates a legally binding and public-facing commitment to increase carbon stocks in the project area for 40 years. It is a tangible and immediate action to increase and quantify carbon sequestration according to a peer-reviewed scientific framework.

It is not common for a landowner with mature timber to make a long-term commitment (40 years in this case) to reduced harvesting and to legally forgo the opportunity to do so. As mentioned above, forest management is long term and cyclical based on financial needs, market conditions, ownership priorities, mill conditions, and other factors. Harvest intensity safeguards and dynamic evaluation over time ensure the baseline remains representative prior to each credit issuance.

Does the project take the most aggressive harvest scenario off the table?

Yes, although carbon projects do much more than just take the most aggressive scenario off the table. Projects enrolling with ACR must maintain or increase their forest carbon stocks over the 40-year project commitment term (i.e., they cannot harvest more than accumulated annual growth). Doing so would be a reversal and they would have to compensate ACR for the reversed credits. It is not common practice for a landowner with mature timber to enroll in a long-term, legally binding agreement that limits their capacity to harvest over time.

What about different kinds of landowners?

In the early days, the primary participants in IFM projects were large timberland owners. Over time, the market has expanded to include many different types of landowners. Evolving financial needs, market conditions, management priorities, and other factors are applicable to all kinds of landowners. Therefore, ACR’s criteria for additionality and determining baselines apply to all project proponents, who must justify why the baseline is a realistic management trajectory for their type of ownership. Organizations that may have longer-term, institutional climate targets should also factor these into their decisions to enroll IFM projects and their justification of baseline scenarios. The ACR methodology considers landowner type in assessing both harvest intensity of comparable properties and financial discount rate.

How does ACR improve its methodologies over time?

All ACR methodologies undergo a rigorous approval process that involves internal review, public consultation, and blind scientific peer review. ACR is the only registry to require scientific peer review for the approval of its methodologies.

We are continually updating and improving our methodologies over time. The ACR IFM methodology, for example, was first approved in 2010 and is undergoing its sixth version update. The new IFM version 2.1 provides clarifications and updates to increase the precision of the methodology, reflecting our deep knowledge base gained from implementing IFM projects for nearly 15 years.

ACR’s current IFM methodology version 2.1 was published in July of 2024.