A dispute over how much carbon should be credited to forests is creating fresh turmoil in the voluntary carbon market, putting pressure on one of the organizations responsible for setting standards for climate-related credits.
The argument may sound technical, but the stakes are substantial. Carbon credits are increasingly being used by companies and investors to support climate claims, while forests have become one of the most important sources of nature-based credits. If the amount of carbon supposedly stored by a forest is overstated, buyers could effectively receive credits that do not represent the climate benefit they believe they are purchasing.
That makes the debate over forest-carbon accounting fundamentally a credibility problem for the carbon market.
Why Forest Carbon Is So Difficult to Measure
Trees absorb carbon dioxide as they grow and store carbon in their trunks, branches, roots and surrounding ecosystems.
The basic concept is straightforward.
The problem begins when that biological process is converted into a financial asset.
To issue a carbon credit, project developers need to estimate how much carbon a forest is storing and, crucially, how much additional carbon would remain stored because of the project.
That requires assumptions about future forest growth, deforestation, fires, drought, disease and other risks.
The uncertainty is significant.
A forest that appears to store a certain amount of carbon today may store substantially less in the future if it burns or suffers from climate-driven damage.
Recent research has highlighted exactly this problem, finding that existing forest-carbon protocols can underestimate the risk of carbon being released because of wildfire, drought and insects.
The “Permanence” Problem
One of the biggest issues in forest carbon is permanence.
A company purchasing a carbon credit is effectively paying for a climate benefit that is supposed to persist for a long period.
But trees can burn.
They can die from drought.
They can be destroyed by insects or storms.
Climate change itself can increase those risks.
That creates a fundamental problem: how can a carbon market guarantee that carbon supposedly removed from the atmosphere today remains locked away decades into the future?
Carbon markets have attempted to address this through mechanisms such as buffer pools.
These are reserves of additional credits designed to compensate for projects that suffer unexpected carbon losses.
But research published this year suggests those reserves may be inadequate.
A University of Utah-led study found that existing buffer pools for US forest projects would need to be roughly six times larger, on average, to cover expected carbon losses over a century.
That finding puts pressure on existing accounting methodologies.
The Baseline Problem
Another difficult question is determining what would have happened without the carbon project.
Suppose a company pays to protect a forest.
How many trees would have been cut down if the project did not exist?
If developers assume that substantial deforestation would have occurred, they can potentially generate more credits.
But if the forest was never actually at serious risk of being cleared, the claimed climate benefit may be overstated.
This is known as the baseline problem.
It is one of the central challenges facing carbon-credit markets because the hypothetical scenario cannot be directly observed.
You can observe what happened to the protected forest.
You cannot directly observe the alternative reality in which the project never existed.
Additionality Matters
Closely related to the baseline issue is additionality.
For a carbon credit to represent a meaningful climate benefit, the activity it finances should ideally be something that would not have happened without the carbon-market revenue.
If a landowner was already planning to protect the forest, issuing credits for that protection may not produce an additional reduction in emissions.
The company buying the credit could therefore be paying for something that would have happened anyway.
That undermines the basic logic of carbon offsets.
Why the Standard Setter Matters
This dispute is important because voluntary carbon markets depend heavily on standards.
There is no single global government regulator overseeing every voluntary carbon credit.
Instead, a network of standards bodies, registries, ratings organizations, project developers and independent auditors helps determine which projects qualify and how their carbon benefits are calculated.
That makes the credibility of standard setters extremely important.
If market participants cannot agree on how forest carbon should be measured, buyers may become less willing to trust the credits.
That could reduce demand and make it harder for high-quality forestry projects to attract financing.
Forest Carbon Is Still a Major Part of the Market
Despite the controversy, forests remain an important component of the global carbon-credit market.
The World Bank says carbon-credit issuance increased 8% from 2024 to 2025, while certain forest conservation and reforestation credits continued to command price premiums.
That tells us something important.
There is still demand for nature-based climate solutions.
The problem is that buyers increasingly want evidence that the credits represent genuine and durable emissions reductions.
That creates pressure for better measurement rather than simply abandoning forest projects.
Climate Change Makes the Accounting Harder
The fundamental irony is that climate change is making forests both more valuable and more difficult to use as carbon assets.
Forests are valuable because they can store enormous amounts of carbon.
But rising temperatures, drought, wildfire and other climate-related disturbances can make that storage less reliable.
The University of Utah research found that the share of US territory projected to experience wildfire-related carbon reversal over the next century rose from 10% under historical assumptions to 33% when climate change was incorporated.
