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Abstract: In recent years, carbon trading systems have continued to increase, develop, and integrate globally, and forestry carbon trading is a crucial component of the international carbon market. This article describes the progress and changes in international forestry carbon trading, summarizes its developmental characteristics and trends, and statistically analyzes the progress and major challenges of domestic forestry carbon trading. Based on the development of carbon trading both domestically and internationally, it proposes four key insights: developing multiple mechanisms in parallel, prioritizing non-carbon benefits, actively expanding financing channels, and continuously exploring pathways for advancement.
Authors: He Guimei, Wang Peng, Xu Bin, Chen Shaozhi, He Youjun
With the development of global climate governance efforts, carbon trading systems (CTSs) have become an increasingly important policy tool and are being adopted by more and more countries and regions. Forestry carbon trading is a key component of the international CTS and a pioneering model for using market mechanisms to control carbon emissions. Before the end of 2014, global forestry carbon trading and financing primarily relied on voluntary markets. Since 2015, the proportion of carbon trading in regulated markets has gradually increased, and financing channels for forestry carbon have begun to diversify. Results-based emission reduction payments under non-market mechanisms have developed rapidly. my country has long established a voluntary emission reduction trading system and launched the National Carbon Emissions Trading Registration System in early 2015, streamlining the entire trading process for China Certified Emission Reductions (CCERs). 95 forestry CCER projects from 23 provinces (municipalities, and autonomous regions) are in the process of being publicized, registered, or issued. A number of successful forestry carbon trading cases have emerged across eight regional carbon trading markets nationwide, with trading products including CCERs, Beijing Forestry Certified Emission Reductions (BCERs), Fujian Forestry Certified Emission Reductions (FFCERs), and Guangdong Pratt & Whitney Certified Emission Reductions (PHCERs). Various voluntary carbon offset and carbon neutrality activities are also underway. However, following the release of Announcement No. 2 of 2017 by the National Development and Reform Commission, the registration and issuance of forestry CCER projects nationwide have been temporarily suspended, impacting other voluntary trading and carbon offset activities. Therefore, analyzing the development, characteristics, and trends of international forestry carbon trading, and summarizing insights and recommendations from my country's forestry carbon trading practices, can provide a reference for national, regional, and industry authorities in developing the forestry carbon market.
1 Development of international forestry carbon sink trading
1.1 Progress in International Forestry Carbon Trading
1.1.1 Progress of Global Forestry Carbon Trading
From 2000 to 2016, global forestry carbon finance totaled over US$6.057 billion, with an additional US$4.4 billion committed to performance-based payments for tropical forest management emissions reductions. In 2015, global forestry carbon finance reached US$888 million, comprised of US$661 million in regulated markets, US$88 million in voluntary markets, and US$139 million in other non-market mechanisms. Total forestry carbon trading volume reached 88 million tons in 2015, comprised of 67.2 million tons in regulated markets, 18.2 million tons in voluntary markets, and 2.6 million tons in other non-market mechanisms. In the same year, over 800 forestry carbon projects were under implementation or development in 52 countries worldwide, with the vast majority located in Australia (428) and the United States (217). Demand for improved forest management projects was highest in the regulated market, while REDD+ projects dominated the voluntary market. Results-based payments under other non-market mechanisms are gradually gaining momentum. The annual trading volume of different types of projects has been changing: afforestation and reforestation projects peaked at 14 million tons in 2011, then gradually declined to 3.5 million tons in 2013, but rebounded to 5.3 million tons in 2015; REDD+ projects peaked at 24.7 million tons in 2013, then gradually declined to 11.4 million tons in 2015; improved forest management projects fell to a low of 2.7 million tons in 2013, then began to recover, reaching 9.2 million tons in 2015; sustainable agriculture and agroforestry projects peaked at 5.7 million tons in 2012, fell to 400,000 tons in 2013, and in 2015, together with wetland, mangrove and soil projects, created a trading volume of 4.4 million tons. Statistics show that since 2015, global forestry carbon offset trading has begun to shift towards diversification, with the regulated market emerging and non-market mechanisms growing rapidly. The Australian Emission Reduction Fund (ERF), the California-Quebec Carbon Market, the REDD+ Readiness Program and other non-market mechanisms have become the main channels for forestry carbon financing.
