Carbon Credit Pricing Trends for Forestry Projects in the Voluntary Carbon Market
The voluntary carbon market (VCM) has become a key market-based tool for helping companies address their carbon emissions. The VCM provides a non-regulatory mechanism by which companies can offset portions of their emissions by financing a wide range of projects that capture and store carbon. Prices for the credits these projects produce can vary widely based on project type and location.
Improved Forest Management Methodology
LandYield operates under the American Carbon Registries’ (ACR) US-based Improved Forest Management (IFM) methodology. IFM projects compensate landowners for managing their forests for enhanced carbon sequestration. Because these projects are backed by high-resolution satellite imagery and data from the US Forest Service and come with co-benefits like improving water quality and biodiversity, US-based IFM projects have commanded relatively high and stable prices in the VCM.
Price Drivers for IFM Carbon Credits
Carbon credit prices vary based on a wide range of factors including:
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Project Co-Benefits.
Purchasers of carbon credits are often looking at the holistic benefits of the project. IFM projects can offer co-benefits that are appealing to buyers including:-
Improved water quality
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Wildlife habitat
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Recreation opportunities.
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- Location
Projects are lower risk when they are done in places that have strong protections for private land ownership and low regulatory volatility. - Permanence
Buyers are looking for long-term carbon sequestration. LandYield has a 40-year contract term so that buyers know the carbon they are purchasing will be held in the forest for the entire project duration. - Measurement and Verification
Carbon projects need to be able to verify and measure the volume of carbon on the property so that buyers can demonstrate how much carbon is being held on the property. Projects with more accurate and complete measurements are viewed as higher quality and command a higher price. - Additionality
The concept of additionality is central to carbon credit pricing. A project must prove that carbon sequestration would not have happened without the carbon offset project. - Removals vs Avoidance Credits
Credits that are based on taking carbon out of the atmosphere, called removal credits, command a price premium to credits that are based on avoiding the release of carbon into the atmosphere, called avoidance credits. Removal credits sold at average prices 3.5x higher than avoidance credits in 2023. - Ownership
Offset buyers may pay more to benefit specific geographies, under-invested communities, and under-served landowners. Investing in rural communities in places where US-based companies operate is particularly appealing to many offset buyers.
These factors all contribute to the perceived quality, and in turn, the price, of a project’s carbon credits.
Rising Demand for Nature-based Carbon Credits
While project characteristics primarily drive offset prices, the market fundamentals for IFM credits have helped drive the price stability behind IFM projects. Demand for nature-based carbon removal is expected to increase, with over 40 million metric tons in expected demand by 2030. Meanwhile, the projected supply for 2030 is only 20 million metric tons. We’re heading toward a significant gap between the level of demand for carbon credits as corporations approach 2030 deadlines for net-zero goals and the volume of supply on the market.
Voluntary Carbon Market Size and Value
There are two major drivers of this increasing demand. First, more than 6,000 companies have set Science-based emission reduction targets that will require them to purchase carbon credits to offset emissions they are unable to reduce. These targets exist outside of any regulation so will not change with Presidential administrations or policy changes.
As these companies approach their target deadlines in 2030, 2040, or 2050, they will need to purchase high-quality offsets to fulfill their promises. Further bolstering demand for ACR credits, the governing body for airlines, the International Civil Aviation Organization has approved ACR credits to be used by airlines to offset their emissions. This could be a significant driver for demand for LandYield’s credit type in the coming years.
Second, a major emphasis for the market in recent years has been to distinguish higher vs lower quality offsets. In 2023, the market moved toward higher-quality offsets as determined by all the factors discussed above. As corporate buyers become more discerning and concerned about the reputational risk of low-quality carbon credits not delivering the promised climate benefits, they prioritize certain carbon sequestration projects backed by high-quality, frequent forest measurements. LandYield’s projects combine environmental and social co-benefits with state-of-the-art satellite-derived forest monitoring data to produce high-integrity credits that companies can trust and are willing to pay a premium for.
Recent Voluntary Carbon Market Pricing Activity
Now that we understand a few of the driving factors behind IFM demand, what are the current prices in the market? Recent transactions have shown prices for US-based IFM credits remaining strong.
Weyerhaeuser completed its first sale of voluntary credits in late 2023 with an IFM project in Maine, selling the credits for $29 per metric ton. Chestnut Carbon sold its first IFM credits for $34 per metric ton in September 2024. Both of these transactions show a substantial premium to the average 2023 removal-based credit price of $15.91, indicating that US-based IFM projects like LandYield’s signal quality and demonstrable carbon reductions on which buyers are willing to place a premium.
Looking Forward: VCM 2025
As the voluntary carbon offset market matures, calls for greater transparency and integrity are growing. The growing interest in carbon credit quality is pushing project developers to adhere to more rigorous standards.
Voluntary Carbon Markets Integrity Initiative
The ICVCM has published standards to guide project development, while the VCMI has published standards for purchasing and using credits toward net-zero targets. Efforts like this are intended to increase the transparency and validity of carbon offsets and will contribute to building robust long-term demand for high-quality carbon credits.
Voluntary Carbon Market Growth
Carbon credits play an important role in the fight against climate change and are a powerful mechanism to keep forests in the hands of small landowners across the US for generations to come. That role will only grow as development and climate pressures continue to increase. Fortunately, markets are beginning to recognize that value and to pay landowners accordingly.
Learn more about how you can be connected to carbon markets through LandYield here.