Options for Forest Sector Participation in International Carbon Markets: Unlocking the Carbon Market Potential of Australia’s Forest Sector

Carbon markets have emerged as a central component of international climate change policies. Within these markets, forest carbon offset projects have become a key nature-based solution due to their low cost, large scale, and co-benefits. However, despite Australia’s vast forest estate, forest sector-specific offsets remain nascent in the Australian Carbon Market, the ACCU Scheme. Only 3.27% of Australian Carbon Credit Units have been issued to forest sector projects. This limited participation can be attributed to several constraints within the ACCU Scheme, principally the limited number of methods available for the forest sector to engage in. As a result, less than 1% of Australia’s current forest estate, both plantation and native forests, is considered eligible to participate in the ACCU Scheme. This limited eligibility is further compounded by the complexity and cost of participation, which act as significant barriers for forest projects within the ACCU Scheme. This paper explores the potential to expand forest sector involvement in the Australian carbon market through a comprehensive literature review of forest sector involvement in international carbon markets. The review found extensive participation by the forest sector in international carbon markets, with various methods available across 20 markets, including the largest voluntary and compliance markets. These methods cover plantation forests, native forests, the bioeconomy, and the built environment. Key results indicate that revising existing methods, developing new ones through the ACCU Scheme’s proponent-led method development process, and increasing participation in international voluntary methods could significantly expand the types of forest sector projects contributing to emissions reductions through carbon markets. Broader conclusions suggest that by embracing lessons from international practises and addressing current methodological constraints, Australia can realise this potential. Doing so would not only bolster the nation’s climate change mitigation efforts, but also unlock the co-benefits of biodiversity, water quality, soil productivity, and ecosystem resilience, ultimately contributing to a sustainable and resilient bioeconomy.