Market Actors: Who is Involved in a Forest Carbon Offset Project?

Market Actors- Who is in charge of generating a credit?

While the motivations for purchasing carbon credits vary, the actors involved in producing and verifying them are largely the same. The primary actors include project developers, registries, the seller (landowner, community), and the buyer (industry, governmental, or other). Additional actors may include consulting foresters and brokers.

The carbon market process is initially driven by a business or corporation (aka the buyer) that is motivated to reduce its carbon emissions (See figure 1). When a business is no longer able to reduce its emissions on its own, then it will be motivated to buy carbon credits to offset its emissions. This is where the landowner comes in. The landowners are the producers of the carbon credit (Sellers). When landowners enter a carbon contract, their change in management will produce additional carbon storage. This additional carbon storage is then sold as a good on the market. In order to actually sell and generate this credit, landowners will engage with additional actors. In Figure 2, the supply chain from buyer to seller is shown, with additional actors that help the landowner successfully engage in the market. 

Project developers typically work most closely with the landowner. They create the project design and arrange contracts with the landowner. In many cases, the project developer will support the landowner in conducting required management activities to ensure the project’s additionality. Common project developers include the Family Forest Carbon Program, LandYield, and Forest Carbon Works. Heritage Habitat and Forestry has a list of programs that accommodate family forest owners, but this list is not exhaustive, so we recommend doing your own research. 

The project developer must work closely with a carbon registry. Registries track the number of credits issued under the methodologies they endorse (Parajuli et al, 2019). Credits verified by a registry tend to be more valuable when sold on the voluntary market.  The registries also keep records of projects to prevent double-counting. Common registries include Verra and American Carbon Registry.

Registries often require an independent third-party verifier to ensure that protocols are being followed and that carbon measurements are accurate. These verifiers are not affiliated with the carbon registries or the project developers, but they do receive compensation for their verification services. SES Inc. is an example of a verifier that works with forest carbon offsets.

In many cases, consulting foresters are involved as verifiers and subcontract with the project developer. Some landowners may choose to work with a consulting forester to estimate the carbon stored on their land before directly collaborating with a project developer. Additionally, forestry consultants assist in developing a forest carbon management plan, which is often necessary to establish the baseline level of carbon for a forest carbon project.

A "broker" is sometimes involved to help connect buyers with credits, although this is less common. Brokers buy the credits directly from the landowner and project developer, but they are in charge of facilitating the final trade (L. Jennifer, 2023). Brokers view the credit as an investment and can allow payment upfront for landowners while they wait to make trades in the future. 

The table below provides definitions of each of the key actors involved in generating a carbon credit. 

Process of Selling a Carbon Credit

While the project developer helps to manage the property during the duration of the carbon contract, it is useful for landowners to understand the process. The process typically occurs across 5 stages: design and planning, implementation, monitoring, reporting and verification, commercialization, and long-term management. The project developers, registries, and landowners are involved at various levels of engagement throughout the process, while the buyers rarely interact until the commercialization stage. You can read a description of each phase in Figure 1.

The final stage for a carbon credit is called "retirement." Carbon credit retirement occurs when a company has used the value of a credit, and it is no longer available for trading in the market. To learn more about ownership of carbon credits in a marketplace, read "Who owns the Carbon?" and visit the FOCCE website.

Sources: 

L, J. (2023, April 4). Carbon credit brokers: What they are and how they work. Carbon Credits.

L, J. (2024, January 9). Retiring carbon credits: Everything you need to know. Carbon Credits.

Kreye, M. (October 2023). Terms and Concepts Associated with Forest Management on Private Forestlands. FOCCE.

Pan, C., Shrestha, A., Innes, J. L., Zhou, G., Li, N., Li, J., ... & Wang, G. (2022). Key challenges and approaches to addressing barriers in forest carbon offset projects. Journal of Forestry Research, 33(4), 1109-1122. doi.org/10.1007/s11676-022-01488-z

Parajuli, R., Megalos, M., Ruseva, T., Chizmar, S., & Fisher, M. (2019b, July). An introduction to Forest Carbon Offset Markets: NC State Extension Publications. An Introduction to Forest Carbon Offset Markets | NC State Extension Publications.