1.1.2 Progress of forestry carbon trading in the regulated market
Globally, forestry carbon offset trading in regulated markets primarily occurs in national or regional carbon markets, such as Australia, California-Quebec, and New Zealand. Since Australia abolished its carbon tax and implemented an emissions reduction fund in July 2014, a large number of forestry carbon offset projects have become a major force in market auctions. In 2015, market demand for forestry carbon offset projects accounted for 66% of all offset demand for the year. The Australian government purchased 60.7 million tons of certified carbon emission reductions from forestry projects at an average price of $9.7 per ton, totaling $588 million. Although the market price of forestry carbon offsets has gradually declined, project developers lowered the average selling price from $10.3 per ton in the first auction to $7.8 per ton in the third auction in 2015 to secure auction agreements. Forestry carbon offset projects have consistently held a prominent position in the ERF, with 104 million tons issued, over 90% of which are certified by the Carbon Farm Offset Initiative. In the same year, the California-Quebec carbon market saw 6.5 million tons of forestry carbon offsets traded, with a value of $63.2 million and an average price of $9.70 per ton, representing increases of 6%, 16%, and 9%, respectively, compared to the previous year. Statistics from the California Air Resources Board (ARB) show that during the second regulatory period of 2015, regulated enterprises submitted a total of 12.8 million tons of certified carbon reductions (CERs) for offsetting their compliance obligations, 46% of which originated from forestry projects. However, these enterprises did not fully utilize the 8% of these offsets (25.7 million tons), and it is estimated that market demand for offsets will not peak until the end of 2017. Due to the consistently high issuance rate of forestry carbon offset projects, registered projects in the market have already issued 28.2 million tons of CERs, and it is estimated that a large number of projects will successfully register and receive CERs in the next one to two years. Consequently, the supply of forestry carbon offsets continues to rise, and an oversupply is approaching. After an adjustment period from 2013 to 2014, the trading volume and value of forestry carbon offsets in New Zealand's carbon market gradually increased in 2015, reaching 1.3 million tons and US$10 million respectively, and the market is in a slow recovery.
1.1.3 Progress in voluntary forestry carbon trading
Despite recent stimulus from strong international forest protection policies, global voluntary forestry carbon offset trading remains sluggish. In 2015, forestry carbon offset trading volume and value reached 18.2 million tons and $88 million, respectively, down 23% and 31% from the previous year. The average transaction price also dropped from $5.4 per ton to $4.9 per ton. In 2016, while global voluntary forestry carbon offset trading value exceeded $1 billion, trading volume fell 24% from the previous year, reaching a 10-year low. Bulk sales typically command lower prices, while smaller sales command higher prices, sometimes reaching $8 to $11.99 per ton. While the average transaction price for certified carbon reductions from forestry projects remains higher than other projects at $3.3 per ton, there is a trend toward a concentration of trading volumes, with the majority of transactions occurring in the three price ranges of $0-0.99, $3-3.99, and $7-7.99 per ton, reflecting relatively low market efficiency. The transaction price for certified carbon reductions varies significantly across project types, ranging from as low as $0.2 per ton to as high as $80.1 per ton. Afforestation projects command the highest carbon price ($7.6 per ton), followed closely by forest management projects ($7.4 per ton). Sustainable agriculture and agroforestry projects command a carbon price of $5.0 per ton. REDD+ projects have seen a gradual decline in carbon prices, from $4.2 per ton in 2013 to $3.4 per ton in 2015. In addition, since the average carbon price in the regulated market (US$10-11/t) is much higher than that in the voluntary market (US$2.9/t), since the California-Quebec carbon market allowed some voluntary projects to be converted for offset compliance in the regulated market, a large amount of voluntary carbon emission reductions have entered the regulated market for trading, and voluntary carbon compensation activities in North America have decreased significantly. In 2015, the United States and Canada only traded 1.2 million tons of certified carbon emission reductions from voluntary forestry projects worth US$11.3 million.
