The science behind improved forest management approaches in the carbon market

By Kurt Krapfl, with contributions from Andrew Taylor and Warren Reed 

At ACR we’re fully committed to promoting positive transformational change for the climate. We’ve been leaders in this space for nearly 30 years.

We welcome critical and constructive review of our program and are constantly updating our methods based on the latest science and technologies. In the spirit of continuous improvement, we clarify key tenets of our program in response to a recent review of one of our commonly implemented project types, improved forest management (IFM).

A Comprehensive Review of Carbon Quantification by Improved Forest Management

A little over a week ago a journal article[1] authored by researchers at UC Berkeley and elsewhere was published in Frontiers in Forests and Global Change, focusing on IFM projects and examining high-level differences in the way IFM is implemented across four leading carbon crediting programs: ARB, ACR, CAR and Verra.

IFM is a carbon project type in North America with a massive climate impact potential. The project action requires landowners to manage their forests such that carbon stocks are always maintained or increasing over the project lifetime. Projects are credited for accumulating carbon from the start of the project, as well as avoiding emissions that would’ve occurred in its absence (i.e., business-as-usual management).

ACR welcomes critical and scientifically based evaluations of the carbon market. As a crediting program that supplies credits for use in regulated and voluntary markets, we recognize that there will always be updates that could be made as the most current science develops and market transformations occur. We invite constructive feedback from anyone, including academics, as we continually evolve our program and update our methodologies based on the best available science.

Unfortunately, in conjunction with the publication of this peer-reviewed journal article, some media reporting materially misrepresented the findings and conclusions of the article. This disparity between nuanced scientific analysis and mainstream media coverage of the carbon market has become commonplace and generally, has not been solutions oriented. We encourage readers to take this type of reporting with a grain of salt and to understand that at ACR we’ve consistently taken time to explain our perspectives and requirements to media inquiries in pursuit of well-informed and balanced media coverage.

In ACR’s role as a carbon offset registry, quality is always on our mind. Our rules and policies follow rigorous processes of development. These include a 30-day public comment period open to anyone and blind scientific peer-review by academic and industry leaders of the methods and rules governing our program.

IFM is a complicated project type, and we don’t claim to be perfect. Rather, we strive for quality and sound action recognizing that the time for critical climate action is now (or better yet yesterday).

The objective of the Haya et al. paper was to qualitatively compare IFM methodologies against the scientific literature, with a particular focus on the fundamental carbon market tenets of additionality, baselines, leakage, durability, and carbon accounting.

Change in forest management

The first question the authors asked is whether IFM carbon projects represent a ‘real’ change in forest management, under the premise that in many projects there is not an immediately noticeable and distinct change in forest practices.

The authors acknowledge that unlike other types of projects that involve a single action in time, IFM involves a change in practice over the project lifetime.

Simply put, it’s important to recognize that forest management is long-term and cyclical[2],[3]. Effective IFM carbon projects change management over timeframes relevant to commercial forestry, which is decadal to multi-decadal. Enrolling in an IFM project constitutes a legally binding, public-facing commitment to sequester carbon for at least forty years in the ACR program. This is a highly intentional, immediate, and tangible management action attributed to the project and one that isn’t taken lightly by landowners.

Baselines

The study also asserts that the baselines upon which IFM projects are credited should represent a realistic management trajectory that would’ve occurred in the absence of the project. We fully agree and would add that baseline setting must be systematic and verifiable.

Long periods of little to no harvesting are often a precursor to major harvesting events since timber value increases over time as trees grow and financial pressure to harvest builds. In addition, land ownership can and does change hands. For these reasons, recent behavior and/or landowner intent isn’t necessarily a useful indicator of future behavior when it comes to harvesting and is not a strong basis for baseline setting for IFM.

The study acknowledges that a ‘true’ baseline (counterfactual) scenario is inherently uncertain (i.e., once a project takes place what would’ve happened in its absence cannot be observed). It also notes that landowners and project developers will always know more than the crediting programs about what would have happened in the absence of the project.

