The growing interest in compliance and voluntary carbon market mechanisms has increased the recognition of forests' role in climate change mitigation (McAfee, 2016; Maguire, 2011). Therefore, carbon markets are often associated with investments in forest-based climate solutions, especially in green projects that enhance carbon sequestration and reduce greenhouse gas emissions.

Four common forms of association exist between carbon markets and forest-based climate solutions. The first form is carbon pricing mechanisms, where a cap-and-trade or carbon pricing system is established. By setting a limit (cap) on the total amount of greenhouse gas emissions, entities (e.g., power plants and factories) are required to obtain permits that are equivalent to their emissions so they can buy or sell these permits in the market (Narassimhan et al., 2018). Second, it is in the form of forest carbon sequestration offsets. Forest-based carbon offsets compensate emissions for entities subject to carbon regulations (van Kooten & Johnston, 2016). These forest-based carbon offsets apply to entities that generate carbon credits via green projects, which include afforestation, reforestation, forest conservation, and sustainable forest management. The accumulated carbon credits are then traded into carbon markets as offsets (van Kooten & Johnston, 2016).

The third association between carbon markets and forest-based climate solutions is through financial incentives for forest conservation and restoration activities. These activities are crucial in climate change mitigation as they safeguard forests' ecological function in terms of carbon sequestration and carbon storage. Therefore, relevant entities such as forest owners or managers can receive revenue from carbon markets when a specific monetary value is assigned to forest carbon stocks or forest carbon sequestration rate (Sonwa et al., 2016; Kerchner & Keeton, 2015). The existence of such revenue often incentivises them to manage forests sustainably, avoid deforestation and degradation, and encourage the implementation of other forest conservation projects. The fourth form of association between carbon markets and forest-based climate solutions is via investments in sustainable forest management (SFM) practice. While SFM promotes socioeconomic development without jeopardising the functional integrity of forest ecosystems, it can also optimise carbon storage (Winjum et al., 1993). From the perspective of climate change mitigation, SFM could enhance forest carbon storage by reducing emissions from deforestation and forest degradation (REDD+) (Indrajaya et al., 2016), implementing forest certification schemes (Charmakar et al., 2021), adapting specific forest management techniques (Ameray et al., 2021), and embracing revolutionary techniques in measuring, monitoring, reporting and verification of forest carbon stocks (Goetz & Dubayah, 2011).

Overall, investments in forest-based climate solutions can be driven by market-based mechanisms that highlight the monetary value of forests by incentivising their ecological role in carbon sequestration, carbon storage and emissions reductions. While it may invariably be challenging to guarantee the effectiveness of this approach, the association between carbon markets and forest-based climate solutions is significant. It offers a promising pathway for mitigating climate change.


References

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Charmakar, S., Oli, B. N., Joshi, N. R., Maraseni, T. N., & Atreya, K. (2021). Forest carbon storage and species richness in FSC certified and non-certified community forests in Nepal. Small-scale Forestry, 20(2), 199-219.

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Narassimhan, E., Gallagher, K. S., Koester, S., & Alejo, J. R. (2018). Carbon pricing in practice: A review of existing emissions trading systems. Climate Policy, 18(8), 967-991.

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