The possibility of obtaining carbon funding for activities that preserve or increase forest cover is both exciting and real. As more carbon accounting methodologies are approved and the number of high-quality projects grows, the sector is rapidly expanding from historically low transaction volumes. Despite these brighter prospects, many projects with positive climate impacts will remain financially unviable for a variety of reasons:
- Forest carbon has been largely excluded from compliance markets, and prices in voluntary markets are relatively low;
- Not all projects fit accepted carbon accounting methodologies, and thus may be ineligible to be certified under an accepted standard;
- Project development and transaction costs can be extraordinarily high, particularly (on a proportional basis) for small-scale projects; and
- Due to high levels of market uncertainty and project risk, project value is discounted.
Accessing carbon markets or emerging forest carbon funds typically necessitates an exceptional plot of land, exceptional people to develop the carbon assets, and exceptional buyers, investors, and/or donors with cash on hand. Creating truly viable forest carbon opportunities necessitates thorough analysis and strategic site and activity selection.