This post includes ideas and content from the Q3 2025 Forisk Research Quarterly.
Humans use petroleum products and coal to power factories, propel cars, and illuminate cities. We consume and release in dozens of years what required hundreds of millions of years to form and accumulate below Earth’s surface. Efforts to recapture these released chemical compounds, such as carbon dioxide, created, in a weird and circular way, business and investment opportunities related to forests.
Forest Carbon Tradeoffs
Forest carbon refers to the carbon dioxide absorbed from the atmosphere by trees as they grow. The capturing of forest carbon can either be considered part of a broader climate change mitigation strategy or an idealistic policy-making shell game with few practical applications. For investors, the dichotomy arrives in, one, the difficulty of securely operationalizing forest-based carbon projects over long periods and, two, on the uncertainty of realizing material financial returns.
In other words, forest fires, legislative whipsawing, competing protocols and measurement schemes, and slowing capital investments make these projects really hard…
Forest carbon can affect timberland values to the extent that robust markets for carbon support reliable cash flows to investors. With wood, the economic value of trees derives from the ability of manufacturers to turn logs into saleable products consistently, at a profit, over time. Without demand, whether from mills or carbon markets, trees have no (economic) value.
A friend and experienced forester from Alabama pondered these ideas and dropped me a note:
Don’t forest carbon markets… penalize cutting trees? At least they don’t acknowledge (economically) the storage and substitution benefits of long-lived wood products from trees that were severed from… land enrolled in a forest carbon project…”
Forest carbon markets do struggle to acknowledge the tradeoffs, incurring potential untended consequences by incentivizing one “beneficial” behavior (storage) over another (building with wood). But this may be too fine a point for the current evolution of ESG markets, if we consider their status as reflected in the projects and commentary of public timber REITs, all of which allocate resources to developing carbon or ESG-related projects.
Bottom Lines Matter
For example, in 2023, Weyerhaeuser completed its first transaction in the voluntary carbon market, inking a deal to sell nearly 32,000 forest carbon credits for just over $900,000 (total) on a forest management project in Maine. However, in 2025, forest carbon fails to secure much notice in the sector. In their Q1 earnings releases, Rayonier and Weyerhaeuser did not mention carbon at all and, for PotlatchDeltic, it only appeared in the boilerplate associated with “Forward-Looking Statements.” Year-to-date, forest carbon projects are not major drivers of timberland investment portfolios or timber REIT earnings in the United States.
When investors decide to acquire and manage timberlands, they rely on estimates of expected, realizable returns. We continue to watch these closely, as explored in Forisk’s Q3 2025 featured research on timberland values and earnings. To the extent forest carbon influences capital investment in the wood products industry or forest management decisions moving forward, investors want bottom-up operational plans and hard cash flows.
To learn more about the Forisk Research Quarterly, please contact Nick DiLuzio (ndiluzio@forisk.com).
It seems that forest carbon markets are driven by a combination of virtue signaling and/or non-profit-maximizing forestland owners getting some money for not logging as intensely as they could, but weren’t planning to do anyway.
It would be useful for Forisk to determine what would the market price of carbon have to be to convince a profit-maximizing timberland owner to sell into the carbon market rather than the wood market?
I feel like the following line “carbon projects don’t credit harvested‑wood products” is something we as and industry need to dispel.
Both ACR and Verra do award credits for the portion of carbon that statistics say will still be locked up a century after harvest (e.g., ACR’s IFM v2.1 gives softwood lumber a 0.234 in‑use storage factor and 0.405 for landfills). What bugs people is that these factors are conservative and they leave out material or energy‑substitution benefits but that’s a coverage gap, not a total omission of HWP.
One reason the big timber REITs keep carbon chatter to a minimum is plain headline‑risk. Nobody wants a Ryan‑from‑The Office perp‑walk moment (i.e., touting a brand‑new revenue stream that later looks inflated once the SEC, auditors or NGOs poke holes in the math). It seems like carbon is still a rounding‑error compared with lumber, panels and land sales so the C‑suite would rather under‑promise than risk being accused of cooking the books later.
Maybe we might re‑frame this as investors assigning scarce, option‑like value to offsets until pricing, methodology durability and buyer demand feel less… well, Dundie‑award‑for‑“Hottest New Business Idea” and more GAAP‑worthy. That framing explains both the cautious disclosure and why carbon projects aren’t yet moving share prices.
If you couldn’t tell I’m a big Office fan! Great post to the Forisk team and looking forward to diving into the Q3 FRQ.