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Objective Economic Additionality v. Subjective Behavior Predictions

Published: October 12, 2021 by Editorial Team

The concept of additionality has been a tricky issue for carbon markets and some of this tension has been reflected in recent criticisms of improved forest management (IFM) projects. This may be due to conflicting ideas about the role carbon markets can play: should markets objectively value sequestered carbon as a commodity or subjectively base value on predictions of future behavior?

All major carbon offset registries require validated forest projects to sequester carbon above a calculated baseline. Baselines are project specific and generally set by calculations of “business as usual”. This is measured in large part by what is economically incentivized under prevailing regional markets, taking into account pre-existing restrictions. For instance, when developing an IFM project, developers must evaluate the amount, price, and demand for the merchantable timber that is on-site. These evaluations help construct a project-specific baseline and model carbon flows as if the timber were being managed to maximize economic returns within current legal and market restraints. Instead, the landowner enters a legal contract binding them to manage their forest for increased carbon stores above the modeled baseline. The difference between these two scenarios in metric tons of CO2e is deemed additional and can be sold as offsets. This measure of additionality is purely economic and legal and does not factor in non-economic landowner motivation.

Critics of this approach point out that the constructed baseline scenarios may not match the landowner’s historical or intended forest management practices. That is, “conservation-minded owners have not and likely will not start clear-cutting their forests so why should they be paid to do what they may do anyway?” This line of reasoning leads down a slippery slope of trying to form a market around anticipated human behavior.

First, basing additionality on historical forest management would all but preclude any conservation-minded landowners and NGOs from participating in carbon markets. Only owners who have been maximizing returns from timber harvesting would be eligible. Privately conserved forests are some of the most important carbon sinks and stores in the U.S.; excluding them from the market could create a perverse incentive to harvest aggressively now so you can be paid to store carbon later.

Secondly, past behavior certainly does not guarantee the future. Improved forest management projects require landowners to enter 40 to 100-year contracts that legally protect carbon stores from harvesting or intentional removal. Environmental organizations routinely face financial challenges, changes in leadership and own valuable forests in dynamic timber markets.  Carbon project revenues help solidify the continued viability of these important groups and ensure their forest carbon stores will be protected even if the property changes hands or the organization becomes insolvent.

Lastly, conservation organizations are utilizing revenue from the sale of offsets to acquire and secure additional lands that can also be managed as long-term carbon sinks. Indeed, carbon offset projects have become a key conservation finance strategy leading to the acquisition and conservation of thousands of forested acres whose future was in question.

In short, carbon markets in their current iteration are an effective tool to value avoided and removed GHG emissions demonstrated in measurable, economic and legal terms. Trying to base this carbon value on anticipated future behavior undermines the objectivity of the market and opens measures of additionality up to a slew of unpredictable and changing metrics.