Abstract
Forestry projects participate in carbon markets by sequestering carbon dioxide equivalent (CO2e) and producing carbon offsets. The creation of forest-based offsets is guided by protocols that dictate how sequestered CO2e is converted into marketable offsets. Existing protocol designs aim to produce offsets that meet sustainability requirements, while providing financial incentives for landowner participation. However, limited Canadian uptake implies that current financial incentives are insufficient to encourage the production of carbon offsets via private landowners. Here we consider various design features of four protocols and their financial implications for an illustrative afforestation project in southern Ontario, Canada. We explore the protocols (two tonne–tonne protocols and two tonne–year protocols) under two afforestation project management systems (“no-harvest” and “harvest” management scenarios). Results indicate that a project that terminates in a harvest is not economically attractive at current CO2e prices under any protocol design at a scale likely to be undertaken in southern Ontario, Canada. Projects that do not conclude in harvest are generally more attractive. Tonne–tonne protocols that pay upfront for sequestered CO2e improve the economic attractiveness of afforestation projects, but the delayed realization of the value of offset credits under tonne–year protocols reduces the economic attractiveness of these projects. We discuss these results in light of the choices facing afforestation project proponents and offset protocol designers (including governments) in general, and provide detailed insights into the financial dynamics of the Canadian case.
Highlights
In the context of some emission reduction schemes — cap and trade markets, for example — polluters may purchase carbon offsets, a marketable credit representing carbon dioxide equivalent (CO2e) sequestration, to avoid the liability tied to their emissions
To address the issue of protocol design and identify design elements that produce positive financial outcomes, we developed an approach composed of three elements: (i) a physical estimate of the CO2e sequestered under the afforestation project, (ii) conversion of CO2e sequestered into sellable offset credits under each protocol, and (iii) estimates of income generated for the project proponent from the sale of credits using assumptions about credit prices
To evaluate the economic outcomes under the no-harvest scenario, we estimated the total CO2e sequestered over time by the afforestation project, calculated the number of credits awarded by each protocol via our spreadsheet model, and estimated revenue from credit sales and afforestation and protocol participation costs
Summary
In the context of some emission reduction schemes — cap and trade markets, for example — polluters may purchase carbon offsets, a marketable credit representing carbon dioxide equivalent (CO2e) sequestration, to avoid the liability tied to their emissions. Offset creation is guided by protocols that dictate how sequestered CO2e (or reduced emissions) can be converted into credits that may be purchased by polluters. Forest-based projects could be a significant source of sequestration and carbon offsets globally (Griscom et al 2017) and in North America (Nabuurs et al 2007; see Smyth et al 2014 for Canadian context). Protocol design must achieve a balance between addressing these issues, encouraging cost effectiveness, and incentivizing forest-based offset production (Galik et al 2009). A diverse set of forest-based protocol designs exists to deal with these issues
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Free) 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call
