About the carbon market

Forest Carbon Works uses the carbon market to help smaller landowners earn revenue by sequestering carbon in their forests. Learn how carbon credits work and why reducing emissions has market value.

Differing age classes of trees

What is a carbon credit?

A carbon credit is a tradeable asset issued by the California Air Resources Board that represents a reduction or removal of one metric ton of carbon dioxide from the atmosphere. Carbon credits are bought and sold through California’s compliance program, cap-and-trade.

How is forestland defined?

Forestland is defined as real estate of ten acres or more that supports, or has the potential to support, at least ten percent tree canopy cover.

How does the forest carbon market work?

The burning of fossil fuels for transportation, manufacturing, and industrial processes emits carbon dioxide into the atmosphere. Entities who are required by law to limit or offset their carbon dioxide emissions, as well as entities that are voluntarily offsetting their emissions, may purchase carbon credits that are generated from growing forests. As trees grow, they use photosynthesis to convert carbon dioxide from the air into wood. This process can be measured and values can be assigned in the form of carbon credits. Carbon credits can then be purchased by entities to help them reach their emission reduction goals. 1 carbon credit equals 1 tonne (metric ton) of carbon dioxide removed from the atmosphere.

What is the Air Resources Board (ARB)?

The California Air Resources Board is the “clean air agency” in the government of California. ARB’s mission is to promote and protect public health, welfare and ecological resources through the effective and efficient reduction of air pollutants in recognition and consideration of the effects on the economy of the state.

Can I decide who buys credits created by the project?

No. As part of the Membership Agreement, members agree to receive an annual payment from Forest Carbon Works, not the credits themselves. Forest Carbon Works will transact credits on the landowner’s behalf, and the landowner will receive annual payments from the sale of credits.

What carbon market does Forest Carbon Works operate in?

Forest Carbon Works functions under California’s compliance market, operating within the cap-and-trade program. All reporting is made to California’s Air Resources Board. The cap-and-trade system was effectively started through the passing of Assembly Bill 32, the California Global Warming Solutions Act of 2006. You can read more about AB 32 here: https://www.arb.ca.gov/cc/ab32/ab32.htm

What is the price of carbon?

The price of carbon varies depending on market conditions. You can check the current price of carbon at http://californiacarbon.info/

What is tCO2e?

tCO2e stands for tonnes of carbon dioxide equivalent. This is the standard unit in carbon accounting used to quantify greenhouse gas emissions, emissions reductions and carbon credits.

What are emissions?

Emissions are the release of greenhouse gases into the atmosphere from sources and processes in a facility, including from the combustion of fossil fuels such as natural gas, petroleum products, and natural gas liquids.

What are emissions reductions?

An emissions reduction is the term used to quantify the amount of release of a greenhouse gas, notably used in terms of prevention of a release. This term is put in place by the California regulating body and it represents the standard unit of measurement for carbon projects. A single emissions reduction unit is equal to one tonne of carbon dioxide (CO2) equivalent.

What are GHGs?

The term GHGs stands for greenhouse gases. Greenhouse gases are gases within our atmosphere which absorb and emit radiation within the thermal infrared range. Excess of these gases due to human activity are widely accepted as a major contributor to global climate change. Carbon dioxide (CO2) is the mostly widely recognized greenhouse gas and is the only greenhouse gas pertinent to forest offset projects. It is also used as the standard unit of measurement for carbon projects.

What is additionality?

In order for a property to be eligible for a carbon project, it must demonstrate that it is additional. Additionality means that actions that are taking place (i.e., implementing a carbon project and maintaining carbon stocks on a property) are beyond what would be otherwise required by law, regulation, or legally binding mandate, and that they exceed what would otherwise occur in a conservative business-as-usual scenario.

What is a Payment Period?

The Payment Period is a pre-determined period for which an offset project will remain eligible to be issued credits (and in which landowners will receive their annual payment). For forestry related carbon offset projects under the Air Resources Board, the Payment Period is 25 years. Under ARB, the Payment Period is synonymous with the term “Crediting Period.”

What is a project lifetime?

The project lifetime is composed of the Payment Period plus a 100-year Legacy Period (known under ARB as the “Monitoring Period). It is the time period over which project activities (i.e. carbon storage and subsequent crediting) and monitoring are implemented. The 25-year Payment Period is renewable in additional 25-year increments. Thus, the minimum project lifetime is 125 years.

Curious about starting a forest carbon project?

Learn how to check your eligibility and apply.

How to start a project