We agree and are very clear that the landowner must devise a baseline based on their best-known intentions and expected management trajectory. Crediting programs, in turn, must do their best to develop science-based methodologies with adequate safeguards to prevent gaming and adverse selection.

This is precisely the reason ACR IFM employs a highly quantitative and verifiable net present value (NPV) baseline approach[4],[5], which Haya et al. fully acknowledges is sound for landowners operating within a revenue maximization framework. NPV examines forest management decisions in the context of the present value of cash inflows and outflows and the time value of money (appropriately discounted). For those interested in learning more about NPV maximization in forestry, Newman et al. [6] provides a thorough discussion and references to over 300 journal articles and textbooks on the subject.

The NPV approach has been shown to be equally strong for other land ownership types assuming the discount rate is adjusted in consideration of amenity values, such as biodiversity, recreation, conservation, and more. Discounting NPV for amenity values has the impact of lengthening rotation ages and anticipating the revenue preferences of forest managers across varying ownership types. The ACR IFM approach does just that, and is also well supported in the literature[7],[8], [9].

Beyond NPV, all ACR IFM baselines must also consider site-specific harvest restrictions, relevancy of silvicultural treatments, best management practices, timber accessibility and operability, nearby mill capacities, hauling distances, and more in developing a feasible and plausible counterfactual baseline scenario. Our approach should not be confused with other programs that set baselines based on regional common practice.

Leakage

Regarding leakage, the authors acknowledge there is no broad agreement on how carbon methodologies should account for potential leakage in their methodologies. This is because quantifying leakage to date has required intricate timber product flow models and simulations of market processes[10],[11]. These approaches are largely uneconomical to implement at a project-specific level and have greater relevancy to wood product dynamics than leakage in a carbon context.

Furthermore, estimates from timber flow models are expected to be inflated because 1) forest carbon projects often include extensive harvest activities and age class management that differs from a no-harvest management scenario in which leakage has typically been studied and 2) U.S. based timber leakage fundamentally differs from carbon leakage due to regional differences in forest carbon density.

In the absence of a broadly accepted approach to direct leakage quantification for carbon projects, the authors suggest erring on the side of conservatism. ACR does just this by employing a 30% leakage deduction that is well supported by existing literature that has examined leakage in a carbon context (see [12],[13],[14], and others), and equally important, applying the deduction in the most conservative way possible – by deducting from total issuance of credits rather than only from the smaller difference in baseline versus project scenario harvested wood products.

Our approach results in a highly conservative leakage deduction in each reporting period, regardless of harvest levels. On average, a 30% deduction applied to total crediting is equivalent to a nearly 45% leakage deduction if applied solely to differences in harvested wood production over a typical project life.

In these ways, the ACR leakage deduction is on par with even the highest carbon leakage rates reported in scientific literature. ACR is interested in making strides to continually refine leakage quantification in the specific context of carbon projects, a subject in need of more research, with the intention of continually reassessing our leakage deduction rates as pertinent data becomes available.

Durability

On durability, the authors acknowledge that setting a minimum project term is a policy decision. They note that even the longest terms (e.g., 100 years) do not constitute a truly permanent offset equivalent to reducing greenhouse gas emissions.

ACR projects must legally commit to monitor, report, and verify the project activity for a minimum project term of 40 years. This meaningful and achievable project timeframe is aligned with scientific reports that have assessed the critical role of the agriculture, forest, and other land-use sector in all 1.5°C-consistent pathways to achieve Paris Agreement targets and reach net zero emissions by mid-century to avoid the catastrophic effects of climate change[15],[16],[17].

At ACR, all reversals must always be reported, quantified, and compensated. Notably, and contrary to the peer-reviewed authors’ assertions, ACR reversals attributed to overharvesting and other intentional management decisions must be compensated by the project owner ‘out-of-pocket,’ rather than with the buffer pool. This commitment is solidly reinforced with a legally binding contractual agreement without exception.

