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What Should I Think About Before Signing a Forest Carbon Contract?

This article reviews what family forest owners may consider in a carbon contract. Content provided by the Forest Owner Carbon and Climate Education (FOCCE) program.

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Updated:

March 24, 2026

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Mature oak forest. Photo credit: Calvin Norman

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A key part of enrolling in a carbon program is signing a contract that spells out landowner responsibilities and administrative details. This article serves as a guide for the factors landowners should consider before signing a carbon contract.

Finding a Good Fit

Management Obligations

All carbon payment programs require some change in management activity on your property as management activities done (or not done) impact the forest, surrounding ecosystems, and climate for decades. Carbon programs pay forest owners to change their management practices so that the forest sequesters more carbon than it would have otherwise. This "additional carbon" storage is the product being sold to buyers who want to offset their carbon footprint.

Carbon offset project developers typically have criteria for selecting which forests and participants are more likely to provide additional carbon storage. Forest owners have an ethical obligation to determine if their own forest is a good fit for climate change mitigation. They can do this by asking themselves two important questions:

Are the requested management activities a real change from the management activities I already planned to do?
Are the requested management activities still in alignment with my broader management objectives?

The answer to the first question hinges on whether the change in carbon storage was intentional. The answer to the second question addresses whether changes in management will be sustained in the future.

It is highly unlikely that management obligations will be exactly the same across programs or even from contract to contract. This is because programs may make customized management recommendations for your forest. In addition, project managers are constantly updating protocols and procedures for managing and measuring carbon in forests to increase their accuracy and integrity. Currently, some protocol options may not be a good fit for forest owners due to the scale and timeline required to provide reliable additionality. If the opportunities available now are not a good fit, it is reasonable to expect that new options may arise as programs evolve.

The buyers of carbon credits often want to know that the offsets they are buying are, in fact, real. Carbon registries are responsible for approving carbon offset project protocols, and they also track the buying and selling of carbon. Some of the more well-known forest carbon registries are Verra and the American Carbon Registry*. Registries determine the types of forest management practices that are well-suited for sequestering additional carbon. Each registry sells credits that represent one ton of emissions reduction or avoidance, but the protocols used in the projects can vary, which could affect the value of the credits issued.

In addition to registry verification, landowners should expect that buyers and third-party verifiers may want to access their property throughout the contract and possibly for a short time after its completion. While on the property, the verifiers or the carbon contract holder may conduct measurements to assess carbon sequestration and examine forest management activities. At the end of the contract period, additional verification will likely occur before final payments can be issued. The timing of access for these actors will be outlined in the contract by the project developer.

There are different kinds of carbon credits, with one of the most common being Afforestation, Reforestation and Revegetation (ARR). These practices have the highest assurance of additional carbon storage and typically involve creating new forests in places where forests have been removed or are unlikely to occur.

In places where forests already exist, "improved forest management" (IFM) practices are commonly recommended (Anew, 2025). The goal is to extend the life of the forest, help the forest grow more quickly, and/or manage at higher stand densities. Specific activities may include extending harvest rotations, placing limitations on how much wood may be removed from the stand, and managing for invasive species. Other climate-smart forest practices include actions that reduce the risk of wildfire, pests and disease and improve natural regeneration (i.e., successful growth of younger trees). Carbon payment programs are generally focused on incentivizing a few select practices, depending on the original condition of the forest.

Carbon program representatives will often initiate discussions by describing the types of management practices generally required in their programs. However, the activities outlined in the contract will likely be specific to the owner's property. To review specific activities, look for a section in the contract titled "Responsibilities". Owners should verify that the obligation in the contract reflects prior discussions and what they have come to understand during the negotiation process. It is also important that owners verify that they are only selling the carbon that will be stored on their land, and not any other non-agreed-upon rights like timber or mineral rights. If the owner finds something new or confusing when reviewing the contract, they should not sign it. Owners should ask the program representative for clarification and solicit advice from a legal professional before signing the contract.

Landowners should understand that meeting these new management objectives may alter their current use of the land. While certain aspects, such as hunting on the land or harvesting for firewood, will most likely be allowed, there will generally be restrictions on how much can be harvested or on the creation of feed plots in certain areas. Landowners should consider their current management priorities and evaluate how those priorities may change if they enter a carbon contract.

Time Commitments

Specific time commitments are also generally found in the "Responsibilities" section. Like management obligations, time commitments can also vary from program to program and even contract to contract. Programs that require very long contracts are usually constrained by the protocols that they follow.

