Roots & Returns

Milliken Media Room

The Value of Experience: What a Generation of Forest Carbon Projects Can Teach Us

by Matthew Smith CF, ACF Forest Carbon Specialist and Darrel Pendris Director of Nature Based Solutions, Milliken Advisors

September 22, 2026

Abstract

For many, carbon offset markets and programs are confusing at best. It’s a challenge to understand differing programs, where opportunities lie and where they do not, and what uncertainties lay ahead. With major changes in the forest carbon market taking place in real time, readers will benefit from an inside look at how the market has evolved, why changes have taken place, and what the recent market reset means going forward. The Author explains these dynamics and looks at what we’ve learned on this journey toward mainstream ecosystem markets.

In the Beginning

Today, carbon offsets are a multibillion-dollar global business but forestry projects that enter the market in 2026 have little in common with those done in the past. The last two decades have produced forestry projects that were winners, and, unfortunately, some losers, too. Regardless of what class project owners fall into, none of the progress this market has made would be possible without the brave early adopters out there. We tip our hat to those landowners and foresters that took the leap and ventured into the carbon space over the past two decades. As we strive to understand the current market, it is helpful to look back at the road that forest carbon has been on, consider what have we learned from it, and look at what’s around the next bend in the carbon road.

In the early 2000s the pillars of carbon offset policy that determine offset quality were first put into practice. These pillars include additionality, leakage, risk, and permanence. These key project characteristics, and each carbon program’s performance regarding them, are what defined quality then and continue to define offset quality today. In these formative years, programs developed their methodologies for forest carbon offset projects in the US independently and with differing requirements around these common pillars. The result was the onset of widely variable program-branded offsets of differing qualities and values.

During this period of innovation and competition, we also saw the beginning of the California Air Resources Board compliance program (CARB) which also followed its own path in defining what a quality offset consisted of. The compliance program from CARB was unique in that the demand side for offsets was assured and price floors were established. The protocol for improved forest management (IFM) developed by CARB is still considered a high bar to meet and has a track record as one of the most demanding protocols available to forest owners.

As growth of the US voluntary offset market showed promise to meet corporate climate goals changes started to take place in 2007 and 2008. Burgeoning growth amongst voluntary programs was rapidly eclipsed by the newly launched CARB compliance offset program. This happened for two key reasons. First, the CARB protocol was the first to credit for what we now call “avoided emissions” credits alongside of “growth” or “new removal” credits. In simpler terms, it meant that forest project owners were credited substantial offsets early in the project life to not emit a portion of the carbon stock they had at the beginning of the project. With large initial issuances and strong pricing, this is when the CARB offsets program took flight. The second reason for the weakening of the then-fledgling voluntary carbon market was the economic downturn in 2008 and 2009. The economic hardships that resulted from the banking crisis influenced voluntary buyers drastically in the US during this time. Green marketing campaigns and corporate responsibility programs at many companies became second or third in importance to corporate survival. As a result, offset values and sales volumes dropped and focus shifted to the CARB’s compliance program for larger landowners looking to generate offsets from forests. One dynamic that remained consistent at this time was that forest owners worked with project developers to strategically develop projects to the terms of a program or registry whose protocol defined the “quality” of the offsets generated. When the project was complete and credits were issued, transactions could take place on either a spot or offtake agreement basis.

The Compliance Program Years

The dominance of the CARB program in the forest sector continued up until 2018-2019.By this time period the global offsets market doubled in size and value more than once. By 2018, policy changes at CARB limiting offset use outside of the CA region plus increasing project maintenance costs caused interest in the CARB IFM protocol to erode among developers and landowners in the US. With a more stable economic environment, voluntary markets began to rebound on the heels of new corporate carbon neutral targets out to 2030 and beyond. This time Page period was the “rebirth” of the voluntary carbon market in the US. The American Carbon Registry (ACR), Verra (VCS), and Climate Action Reserve (CAR) began producing new or revised improved forest management (IFM) protocols that also credited stock retention or avoided emissions credits alongside removal credits. These protocols prescribed use of static “without project” baselines that remained in effect for the life of the project.

