Forest Carbon Markets: Potential and Drawbacks [July 3, 2008]   [open pdf - 143KB]

"Forests are major carbon sinks (storehouses), and activities that alter forests can release or sequester carbon dioxide (CO2), the most common greenhouse gas (GHG). Some carbon markets have been formed under mandatory GHG reduction regimes, such as the Kyoto Protocol and various regional and state initiatives in the United States. Other markets have formed for voluntary efforts to reduce GHG emissions. Offsets, or credits for sequestering carbon or reducing emissions in unregulated sectors, are typically allowed in both mandatory and voluntary markets. Forestry activities are among the largest-volume and lowest-cost opportunities for generating offsets. Various forestry activities may be feasible for carbon offsets. […] Forestry projects may offer considerable market opportunities for carbon offsets, but several issues have generated concerns and controversy. One concern, especially for compliance markets, is whether the project is additional to business as usual. An activity that is common practice or industry standard, or a project that is required under current federal, state, or local laws, cannot be used as an offset. Functional carbon markets also require cost-effective practices to verify carbon sequestration. Current measurement and monitoring practices are costly and have several implementation challenges. Another concern is that, compared to other types of offsets, forestry projects present the greatest risk of leakage. Emission leakage can occur if carbon sequestered in one location (e.g., by avoided deforestation) leads to carbon release (e.g., from increased harvesting) in another location. Product leakage could occur if forest carbon sequestration encourages use of more carbon-intensive substitutes (e.g., cement or steel). Forest carbon projects are expected to generate offsets for decades."

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CRS Report for Congress, RL34560
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