That is a major difference.
It suggests that historical forest behavior may no longer be a sufficient guide to future carbon-storage risk.
The Market Faces a Credibility Test
The carbon market has already faced criticism over questionable projects and inflated claims.
That history makes the latest dispute particularly sensitive.
If buyers believe that credits exaggerate the amount of carbon actually being protected or removed, they may demand higher-quality credits or abandon offsets altogether.
That would hurt weaker projects.
But it could benefit developers that can demonstrate genuine, measurable climate benefits.
In other words, greater scrutiny does not necessarily threaten the entire carbon market.
It could instead accelerate a shift toward higher-quality credits.
Companies Need to Be Careful
For corporations purchasing carbon credits, the controversy creates an obvious lesson.
Buying a credit is not the same as eliminating an emission.
Companies still need to reduce their own emissions.
Carbon credits should ideally complement direct decarbonization rather than provide a convenient substitute for it.
That distinction is becoming increasingly important as investors, regulators and consumers scrutinize corporate climate claims.
A company that claims to be “net zero” because it purchased large quantities of questionable forest credits could face significant reputational damage.
Investors Face Similar Risks
The same issue applies to investors.
Carbon credits are increasingly becoming financial assets.
But their value depends on assumptions about future carbon storage, regulatory acceptance and demand.
If methodologies change, some existing credits could become less valuable.
Investors therefore need to evaluate not only the environmental claims behind a project but also the methodology used to calculate those claims.
A cheap credit is not necessarily a bargain if the underlying carbon benefit is unreliable.
There Is a Better Way Forward
The solution is unlikely to be abandoning forest carbon altogether.
Forests provide benefits far beyond carbon storage, including biodiversity protection, water regulation, soil protection and ecosystem services.
The better approach is to improve the accounting.
That means:
- using more conservative carbon estimates;
- incorporating climate-change risks into models;
- increasing buffer reserves;
- improving satellite monitoring;
- conducting more frequent verification;
- using location-specific risk assessments;
- strengthening independent auditing;
- making project data more transparent.
Recent research suggests that climate-informed risk mapping could help direct forest-carbon projects toward areas where stored carbon is more likely to remain secure.
The Economics Are Changing
Better standards could make some carbon credits more expensive.
That is not necessarily a bad thing.
If a credit is genuinely more durable and accurately measured, it should arguably command a premium.
The World Bank already notes that higher-quality forest conservation and reforestation credits can attract price premiums.
The market could therefore evolve toward a two-tier structure.
Low-quality credits could remain cheap but face declining demand.
Higher-quality credits could become more expensive as buyers increasingly prioritize environmental integrity.
The Bigger Problem Is Double Counting
Another major issue for carbon markets is double counting.
If the same emissions reduction is claimed by more than one party, the apparent climate benefit is exaggerated.
This can happen at different levels, including between project developers, companies and governments.
As carbon markets become more interconnected with national climate policies and international trading systems, avoiding double counting becomes increasingly important.
A credit needs to represent a clearly defined climate benefit that is not simultaneously being claimed elsewhere.
Carbon Markets Are Growing Despite the Problems
The controversy should not obscure the fact that carbon markets continue to expand.
The World Bank reports that direct carbon pricing now covers nearly 30% of global greenhouse-gas emissions, while carbon-pricing systems generated more than $107 billion in public revenue during 2025.
Voluntary carbon markets are only one part of that broader ecosystem.
But the growth of carbon pricing means questions about measurement and credibility are becoming increasingly important.
The larger these markets become, the greater the financial consequences of getting the accounting wrong.
The Bottom Line
The dispute over forest-carbon accounting exposes one of the central weaknesses of nature-based carbon markets:
the carbon may be real, but measuring how much exists, how much is additional and how long it will remain stored is extraordinarily difficult.
That does not mean forest carbon is useless.
It means the market needs stronger standards.
Climate change itself is making traditional assumptions about forest permanence less reliable, while new research indicates that existing risk buffers may be insufficient.
The likely outcome is greater scrutiny, more conservative accounting and a growing premium for credits that can demonstrate genuine and durable climate benefits.
For companies and investors, the lesson is straightforward: the number of tons printed on a carbon-credit certificate matters far less than whether those tons actually represent carbon that would otherwise have remained in the atmosphere.
The future of the forest-carbon market will ultimately depend on whether standard setters can convince buyers that the credits being sold represent real, additional and lasting climate benefits.
