Forest Carbon Markets

What are carbon markets?

A carbon market is a system that enables people to generate, sell, and buy carbon credits. One carbon credit corresponds to one metric ton of carbon dioxide (or the amount of another greenhouse gas that results in the same global warming potential) removed from the atmosphere or prevented from being emitted into the atmosphere. Projects to generate carbon credits have been developed in many industries, including forestry, agriculture, manufacturing, energy, and transportation.

Two types of carbon markets exist. Government regulations that set emissions limits for certain industries (e.g., methane gas producers or electric utilities) gave rise to compliance carbon markets, which have mandatory participation. Companies can buy carbon credits if they exceed their emission limit or generate and sell carbon credits if they are under. Companies, governments, and even individuals seeking to voluntarily decrease their emissions can participate in voluntary carbon markets (VCMs) in which non-governmental stakeholders set the standards for generating, verifying, and selling carbon credits.

Wisconsin has land enrolled in both compliance and voluntary carbon markets. As of March 2025, nearly 150,000 acres of Wisconsin forests are generating compliance credits for the California Cap-and-Trade Program, which you can see in this interactive map. As of September 2024, 11 out of Wisconsin’s 30 county forests have entered the voluntary forest carbon market. These county forests have enrolled a total of more than 1,167,000 acres, representing 49% of the total acreage of county forests in the state.

Many companies participate in a VCM to help reach their emissions goals. When a company purchases carbon credits, those credits are subtracted from the company’s actual emissions to determine their net emissions. A common criticism is that VCMs give companies permission to continue polluting. In an ideal scenario, carbon credits would only be used to offset carbon emissions that truly cannot be avoided.

How do forests generate carbon credits?

Four main types of forest carbon projects can generate carbon credits by absorbing carbon or preventing emissions.

• Afforestation: planting trees in areas that have not been forested in the past 50 years
• Reforestation: creating new forests on recently cleared forest land or adding trees to understocked forests
• Avoided Conversion: preventing the conversion of forest to non-forest land
• Improved Forest Management: sustainable forest activities that maintain or increase carbon stocks

In the U.S., Improved Forest Management is the most common forest carbon project type.

Key players in forest carbon markets

Carbon markets are a complicated and rapidly developing system. Forest landowners and foresters will likely only engage directly with project developers, but an awareness of how markets function overall is helpful in evaluating the quality of forest carbon projects.

The flow chart below provides a simplified overview of how different people and organizations involved in forest carbon markets interact. Ultimately, interventions implemented by forest landowners generate carbon credits that are purchased by end buyers for carbon offsets.

• Forest Landowners: Enroll in a carbon project and are incentivized to change forest management practices on their land to generate carbon credits.
• Foresters: Serve as advisors for forest landowners and project developers and facilitate interactions between the two. They also support ongoing project management and data maintenance during the lifetime of a project.
• Project Developers: Design carbon projects and seek approval for their methodology, carbon credit calculation, and related activities. Family Forest Carbon Program and Forest Carbon Works are two examples of project developers currently operating in Wisconsin.
• Carbon Standards/Registries: Set rules for carbon projects, then issue, transfer, and retire the resulting credits. Registries develop and approve new methodologies and accept projects that meet their requirements. Two of the largest registries are Verra and the American Carbon Registry.
• Validation and Verification Bodies (VVBs): Validate that a carbon project is following an approved methodology and verify that carbon credits are accurately reported, including through on-site audits. VVBs may monitor many types of carbon projects or specialize in a particular sector.
• Marketplace & Intermediaries: Negotiate between project developers and end buyers. Some project developers sell directly to end buyers without relying on an intermediary, while some carbon credits may pass through multiple intermediaries.
• End Buyers: Purchase carbon credits and “retire” them to use as offsets for emissions. Corporations, individuals, NGOs, and public entities are all potential end buyers.

If you have questions about forest carbon or other topics related to the changing climate, or if you want to provide feedback on this webpage, contact:

Page last updated March 2025.