Carbon Contract Key Terms

Introduction

Carbon offset projects provide landowners with payment for storing additional carbon on their forested land, but to sell credits landowners must enter carbon contracts. The contracts help to ensure the integrity of a carbon project, but for landowners it can often feel overwhelming to understand the requirements. This article breaks down key terms and the three essential standards that landowners need to meet in order to qualify for a carbon contract.

Baselines

Before understanding the key standards of a carbon project, it is important to understand how forest carbon is being accounted for in the first place. This is done through a baseline. The baseline is the amount of carbon stored that would be stored in your project without enrolling in a carbon program. It is similar to calculating a business-as-usual projection. The baseline allows project developers to measure the difference between the carbon project scenario and the baseline. In fact, most carbon offsets are defined by their baseline. In many cases, "a carbon offset comes from verified activities that remove/reduce carbon compared to baseline activities." Project developers may use one of two types of baselines in their contract. The two baselines are static and dynamic. A static baseline uses a fixed reference point to measure progress over time while a dynamic baseline adjusts overtime based on new data. Landowners should pay attention to which baseline is being used when they are entering a carbon contract!

Three Standards for Carbon Contracts

Additionality

The standard of additionality is the base concept for a carbon contract. Additionality requires that storage must be real and more than the amount of carbon storage that would have naturally occurred before enrolling in a program. Additional carbon storage comes from a change in management practice. For afforestation/reforestation programs, this process is fairly straightforward. Registries account for the carbon added from the new tree growth. However, the majority of carbon credits on family forest lands are not afforestation projects, but rather something known as "delayed harvest" or "Improved Forest Management (IMF)." These projects require that landowners show how changes in management strategies hold additional carbon on the land. For these projects, having robust forest management plans will be important for landowners. As a result, some of the current carbon programs work with landowners to develop their forest management plans.

Permanence

One of the most crucial aspects of a carbon contract is that the carbon storage is "permanent." This refers to the long-term storage of carbon on the property, which in turn will create longterm benefits to the climate. This means that there must be net gains for the entire lifetime of a carbon program, which is usually considered to be about 100 years. Permanent carbon requires that contracts often span for longer periods of time, 20-40 years, which is sometimes longer than the expected lifetime of the current landowner. For this reason, landowners should consider legacy/succession planning as a key part of their management plan and should have conversations with family members about the carbon contract.

Non-Leakage

Projects should strive to achieve the standard of non-leakage. This refers to projects ensuring that their additional carbon storage has not led to additional carbon losses outside the project area. Leakage situations occur when loss of timber production is then replaced on other plots of land. This is especially hard to ensure due to pressure from market demand. Project developers work closely with landowners to address the standard of non-leakage. As a landowner just getting started in the carbon offset space, it can be overwhelming trying to understand the requirements of a carbon contract. By understanding the most common key terms, landowners can feel more confident engaging with project developers. There is a plethora of other key terms that landowners may come across during their journey in the carbon offset space. For a complete list of key terms visit our online glossary.