1. Why is reforestation critical to addressing climate change?
Restoration activities on forestland present massive opportunities for carbon sequestration, which is critically important to taking as much CO2 out of the atmosphere as we can. The TNC/American Forests Reforestation Hub (https://www.reforestationhub.org/) shows potential for 133 million acres of reforestation in the contiguous US alone. Interestingly, they identified much of the opportunity in the Midwest and Southeast, with the greatest potential being areas that are currently pasture but were historically forested. Additionally, reforestation is a low tech, shovel-ready tool to address climate change that people can easily relate to and understand, making it an attractive activity with broad support.
2. How does the Climate Forward Reforestation Forecast Methodology support reforestation efforts?
Reforestation has always had great potential to mitigate climate change, but traditional offset programs—which until recently have been the only viable means for landowners to leverage carbon markets to restore their forests—typically only issue credits after the forest has matured. While that is a sound and trusted approach, it presents a significant challenge for certain types of climate mitigation activities, including reforestation, to participate in those markets.
When a landowner reforests their land, they have significant upfront costs. Under traditional offset programs, landowners bear those costs until they have enough carbon sequestered in the trees for the sale of credits to cover not only their initial reforestation expenses but also the costs of having the project verified and registered. This can take 10 years or more, depending on the forest type.
A few reforestation projects have been successful in registering under traditional offset programs, but that small number does not reflect the huge untapped potential that reforestation opportunities offer if they can be more efficiently brought into carbon markets.
Climate Forward offers a way to tap into that potential because it shifts the economics of reforestation carbon projects, allowing projects to be recognized up front for the tree planting and/or site preparation actions they’re taking today to remove CO2 from the atmosphere in the future as their trees grow and sequester carbon over time. Credits under Climate Forward (Forecasted Mitigation Units or FMUs) are issued much earlier in the reforestation process for the anticipated climate benefits, bringing the financial returns in closer alignment to when most of the costs for reforestation occur. And credits are issued all at once, rather than incrementally over time.
3. What are some key tenets that ensure environmental integrity in the Reforestation Forecast Methodology?
- There must be approved forest growth projections for the conditions applicable to the project. Currently, approved projections exist for most forest types in the US. Growth projections can be approved broadly for general forest types (typically based on governmental publications and/or peer-reviewed studies) or they can be approved on a project-specific basis, where the project proponent conducts their own growth modeling and submits them for approval.
- Projects can only be located on sites suitable for reforestation. The methodology requires a professional forester or ecologist to describe and attest to the suitability of a site, to describe why intervention is required to restore a site to forest cover, and to certify how the project mitigates risks to the future survival of the trees being established on the project site.
- Reforestation projects are limited to native species and forest types, including a natural diversity of tree species appropriate for the project location.
- In order to ensure additionality:
- The site must not have been under forest cover for the past 10 years, or the site must have been affected by a natural disturbance within the past 10 years that resulted in a reduction of canopy cover to below 25%.
- Reforestation of the site can’t be legally required.
- A project must meet specific criteria around enhancement payment stacking or ecosystem services payment stacking. If a project is getting full funding to undertake reforestation activities from sources such as grants, the project may have taken place even in the absence of the Reforestation Forecast Methodology, in which case the project is likely not additional. A project may, however, be able to stack enhancement payments in many situations—we ask anyone wanting to develop a project with such payments to seek guidance from the Reserve before undertaking their project.
4. How does the Reforestation Forecast Methodology ensure permanence of GHG reductions for reforestation projects?
Because the methodology anticipates climate benefits and does not require long-term monitoring, reporting, and verification (MRV), it includes several key criteria for permanence:
- Climate Forward relies on a 100-year permanence standard, in line with most policy applications of IPCC calculations for Global Warming Potential (GWP) values for GHG inventory purposes.
- Projects have the option for employing a conservation easement, including certain terms as specified in the methodology that address the long-term maintenance of the forest and, by association, the accruing carbon stocks. Compliance with those terms is monitored by the entity holding the conservation easement, thus providing a surrogate for long-term MRV.
- For projects not able to provide the same long-term assurances around the maintenance of the forest, such as what a conservation easement provides, tonne-year accounting (TYA) is incorporated along with limited crediting period lengths. TYA awards a pro-rated, conservative share of carbon credits for each successive year that carbon is sequestered. TYA assumes that for each year a tonne remains sequestered, 1/100th of the 100-year climate benefit is achieved and credits are awarded at a rate of one percent per tonne per year for the crediting period. For example, if a project sequesters 100 tonnes of CO2 in the first year of the project and that carbon is expected to remain sequestered for 50 years, the project would be awarded 50 FMUs (i.e., 50% of the sequestered value). If that same project were to sequester 100 t CO2 in the 49th year of the project and that carbon was only expected to remain sequestered for one year, the project would be awarded 1 FMU (or 1% of the sequestered amount).
- The methodology takes an overall conservative approach to quantification to ensure that credits have integrity at the program-level, despite possible underperformance at the project-level.
- The methodology uses a permanence risk pool, which is similar to a buffer pool, as well as an additional discount applied to all reforestation projects participating under Climate Forward to ensure that credits issued are backed up by credits withheld from other projects in the event that an individual project experiences a reversal, or loss of CO2 back to the atmosphere, such as from a wildfire, or if a project doesn’t sequester as much carbon as originally projected.
- An additional safeguard is to require confirmation one year after planting or site prep activities have been completed. This allows the confirmation body to better judge the success of the reforestation activity, based on tree survival/growth in the initial year of the project.
5. Can small landowners participate?
The efficiencies built into the methodology make it possible for small projects to be financially feasible, though this depends on the forest type(s), the landowner classification, and perhaps more importantly, whether the project is providing any permanence assurances. The final cost-benefit analysis depends on the costs of project development and confirmation—our current understanding is that such costs are quite low compared to traditional offset projects—as well as the prices buyers are willing to pay for FMUs. However, the methodology is designed to be cost-effective.
6. What is the market for reforestation FMUs?
Buyers for FMUs may include entities looking to bolster their ESG claims and California entities looking for local GHG mitigation opportunities for CEQA compliance, especially in the wake of high severity fires where sites need support to restore tree cover. Buyers may also include companies looking to secure a future stream of offsets since the reforestation projects registering under Climate Forward have the potential to transition to the Reserve’s voluntary offset program, not only to have their FMUs converted to offset credits but also to potentially have additional credits issued beyond the amount originally issued as FMUs.