The protocols advanced by the California Air Resources Board (CARB) require payments to landowners for around 25 years and then an additional 100-year monitoring period in which there is no payment (CARB, 2021). Projects that use CARB-supported protocols are generally able to sell carbon in the California-Quebec Carbon Market, which is a regulated market. Regulated markets are controlled so that prices increase as new caps are put on carbon dioxide emissions. The average price of a carbon credit sold on a regulated market is typically higher compared to credits sold on an unregulated market.

Programs that do not work with CARB-supported protocols are very often selling into the voluntary carbon market. The voluntary market is unregulated and uses third-party verification procedures to support claims that a carbon project meets a set of standards for generating a legitimate carbon unit that can be sold. Programs that sell carbon on the voluntary market are able to use protocols that allow for shorter contract periods, with these projects starting at a minimum of 20 years, with 40 years being the most common (Pappas, 2026).

Payments

The payment schedule generally has its own section in the contract. Each carbon program differs in the allocation of payments for carbon credits. Payment forms can be lump sum, spread out over time, or a percentage based on selling price of credits when sold (Pappas, 2026).

It is common for landowners to receive a larger upfront percentage of the payment to help cover costs such as developing a new management plan. Then in the middle years landowners may receive a smaller percentage of payment with a large payment in the final year. Owners should verify if a percentage of credit sale allows them to benefit from changes in carbon prices.

Sometimes the program will allow the owner to negotiate a price and possibly respond to market conditions. However, this may be a challenge for some owners since the market price of carbon credits can be different from project to project, and the opportunity costs for family forest owners are not well understood by many landowners. It may be helpful to consider what other forest owners think is fair compensation for forgoing certain land uses.

Project developers, managers, and other project partners (e.g., consultants) receive a commission for organizing the project. The commission rate and how they are allocated are generally not disclosed in a contract with forest owners. If this information is important to the owner, they should ask the program representative. Keep in mind that sometimes commissions can be based on thresholds in landowner enrollment. You can explore other payment schemes by reviewing this compilation of carbon payment programs in the mid-Atlantic region. The average cost of a carbon credit in 2025 ranged from $13 - 50 per wooded acre per year. Typically, contracts with longer lengths receive higher payments (Pappas, 2026). It is important for owners to decide which payment arrangements are acceptable before entering negotiations, so they can understand the payment amount to expect over the course of the contract. Landowners should consider which payment strategy will best address their needs now and into the future.

Time Value of Money

Understanding the value of money in the future is critical for making economically efficient decisions about forest investments. Given the slow pace of tree growth, it can take 20-125 years for a carbon contract to be completed. While this may be a short time for trees it is a long time for people. That's why landowners should consider the benefits of receiving payments now rather than in the future. Money made available today is generally more valuable compared to money that is made in the future. If a person is asked to wait for payment, they should be compensated for that delay. Interest rates help with this by comparing the value of a dollar earned today to that of a dollar earned next year.

The ability to acquire wealth is dependent on making accurate comparisons between alternative outcomes. The benefits gained from enrolling in the carbon program was not intuitively understood until it was compared with another investment option. See Appendix A to for a full example of comparing future values. There are also some other considerations that need to be made when payments occur in the future, such as predicting what may happen in the meantime. Delaying harvest can come with some risks. For example, in year three a hurricane could blow down the forest, which would kill the trees and make a future harvest impossible or much less valuable. In this case, the interest rate should be adjusted to reflect the owner's own feelings of risk. What is important to understand is that delaying payments (either of harvest or choosing between two different payment schedules) makes a difference.

Clauses/Exemptions/Violations

As with all contracts, it is very important for landowners to thoroughly read and understand what is expected when things go to plan, and what can be expected when things do not go to plan. Landowners need to read all of the clauses in the contract, as they provide a legal and binding definition of important points, such as how to handle land transition and what may cause the contract to be terminated. Many carbon programs also have specific ways for how to designate property heirs or specific reporting requirements for land management actions. It is important for landowners to consider that in most cases if the land is sold, it will pass on the contract to the next owner. This is true in the case of transition to heirs as well. Contracts that are broken early will require a fee.

Many contracts contain "exclusion clauses" which describe how a party to the contract may be eliminated with no fault (e.g., a natural disaster leading to loss of the forest. The "limitation clauses" describe limits to compensation for certain unexpected damages Sangha, 2022). Landowners also need to understand what the contract defines as an accidental release, what was intentional, and how disputes are resolved.

An accidental release is when a natural disturbance (e.g., wildfire, hurricane, pests) causes a large number of unexpected tree deaths, which increases carbon emissions from the forest via conditions that are deemed "unavoidable". Carbon programs that use approved protocols often have a carbon pool or buffer that they use to cover any accidental release. Owners need to understand if they may benefit from these types of insurance protocols wrapped into a project.

