ABC: afforestation carbon credits in numbers - understanding the market

All underlying data courtesy of the Berkeley Voluntary Registry Offsets Database v7, published in February 2023.

First things first...

How does afforestation fit into the broader carbon credit market?

Afforestation is just one type out of a range of carbon projects, accounting for just over 3% of all carbon credits issued:

Are all these projects developed according to the same rules?

Not entirely - there are different types of afforestation projects based on various methodologies (a methodology is just a set of rules for how the project should be operated).

The biggest afforestation methodologies currently used in the market are managed by Verra (read more about Verra and its role in the voluntary carbon markets here). They are usually referred to by the rather un-catchy code names AR-ACM003 and AR-ACM001 (you can read the methodologies on the Verra website, but be forewarned, it is rather dull reading!). Between them, these two methodologies account for 36 million credits (/tonnes of CO₂ stored – roughly equivalent to the annual CO₂ footprint of 6 million Europeans, or the entire country of Denmark). That represents 64% of all afforestation credits issued, ever.

Who and where is planting all those trees and generating the credits?

At the end of 2022, there were 178 afforestation projects listed in the Verra registry, of which:

• 5 were inactive or rejected (including one Europe-based project)
• 49 had already issued at least some credits (remember that it can take 5 years for afforestation projects to start issuing credits!)
• The remaining 124 were under development (Arbonics is one of these)

Of all 19.4 million credits issued so far, the majority were generated in East Asia and South America:

All these projects...

Does that mean the market supply is growing rapidly?

Surprisingly, no - despite a large number of projects in development, new credit issuances have dropped in the five years to 2021 (2022 vintage issuances have not yet been published) – suggesting a lack of high-quality afforestation credits entering the market.

How big is the afforestation carbon credit market in dollars/euros/yens?

All this talk about the number of credits generated may lead you to ask – okay, but what is the actual value we’re talking about here? On this, it becomes much harder to find solid data.

However, we can take an educated guess: from our experience, afforestation credits are currently selling for a broad range of prices,  from $20 (generally older vintages and/or lower-quality projects with non-native species or low permanence) to $50/tonne (very high-quality credits). ( Using these as an indicator, the market value of the 2020 vintage ranges from $155M to $388M, and the smaller 2021 vintage from $63M to $157M. While these numbers may not be huge, a few key things to keep in mind:

• Demand in the voluntary carbon market more broadly has increased by nearly 4x over the last couple of years and is likely to continue increasing
• Afforestation is one of the few removal-type carbon credits available on the market today at scale – as a result, while supply has been lagging, demand has grown significantly.
• Prices for carbon credits more generally are expected to increase several times by 2035 – read more in our overview of carbon credit pricing here.

For more on the voluntary carbon markets and afforestation, please see our Knowledge Hub. In particular, you might find this primer on carbon credits quite handy, or else wish to dig more into how the voluntary carbon market functions.

If you are ready to jump in and think you have suitable land - get in touch here!