Forestry gains momentum in voluntary carbon market

(Reuters) - Voluntary carbon market players could increase demand for carbon credits from the forestry sector after the first forestry investment was issued credits under an industry-backed standard last week.

"It could trigger a boom. Everyone has been waiting forever so hopefully we finally see some forestry credits come to market," said a market player, who declined to be named.

The voluntary carbon market, which operates outside mandatory emissions cutting schemes, has been waiting for the news as players gear up for participation in a multi-billion U.N. deforestation emissions reduction mechanism.

Last week, a Tanzanian reforestation project became the first forestry investment to earn carbon offsets under the Voluntary Carbon Standard (VCS), which will assure investors the emissions cuts are credible and long-term.

The first batch of credits have been issued and placed in the VCS registry.

Forests soak up large amounts of carbon dioxide and scientists say curbing deforestation is a key way to fight climate change.

REDD

A U.N.-backed scheme, called reducing emissions from deforestation and degradation (REDD), is not yet formally part of a broader U.N. climate deal but buyers of carbon credits are still investing in the sector as they expect REDD to be highly lucrative in the future.

"Many have been waiting on the sidelines for others to make the first moves and in particular address the permanence issue." Grattan MacGiffin, head of GTE Global Trading Ltd, told Reuters.

"(California's) Climate Action Registry has been doing forestry for a while but the VCS news is bigger, potentially adding impetus to the growing support for a CDM REDD methodology to be given the green light," he added.

Carbon offset organization ICROA said the voluntary market has helped bring forestry offset projects into the mainstream and could help shape REDD's future structure.

"One reason why the voluntary market has embraced forestry projects is because they are emotive and conceptually easier for business and consumer customers to grasp," said Sascha Lafeld, ICROA'S co-chair.

In 2009, forestation and reforestation was among the top three most popular project types in the market.

In separate developments in the United States, the American Carbon Registry approved a methodology this week developed by Finite Carbon to enable owners of private industrial timberlands to earn credits for sequestering carbon better.