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Types of Carbon Offset Projects

There are two general categories of land-use activities that can contribute to conservation goals while helping to reduce or stabilize atmospheric greenhouse gas concentrations:

Many well-designed carbon projects combine both carbon sequestration and emissions avoidance components.


Carbon sequestration

Carbon sequestration is accomplished by increasing the carbon stored (or fixed) by a certain area of forest and is most applicable in areas that have been degraded or will not recover without the management activities implemented through the carbon project. This category includes reforestation and afforestation projects.

Within this category natural forest restoration is probably the most directly relevant to conservation. Depending on the previous treatment of the land and the likelihood of its natural recovery, reforestation projects clearly result in carbon sequestration, and are easily understood. Grassland restoration on degraded agricultural lands with low biomass, and improvements to agricultural practices to increase soil carbon (e.g. no-till agriculture), are other carbon sequestration options. Areas that were converted prior to 1990 are the most compelling project sites, since it is easy to refute any claim that the sites were converted only to make possible carbon credits. Some agriculture-related project types, such as agroforestry, or changing from full sun-grown to shade-grown coffee, also fall within this category.

Since the policy regimes developing support carbon sequestration more than emissions avoidance, successful carbon project proposals should generally include 50% or more of restoration. Areas that are particularly attractive for conservation purposes are those where habitat fragmentation is a problem and funds could be used to restore habitats in order to decrease fragmentation, build corridors, or create buffers around core conservation areas.


Emissions avoidance

Emissions avoidance projects preserve carbon stocks (in soils, vegetation, etc.) in areas that are demonstrably threatened with imminent land conversion or degradation (e.g. clear-cutting, removal of the most economically valuable species, or high-grading). Forest protection projects are usually very attractive for their conservation benefits. Unfortunately their climate benefits are generally less easily understood than reforestation or other restoration approaches, as people don't always see a visible change between before (baseline) and after (with project) implementation of the project.

As noted, forest protection projects are not credited under the Kyoto Protocol but may be included in other climate change policy regimes. With this in mind, where there are clear historical trends of deforestation or degradation, and where imminent threats are obvious, these areas are more attractive sites for emissions avoidance projects. In these projects the highest rates of emissions avoidance are possible in high biomass sites that would have been completely and lastingly converted to low biomass systems without the project.


Forest management

Forest Management projects may involve both carbon sequestration and emissions avoidance. For example, emissions avoidance would result from reduced-impact logging where timber is still being harvested but the residual impact is reduced through directional felling, well-planned skid trails, etc. Net carbon sequestration results where forests are managed to increase storage rates and volumes through longer rotations, thinning regimes, enrichment planting, or other silvicultural treatments. Management improvements in agriculture, for example reduced-till agriculture, can also serve to sequester carbon.


Advantages and Disadvantages




  • The potential for forest carbon offsets as a mechanism to finance conservation is enormous. This market is projected to be worth billions of US dollars.
  • Environmental co-benefits are conservation of biological diversity, increased forest productivity, reduced erosion, improved soil and hydrological benefits (water quality, regular flows, etc.), and ecotourism potential. These co-benefits are the basis for other conservation finance mechanisms.
  • Carbon offset projects assign economic value to one of the key environmental services provided by standing forests, thereby recognizing the value of natural ecosystems beyond timber.


  • The CDM mandates that projects must contribute to sustainable development. Ideally, carbon offset projects can increase local communities access to forest goods and services, and diversify income.
  • Technology transfer includes developing local institutions and the local knowledge base, training in sustainable forestry, project management, etc.
  • Associated policy work can result in increased land/resource tenure security.
  • Improved forest management can have positive impacts on human health through improved water and air quality and diversified diet, if there is improved access to NTFPs (non-timber forest products).
  • Stable income streams can reduce vulnerability to seasonal shifts in land-based activities for local communities.

Investors and buyers:

  • It offers a cost-effective means of reducing GHG emissions. Indications from pilot projects indicate that forest-based carbon offset projects in developing countries offer the cheapest carbon credits.
  • Public relations benefits come from investing in projects that have positive social and economic impacts.
  • Forest carbon offset projects offer a wide range of investment opportunities.

Project developers:

  • Can create a long-term stable stream of income.


  • Not all biodiversity conservation projects will work as carbon offset projects. Carbon content is not necessarily correlated with biodiversity value.
  • Monoculture plantation forestry projects will result in reduced biodiversity, and can have other negative environmental impacts such as increased erosion, siltation, and reduced water supplies.


  • Local communities can experience a loss of access to forest resources if projects involve complete protection.
  • Land tenure security for the poor can be adversely affected with increased competition for control over forest land.
  • It can result in reduced food security and have adverse health impacts if a project reduces forest dependent communities' access to forests.
  • Project investments may cluster in a relatively small number of large developing countries that that have the infrastructure and institutions to develop carbon offset projects.
  • Project financing may reduce other aid or foreign direct investment flows.

Investors and buyers:

  • Compared to carbon credits derived from the energy and industrial sector, land-use based projects tend to be riskier investments due to concerns of leakage and permanence.

Project developers:

  • Transaction costs are high: project preparation and implementation (information gathering, design, monitoring, risk management, etc.).
  • Forest sequestration projects under the CDM are limited to 1% of emissions.
  • Uncertainties still exist for project developers and investors in development of policy regimes such as the Kyoto Protocol.
  • To achieve full carbon benefits requires a minimum project development time of at least 30 years.


Success Factors

The following list of carbon offset project success factors should be considered in tandem with the general project site selection criteria given in Box 2 and the project screening criteria in Table 2 (section 2.1)

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