In the instance they occur, reversals attributed to natural disturbances (e.g., fires, floods, pests, diseases) are considered “unintentional” and must be compensated via retirement of credits from the ACR buffer pool. The ACR buffer pool is managed across our entire program, rather than on a project basis and its size coincides with programmatic scale, geographical diversity and connectivity, disturbance risk, and other risk-based factors.

We agree with the peer-reviewed journal recommendations that carbon crediting programs should incorporate climate risks and targeted disturbance hazards into their risk assessments to adequately capitalize their risk buffers. ACR, in fact, has recently re-examined our buffer pool in such context in an update that is currently available for public comment on our website, which we expect will be published for use in in the second quarter of 2023.

We disagree with the authors conclusions that allowing project developers to contribute credits from a variety of projects to the buffer pool creates perverse incentives. On the contrary, allowing buffer contributions from a variety of project types adds robustness and stability through diversification of project types and geography. This is especially true when credits are contributed from project types that are non-reversible.

Quantification

On quantification, Haya et al. notes that the IFM protocols examined in their study “provide appropriately rigorous, high-level guidance on inventory design … that aligns with recommendations from the IPCC.” They also assert that the IFM methodologies reviewed “… provide appropriate selection criteria for plot distribution, measurement, and carbon stock estimation and distribution methods”.

ACR’s methods in inventory design allow project developers to accurately quantify forest carbon stocks that reflect the local structure and composition of each project. The quantification methods that ACR approves for use are all properly peer reviewed and based on trusted, current, and available methods.

We agree with Haya et al. that while there may be some areas for continued improvement as carbon quantification continually strengthens, ACR’s current ruleset ensures high integrity carbon quantification. This is especially true given ACR requires forest carbon accounting methods (and hence the basis of the crediting comparison) to be the same in both the project and baseline scenarios.

We are very aware of the rapidly changing technological developments in the forest measurement space related to carbon stock quantification. Like with all aspects of the methodology, we have an eye towards adapting and evolving as these technologies become validated and more trusted in the near future. ACR has recently announced the development of a framework for evaluating the quality of remote sensing-based forest quantification approaches that we hope to release for public comment by the end of 2023. Academic experts and others are welcomed to contact us if they have interest in this endeavor.

Summary

The ACR methodology approval process involves internal review by our team of forestry experts, public stakeholder consultation, and blind scientific peer review. We are the only crediting program to require scientific peer-review by subject matter experts for the approval of its methodologies. The ACR IFM methodology, relevant to the projects in question, was first approved in 2011 and has undergone four version updates. The newest version of the methodology (recently updated in July 2022, after the study’s reference point of March 2022) demonstrates the continuous strengthening of the methodology, and reflects lessons, insights, and experience gained from implementing IFM projects for over a decade.

We appreciate the efforts of academic researchers who ask critical questions and draw conclusions based on the scientific process. We invite anyone, including researchers in the academic sector such as Haya and others, to participate in our public comment processes and help to refine our approaches. However, we urge caution in accepting the assertions of media outlets that gloss over important detail and nuance in the race to deliver click-worthy headlines.

We’d refer interested parties to the Haya et al. peer-reviewed journal article itself, published in Frontiers in Forests and Global Change, which concludes there is a large potential to reduce emissions, sequester carbon, and create meaningful climate incentives through IFM. The study supports many aspects of our approach and the authors’ recommendations may be helpful as we continually evolve our program and update our methods based on the best available science.

Where key aspects of our approach were misunderstood or misrepresented in the peer-review article we intend to address these with the author team directly. We’re happy to provide more information to anyone on ACR’s IFM methodology if you have specific questions.

Gratitude to my colleagues Andrew Taylor and Warren Reed for their contributions to this post.