As developers and buyers looked for new carbon credit opportunities, they paid long overdue attention to the largest group of woodland owners in the US — roughly 11 million families and individuals owning fewer than 2500 acres. Several programs emerged to scale carbon market participation to meet smaller landowners. The American Forest Foundation, Natural Capital Exchange, LandYield, The Nature Conservancy Working Woodlands Program, and others put together programs using available methodologies or their own protocols to try to reach this market. As a result of the continued innovation, the VCM blossomed with more favorable cost profiles, contract terms, and monitoring requirements. Forest owners of all types and sizes started gravitating toward voluntary programs as palatable options with lower opportunity costs.

Shifting Sands, the Pandemic Years

All this activity inevitably caught the eye of critics and the press. Going into the pandemic period, the market began to experience meaningful scrutiny. The evolution and innovation the market had experienced to date began to conflict with what was suspected to be financial gamesmanship and the production of low-quality offsets. This quality concern grew and became the industry’s Achilles heel. For a period leading up to and including the pandemic years it was common to see articles criticizing various projects, landowners, registries, or programs. Much of the criticism was related to a persistent variety of opinions of what a “quality” offset is, and disagreement on which programs or groups fell short of expectations. (Of course, expectations varied amongst all parties and still do.) During the 2020s older projects were labeled by opposers as non-additional or low quality. Some programs were exposed to perform so poorly on the key pillars of quality as to be simply schemes. In addition, some argued that “avoided emissions” credits were of lower quality and less additional, and that project baselines were fixed rather than dynamic and overly aggressive. This was the atmosphere in the forest offset space through the pandemic years and it heavily influenced where we are today.

The ensuing turmoil and confusion were met with the onset of new independent ratings agencies and revised IFM protocols. Spurred on by the “quality” debate and with the encouragement of the investors in the space, several offset ratings agencies were developed – with a few rising to the top. What is important to know about this shift is that the definition of quality was no longer solely in the hands of registries and programs. Buyers were now looking to do their own due diligence and/or rely on third party project ratings to prioritize their investments in forest offsets going forward. Of course, there was a lengthy line of legacy projects built and verified to older standards that suddenly found themselves rated poorly, with few buyers to sell their credits to for the duration of their contractual agreement. The market had reset.

As the pandemic period ended the market for forest offsets split. Regardless of program, buyers sent clear signals that they preferred new removal offsets from forest growth over avoided emissions credits. New removal offsets sold commanded a 15% to 30% premium at the time. Project owners who already marketed their projects’ initial avoided emissions credits were largely insulated from the worst financial impacts. New forestry projects under development or those holding these less desirable credits were adversely impacted as lower sales prices and decreasing demand imposed severe negative consequences on project cashflows and economics. In any program, developing an offset project was (is) expensive to do. With reduced up-front or early cashflow from avoided emission credits, fewer landowners initiated project development after the pandemic. Sales were flat at moderate levels for nearly all projects. The post-pandemic period also represented a time of policy change and increased optionality in the market. Baseline calculation methods changed from static (and without project scenarios) to dynamic. In the eyes of consumers this policy shift was largely seen as an improvement in offset quality ;but it also posed a future offset delivery risk for landowners. In other words, how would a landowner know that the economics that favored the choice to initiate an offset project would not be eroded by baseline conditions decades out into the future?

A Market Reset

That brings us to today. The evolution of the market continues in real time. Buyers and policy makers continue to hone their approaches to carbon neutrality using natural climate solutions. Much of the offset world stood on pause in 2024-25 awaiting news from the Integrity Council for the Voluntary Carbon Market (ICVCM) ratings agency on which programs would receive their Core Carbon Principles (CCP) “approved” designation. That pause lingers on somewhat, with fewer offset transactions taking place in early 2026. All eyes were also on the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) to see what projects they would rate highly.