1.1.4 Progress in forestry carbon trading under other non-market mechanisms
Non-market forestry carbon trading primarily refers to financing methods that have occurred in recent years between two or more governments, using payments based on the results of forestry actions. In 2015, the volume and value of forestry carbon trading under non-market mechanisms reached 2.6 million tons and US$139 million, respectively, with over 90% utilizing results-based payments. Unlike market-based approaches, these results-based payment institutions typically do not require ownership of project emission reductions or use them to offset their own climate footprint, nor do they require access to the actual carbon market with multiple buyers and sellers. However, similarly, project carbon reductions must be independently certified by a third party before they can receive the associated fees, making them payments based on results. Currently, global REDD+ financing approaches, including related readiness programs, are moving away from traditional upfront payments or timetable-based payments and are shifting towards results-based payment initiatives. At the 14th Forest Carbon Partnership Facility (FCPF) meeting in Paris in June 2016, participants approved initial emission reduction project documents for Costa Rica and the Democratic Republic of the Congo, enabling them to negotiate future emission reduction payment agreements with the World Bank. Norway, the United Kingdom, and Germany recently announced $5 billion in funding to support REDD+ projects by 2020. However, these projects will only receive funding from donors if they achieve the expected results, and there is a development process from announcement to commitment and disbursement. Non-market mechanisms have so far been implemented in three ways: from the Amazon to Brazil, from the REDD+ Early Action Project to Colombia and the Brazilian state of Acre, and from the Norwegian government to Uganda. More projects are under development, potentially through the World Bank Carbon Fund, ongoing bilateral commitments, or the Green Climate Fund.
1.2 Development Trends of International Forestry Carbon Sink Trading
1.2.1 Diversified development of forestry carbon financing channels
Before the end of 2014, international forestry carbon trading primarily took place in voluntary markets, with regulated markets accounting for a relatively low proportion. However, since 2015, voluntary market trading has declined annually, while regulated markets, such as the Australian Carbon Market, the California-Quebec Carbon Market, and the New Zealand Carbon Market, have steadily increased and are expected to continue to do so. Forestry carbon trading has always been a key component of these markets. New trading mechanisms, such as payment-for-results and other non-market approaches, are also emerging, diversifying global forestry carbon financing channels. Statistics show that in 2015, financing for international forestry carbon projects came from the sale of carbon emission reductions (39%), loans or public sector grants (24%), grants and non-profit funding (15%), production activity funds (13%), private investment (8%), and other sources (1%). The primary recipients of this financing were landowners (61%), production activities (17%), project development (13%), third-party institutions (6%), and communities and local stakeholders (3%). With the innovative development of various carbon financial products, such as carbon pledge, carbon insurance, carbon options, carbon futures and carbon securities, the interest of public and private institutions in participating will gradually increase, and various new forestry carbon financing models will gradually appear in the rapidly developing carbon trading system.
1.2.2 The buyer's market will continue for a long time
Although international forestry carbon trading volume reached a record high in 2015, 39.7 million tons of certified carbon emission reductions from forestry projects remained unsold across various carbon markets. Excluding purchases by the Australian Emissions Reduction Fund, for every ton of certified carbon emission reductions sold in the market that year, 1.6 tons remained unsold. In 2016, market suppliers held 80 million tons of unsold or underdeveloped forestry carbon emission reductions, awaiting higher prices or local mandatory market signals. Market research by Forest Trends indicates that project developers generally believe that current forestry carbon price levels are too low, believing that the ideal price should be at least double the current price. At the same time, the global issuance of forestry projects reached a new high in 2015, reaching 33.1 million tons, while the offset usage was only 14.1 million tons. The issuance of projects exceeded market demand and the usage of offset compliance and neutralization compensation, resulting in an oversupply of forestry carbon sink projects in the international carbon market in recent years. The sales price of certified carbon emission reductions from early development projects has continued to decline, and there is a serious shortage of support funds for current development projects. A large amount of green capital investment is needed to promote their sustainable development.
