Measuring forest carbon is uncertain. Pessimistically, estimation errors could be as high as 25%. So does this disqualify nature based carbon credits? This 12-page note explores solutions, borrowing risk-pricing from credit markets, preferring bio-diversity and looking to drone/LiDAR technology.
The importance of nature-based solutions in our roadmap to net-zero is recapped on page 2. But how can we measure the carbon stocks in reforestation projects fairly?
Today’s methodologies are explored on pages 3-6, covering direct estimates, allometry equations and scale-up factors. The maths are horrible and precision is low.
Are ‘verified’ offsets any better? We are not convinced that these elaborate rules necessarily confer much better precision, as explained on page 7.
What hope then for offsets? It seems questionable to commercialize a precise number of carbon offsets against an imprecisely measured carbon sink…
Our first solution is a risk-tranching system, borrowed from the credit markets, described on page 8-9. This allows buyers to pay premium prices for higher certainty.
Our second solution is bio-diversity, explored on page 10, which can lower statistical uncertainty in allometry by an amazing 50-70%.
Finally, drone technologies are emerging. Their promise is described on pages 11-12.