Calculating Carbon Credits
From Harvest Deferral
This story illustrates the key questions, considerations, and assumptions that NCX accounts for when partnering with landowners to generate carbon credits from harvest deferral.
9 February 2023
Decay rates over time:LUMBER0-1 yearMILL RESIDUE 100+ yearsSLASH2-7 years
Decay rates over time:29.78 tonsMILL RESIDUE LUMBER14.78 tonsSLASH15.11 tons
Decay rates over time:29.4 tonsMILL RESIDUE LUMBER14.6 tonsSLASH14.9 tons
Deduction %Precision %10%
This is a timber harvest.
It didn’t happen, because the landowner enrolled in NCX.
NCX creates carbon credits with working forests, where landowners are actively managing their trees for multiple priorities.
The owner of this forest wanted to contribute to efforts to fight climate change while still making some income. Instead of harvesting as planned, they enrolled in NCX’s annual harvest deferral program and kept their trees on the stump for another year.

Before the landowner was able to enroll, NCX checked that the property was eligible.

This means checking that:
  • It’s really a forest
  • It can legally be harvested
  • It can actually be harvested
  • The landowner really owns it
  • Once we know the property is eligible, NCX uses a model to predict how much would have been harvested.
    Based on all of these things, we predict a harvest in this forest would remove 100 tons. This includes wood that is turned into lumber and paper, as well as harvest “slash”, which is residue left in the forest.
    But if we issued credits for all 100 tons, we would overestimate the true climate benefit of this harvest deferral.
    Why? Because forest carbon storage doesn’t happen in a vacuum. Forests are embedded in the global carbon cycle. We need to account for some downstream effects, and especially changes to flows in and out of harvested wood products.
    Carbon is always cycling through natural systems like forests. It comes in when trees & other plants perform photosynthesis and grow. It goes out when plants, microbes, fungi, and animals respire.
    Carbon can also be lost during timber harvests. There may be other losses too, such as those from wildfires, which is why forest carbon projects need a mechanism to manage reversal risk of carbon storage.
    Harvest deferral projects create additional offsets by stopping harvest removal for the length of the project period. The carbon in the forest remains during the project, except for what is lost to natural respiration, and more gets added via growth.
    So if we stop 100 tons of harvest, why wouldn’t this produce 100 tons of offsets? Because we need to think about what happens to the trees that are harvested once they’re removed from the forest.
    They decay, but over time. Wood utilized in buildings is slowly returning carbon to the atmosphere, even if it’s at a much slower rate than trees that are laying on the forest floor.
    We need to account for the carbon released back to the atmosphere during decay. We can’t just assume the carbon was zapped out of existence.
    Traditional carbon projects usually use a fixed percentage deduction, often 10%. However, that is based on many years of deferral. In this example we are only delaying harvest over one year.
    Decay rates through time are predictable. This is true of carbon laying on the ground in forests, and also of the various products made from trees. There’s a lot of forestry research on these decay rates and a lot of data to draw from. This means that we can predict how much of the carbon, in the harvest that didn’t happen, would have moved back into the atmosphere over time. Now let’s go back to our forest to see how we account for this when producing credits.
    When trees are harvested, much of the carbon is utilized to make wood products.
    And some of it remains left behind on the ground.
    As soon as the trees are cut, they begin to decay. Some parts, like residue left on the forest floor, decay quickly. Other parts, like timber used in buildings decay much more slowly.
    We can calculate the climate impact of a 100 ton harvest based on these 3 decay curves.
    Here are the results of that analysis. This sum (59.67 time-discounted tons) is our baseline estimate of emissions.
    But, 59.67 tons isn’t the number we need either. This would be the potential benefit of deferring harvest forever.
    But, owners of working forests cannot defer forever, for practical ownership reasons and ecological reasons. It’s impossible to guarantee the state of a forest in perpetuity, as forests are prone to natural disturbances over time.
    This is why NCX uses annual terms. They are more flexible for owners of working forests, and by measuring and crediting impact annually, we lower the risk of over-counting carbon credits for forests that are lost during the crediting period to natural disturbance.
    To properly estimate the climate benefit of a one-year deferral, we need to calculate the difference between the baseline scenario we just derived, and a project scenario where harvest deferral happens.
    We do this using the same process we applied to calculate the baseline, but with two changes: Adding one year of new growth from the deferral period and shifting the decay curves over by a year to account for the time value of carbon.
    New growth adds 2.1 tons of carbon. When we estimate the flow of carbon through wood products for the project scenario, we’ll need to include this new growth in our calculations.
    From here, the process is similar to how we estimated the baseline: we again model decay of the different products through time, and calculate emissions through time based on these curves.
    Added together, our project scenario results in emissions of 58.9 tons of carbon minus 2.06 tons of carbon sequestration from extra growth, for a total of 56.84 tons.
    The climate benefit of an annual deferral will be the difference between the baseline and project estimates. Our project has created 2.83 tons of additional carbon storage.
    But wait: 2.83 tons of storage is still going to be too high. There are other things affecting the climate benefit created.
    One of these is that taking timber off market in one place may just lead to it getting harvested somewhere else. This is called leakage.
    Like most project developers, we assume a constant rate (20%) of carbon lost to leakage.
    Lastly, we deduct for the uncertainty of our estimates. We use a sliding scale, where the size of the deduction is determined by the statistical precision of our predicted number of carbon credits. This incentivizes making better forecasts: the more precise your model, the lower % deduction you take to account for performance. For this property, we derived a 10% deduction using a curve such as this one.
    Now we have estimated the true climate benefit created by this one property. This is the number of credits that can be brought to market to offset the impact of emissions today.
    It may not sound like a lot, but imagine we keep doing this for many properties, again and again, year over year.
    Added together, this becomes massive impact, generated from working forests.