In the meantime, some large buyers such as Microsoft have shifted away from the model of buying credits from projects that have been built to a standard defined by others. Citing concerns about potential reputational risks, Microsoft shifted instead to taking actions that directly produce a pipeline of the desired removal offsets from the ground up. In practice, Microsoft/Chestnut Carbon projects are dominated by tree plantings that represent a pipeline of offset delivery into the future. Some buyers of offsets continue the model of purchasing credits in offtake agreements from established projects that meet their criteria, but these transactions have slowed. What are buyers looking for? Primarily, new removals of current or future vintages developed to current methodologies that require third party verification and dynamic baselines. Buyers are also increasingly looking to charismatic offset projects to provide strong biodiversity and other secondary values as well.

What did all of this teach us?

Here are some of the dynamics that early projects have taught us:

With the reset of the VCM, the definition of what a quality offset constitutes is no longer in the hands of a registry or program alone. Ratings agencies are entrenched and buyers are looking to them before purchasing. Projects competing for buyers may now have to exceed the requirements of a protocol or methodology to get the independent rating they desire.
Carbon registries and programs can be challenging partners for landowners. Unforeseen policy shifts or differences in interpretation are not uncommon events over the past two decades. Some of these changes devalued older project credit values or left projects done to older protocols insolvent. Also problematic is the issue of “standard creep”. Standard creep, or the evolution of program rules over the life of the project in the form of guidance or new interpretation, is a challenging issue for project owners under nearly all programs or protocols.
Forestry projects are extremely attractive to buyers, but they are looking for forestry projects with strong ancillary benefits like biodiversity or others. Charismatic projects are sometimes highly rated, and therefore, more readily monetized and may yield premiums.
The costs of monitoring, verification, and reporting on a forestry project have few guardrails and continue to rise, creating economic pressure on landowners that can exceed original expectations.
Using the USFS Forest Vegetation Simulator for precise annual accounting projections is challenging. Conservatism and calibration of carbon stock growth modeling is imperative to abate statistical reversal and economic risks for landowners.
The shift from static to dynamic baselines created increased cash flow uncertainty for project owners throughout the life of a project. This unknown variable represents real cash flow risks when considering a project.

As you can see, the only constant in the market for carbon offsets has been change since its beginning in the early 2000s. In spite of new challenges and a reset market, some new projects are under development if the situation is right. Current geopolitical challenges aside, market forecasts from groups such as the Ecosystem Marketplace share that 2026 offset sales should be stable but at conservative levels, but market hawks are still optimistic about the potential for the growth of the industry. With large buyers like Microsoft stepping back from new purchases earlier this year, it will be interesting to see if other buyers step up to secure the available supply. Those buyers with unrealized climate goals tied to 2030 could become more motivated purchasers.

Making the decision to build an offset project today represents a multi-decade commitment. On the demand side, landowners and foresters should find comfort in the steady list of corporate carbon neutral goals carrying out as far as 2050. One challenge a forester or landowner has is: Page 5 | 6 will today’s definition of offset quality measure up in 5 yrs, 10 yrs, 40 yrs? This highlights the question: Which program or protocol has the definition of quality needed to secure offtake sales agreements far enough into the future to make the project financially attractive and secure? With buyers preferring new removals from growth, new projects may be restricted to smaller annual credit streams going ahead. Will the market recognize this potential bottleneck to offset supply or possibly meet this challenge with higher pricing and longer offtake terms? We will have to see, but for right now carbon projects are still highly situational. Fortunately, most landowners and foresters are inherently long-term thinkers. Their diligence on this “new” market will be as critical as ever to find success for the next generation of forest carbon offset projects.

Interested in continuing the discussion? Reach out to Matt or Darrel.

About the Authors

Matthew Smith CF, ACF Forest Carbon Specialist, Milliken Advisors. Matt has been a leading expert and consultant in the forest carbon space since the early 2000’s, developing nearly 70 projects under numerous protocols across North America over three decades.

Darrel Pendris, Director of Nature Based Solutions, Milliken Advisors. Darrel and the Milliken Team advise companies, families, and individuals on natural resource strategies to meet their economic and ecologic goals. He’s worked for two decades as a consultant, forester, forest and supply chain certification specialist, natural resource policy analyst, and landowner advocate.