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Whitepaper: The Size and Scope of Carbon Markets Related to Forestry and Deforestation Prevention

Carbon markets have emerged as a promising tool in the fight against climate change. They offer a mechanism for quantifying and trading the carbon sequestration benefits provided by forests, thereby creating a financial incentive for forest conservation and restoration. This whitepaper explores the current size and scope of these markets, with a particular focus on forestry and deforestation prevention, and discusses the potential growth of these markets over the next decade.

Current Size and Scope of Carbon Markets

The carbon markets related to forestry, also known as forest carbon markets, have seen significant growth in recent years. These markets operate by allowing entities, such as companies or individuals, to buy and trade credits to offset a portion of their carbon emissions. The revenue from these transactions is then paid to landowners and communities as an incentive to protect and restore forests.

In the United States, the U.S Department of Agriculture (USDA) released a comprehensive report on the role of agriculture and forestry in the U.S. Carbon Markets. The report identified a variety of barriers that have hindered the participation of agriculture in these markets, including high transaction costs and limited returns on investment1. However, it also highlighted the potential of these markets to provide new income opportunities for farmers and forest landowners through carbon credit sales.

Internationally, several countries, including Mozambique, have begun to receive payments from the World Bank’s Forest Carbon Partnership Facility for reducing emissions. These payments signal to international carbon markets that large-scale programs that reduce emissions from deforestation and forest degradation (known as REDD+) can produce high-quality carbon credits.

Future Growth of Carbon Markets

While it’s challenging to predict the exact growth of these markets over the next decade, several factors suggest that they will continue to expand. The increasing recognition of the role of forests in mitigating climate change, coupled with the growing demand for carbon offsets, is likely to drive further growth in these markets.

Moreover, new initiatives are emerging that aim to simplify the carbon project development process, criteria, and financial requirements, thereby making it easier for more forest owners to participate in these markets2. At the same time, efforts are underway to address the barriers that have hindered participation in these markets, such as high transaction costs1.

In conclusion, carbon markets related to forestry and deforestation prevention represent a promising tool for combating climate change. While these markets are still evolving, they have already shown significant growth and are likely to continue expanding in the coming decade. However, for these markets to reach their full potential, it will be crucial to address the existing barriers to participation and ensure that the benefits of these markets are accessible to all forest owners.