Large and persistent social risks to forest carbon projects
An analysis of 244 forest-based carbon projects reveals that social risks are systematically underestimated, suggesting that credits from failed projects could soon exceed registry reserves and necessitate stronger safeguards to ensure climate benefits.
Original paper licensed under CC BY 4.0 (https://creativecommons.org/licenses/by/4.0/). This is an AI-generated explanation of a preprint that has not been peer-reviewed. It is not medical advice. Do not make health decisions based on this content. Read full disclaimer
For decades, companies and individuals have sought ways to offset the carbon dioxide they release into the atmosphere. One popular method involves buying carbon credits, which are certificates representing a promise that a specific amount of carbon has been removed from the air or prevented from entering it. These credits often come from nature-based projects, such as planting new forests or protecting existing ones from being cut down. The idea is that the carbon stored in these trees will remain locked away for a very long time, effectively canceling out the emissions from burning fossil fuels. However, for this system to work, the promise must be kept. If the trees are destroyed by fire, disease, or human activity before the carbon is released back into the air, the credit becomes worthless, and the climate benefit vanishes. While the risk of natural disasters like wildfires is well known, a new study suggests that the threats coming from human behavior and social instability are far more dangerous and largely ignored.
A team of researchers set out to investigate the stability of these forest carbon projects, focusing specifically on the largest registry in the voluntary market, where most of these credits are issued. They examined 244 forest-based projects to see how often they run into trouble due to social risks. These risks include things like fraud, poor management, land disputes, and political instability, rather than just natural events. The researchers found that the projects themselves are systematically underestimating how likely they are to fail. When the researchers looked at the data, they discovered that 30 percent of the projects they studied were already in a state of trouble, meaning they were either missing required checks, under investigation, or had already withdrawn from the program. These troubled projects were not small, minor operations; on average, they were significantly larger than the healthy ones, representing a massive amount of carbon that is currently at risk.
The study used a method called survival analysis to look at how these projects change over time. Instead of just counting how many are in trouble right now, the researchers modeled the likelihood of a project becoming troubled as it gets older. They found that even under the most optimistic assumptions, a project is roughly twice as likely to fail within the first 25 years as the project managers themselves predicted they would fail over a full 100-year period. In fact, the data suggests that more than half of all projects will likely encounter serious problems within just 25 years. This is a critical finding because the system relies on a safety net called a buffer pool. Think of this pool like a shared insurance fund where every project contributes a small percentage of its credits. If a project fails, the registry cancels an equivalent number of credits from this fund to ensure that the total amount of carbon claimed to be stored still exists.
The researchers calculated that the current size of this insurance fund is dangerously small compared to the number of projects that are likely to fail. If the trends they observed continue, the credits that would need to be cancelled to cover failed projects will exceed the entire amount of credits currently sitting in the safety net within just one or two decades. This means the system could run out of money to cover its losses very soon. The study also highlighted that the rules governing these projects have recently changed in a way that makes the situation even more precarious. Previously, if a project failed, a large portion of its credits would be automatically cancelled to protect the system. Now, the registry often waits to see if the project developers can fix the problem or replace the credits themselves, a process that is uncertain and often fails to happen.
The authors point to specific cases where projects have collapsed due to fraud or land conflicts, yet the registry has been hesitant to cancel the credits from the safety fund, leaving buyers with certificates that no longer represent real climate benefits. The researchers argue that the current approach is insufficient and that the safety net needs to be much larger to handle the reality of social risks. They suggest that registries should treat project failures as immediate losses and cancel the corresponding credits right away, rather than waiting for developers to fix the issue. Without these stronger safeguards, the study concludes that the voluntary carbon market may not be able to deliver the durable climate benefits it promises, potentially leaving the atmosphere with more carbon than expected.
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