An intentional release occurs when more harvesting takes place than is allowed by the legal forest carbon contract within the designated area and during a given period. This action increases the expected carbon emissions from the forest through activities deemed "avoidable."

When landowners sign a carbon contract, they are fully responsible for ensuring that the management outlined in the contract is carried out, so it is critical for them to understand the management obligations they have agreed to. For some owners, certain management obligations may not be feasible or overly burdensome. Owners should try to negotiate the parts of the contract they consider overly challenging with the help of a legal professional. If negotiations fail, they should not hesitate to walk away —there are other programs available and violating a contract may end up costing more than the contract is worth. Keep in mind that it is much easier to address questions or disagreements about the contract or its clauses before signing.

Clauses and exemptions may also impact other activities such as collecting firewood and recreation. For the most part these activities are allowable, although there may be restrictions on how much firewood is taken or specific recreation management. For example, hunting is likely to be allowed, but there may be a restriction on feedplots or it may impact trail maintenance for hiking. Other legal arrangements, such as hunting leases and conservation easements, may also be allowable under certain circumstances. Landowners can also be eligible to be enrolled in a preferential tax program while participating in a carbon contract, but this is dependent on specific state-to-state requirements. In all cases landowners must double-check with the project developer and a legal expert that these projects are compatible. Prescribed fire may be an allowable management practice as long as it is recognized as an approved management practice in the standards and protocols used by the project developers.

New carbon programs are coming online quickly and are looking to grow. Many are in the early stages of implementation. The contracts they create will likely evolve as they gain more experience working with landowners. In the meantime, don't expect that carbon programs will be able to fully account for the owner's interests when designing a contract. Carbon programs have legal representatives who advise them on how to protect their investments, and owners should give the same consideration to their own assets. It is good practice to work with legal and forestry professionals before signing a contract to assess unreasonable risk and ensure alignment with landowner objectives. Keep in mind that since carbon markets are relatively new it may be difficult to find professionals who work specifically with carbon markets, but some expert advice is better than none.

Contract Renewal

Once a contract is completed, owners may consider renewing it. To help with this decision, owners should take occasional notes about their experience in the program to help remember things like disputes and how they were resolved, if there were opportunities missed, or what good outcomes came from being enrolled. Forest owners also need to consider that over the length of the contract, their forest will change–trees age, forest pests attack, and weather events happen. As the end of the contract approaches, forest owners should work with a professional forester to assess the condition of their forest to determine (1) if their forest can still qualify, and (2) if re-enrollment in the program still aligns with the landowner's broader management objectives. If the property is inherited with a carbon contract, a renewal should only be considered if the objectives of the new owner are still in alignment with the program's requirements. Forest owners should always thoroughly read the contract and work with legal and forestry professionals before renewing a contract.

If the owner is considering enrollment in two different programs, one right after the other, it is important to consider if the second program has a conflict with this approach. Carbon projects differ in the types of protocols they use to quantify carbon. Project developers also have to make some assumptions about landowners' "business as usual" behaviors, which indicates how much carbon they have available to sell and how to avoid double counting the carbon. Be sure to talk to carbon program representatives to find out if back-to-back enrollment is allowed or if a time delay in between programs is required.

*The organizations mentioned in this article are examples and not necessarily endorsed by the authors.

Appendix A

Let's look at an example of how the time value of money can impact decision-making if the carbon program requires a delay in harvest. The forest today is ready to be harvested and will likely net $1,000, but the forest owner has been approached about enrolling in a harvest deferral program. The owner is offered a total of $200 that will be paid out after 5 years of not harvesting. To decide if the contract is worth enrolling in, calculate the future value of the money from a harvest today (at a 4% interest rate), and compare it to the sum of the carbon payment ($200) and the revenue from a harvest 5 years in the future. To calculate the first part, or the future value of $1,000 invested for 5 years at 4% interest, use this equation:

Value of harvest money invested for five years = $1,000 x (1 + .04)5 = $1,216.

If the funds received from the harvest today were invested, they could provide the landowner $1,216 in five years. Compare that with $1,450, which is what would have been made by accepting in five years the $200 carbon payment and $1,250 from the harvest (the trees will grow during the five years producing more revenue). In this example, the landowner would be better off entering the contract and receiving the payment plus the harvest revenue ($1,450 > $1,216).

* Previous versions of this article were co-authored by Calvin Norman.

If you have any questions or are interested in collaborating with FOCCE, please reach out to Melissa Kreye at mxk1244@psu.edu