1.3 Development characteristics of international forestry carbon trading
1.3.1 Forestry carbon sink trading is deeply affected by emission reduction policies
In theory, forestry carbon trading is a loosely organized collection of projects based on afforestation, reforestation, forest management, and reduced deforestation, generating carbon emission reductions and trading them. This type of trading is closely tied to global, regional, national, and subnational emission reduction policies. Only when local governments signal mandatory emission reductions and most participants perceive a certain level of market expectation will demand for forestry carbon trading surge, leading to active trading. Conversely, when government commitment to emission reductions declines, action targets are unclear, or emission reduction policies fluctuate frequently, market demand weakens. Consequently, global forestry carbon trading exhibits multiple regional and hierarchical characteristics, making widespread integration and development difficult in the short term. For example, strengthened enforcement of emission reduction policies by the California and Australian governments has spurred a significant increase in forestry carbon trading volume in the California-Quebec Carbon Market and the Australian Emissions Reduction Fund. New Zealand's carbon market, after a two-year stagnation in May 2015 when it stopped allowing regulated entities to use international emission reductions to offset emissions, has seen a surge in local forestry carbon trading. Currently, 15 existing and future regulated markets include offsetting mechanisms. Eleven of these systems, located in North America, Oceania, Africa, and Asia, accept certified carbon emission reductions from forestry projects as eligible offsets. The Green Climate Fund has also prioritized increasing forestry carbon financing as a core strategy, working to promote enhanced national programs. The International Civil Aviation Organization's proposed market-based offsetting program may also include carbon emission reductions from REDD+ and other forestry projects. These policies will significantly impact international forestry carbon trading.
1.3.2 Prioritizing national and regional carbon emission control development
Global carbon pricing initiatives have made sustained progress at the regional, national, and subnational levels, with a total of 47 implemented or planned action systems, including 24 carbon emissions trading systems and 23 carbon tax systems. In reality, all approaches-carbon trading markets, carbon taxes, emission reduction funds, and results-based payment-are distinct policy tools for addressing global climate change. Each system is a set of rules established based on close integration with local emissions and management systems. Their goal is to reduce total carbon emissions at the local, national, or regional level, achieving a win-win situation for carbon emission control and development, or maximizing regional benefits. The integrated development of different action systems also aims to improve cost-effectiveness and efficiently achieve the objectives of policy instruments. Therefore, the government plays a significant role in the development and operation of carbon markets. Especially in the early stages of market development, forestry carbon offset trading serves only as a supplementary regulatory mechanism for carbon trading systems. Its market share and development progress depend primarily on the regulatory targets and effectiveness of national or regional emissions markets. Market participants tend to purchase forestry carbon offsets from their own countries or regions. For example, the Quebec carbon market was linked to the California carbon market in 2014. The 8% offset ratio of its emission-controlled enterprises created an offset demand of 32.5 million tons (5 million tons per year since 2015). The California government hopes that these emission-controlled enterprises can act as both supply and demand participants in the joint carbon market, but as of October 2016, these enterprises have not purchased carbon emission reductions produced by California forestry projects; the development models of the Brazilian state of Axis and the Canadian province of Ontario after linking with the California carbon market may also be similar to those of the Quebec market.
1.3.3 Non-carbon benefits are highly valued and promoted
In addition to carbon sequestration and oxygen release, forests also offer multiple ecological, social, and economic benefits, a key consensus on forestry issues in global climate negotiations. Using carbon emissions reductions from forestry projects to offset or neutralize a certain percentage of other carbon emissions within the carbon trading system is essentially a development approach that productizes, markets, and innovatively feeds back small amounts of forest ecosystem services. Whether in regulated or voluntary markets, the average selling price of certified carbon emissions reductions from forestry projects is generally higher than that of other projects. Many market participants are willing to purchase forestry carbon offsets primarily for the co-benefits generated by forestry project activities, such as community benefits, biodiversity conservation, women's skills development, and improved livelihoods. Data analysis by Forest Trends shows that nearly half of buyers of forestry carbon offsets in the 2015 carbon market were motivated by non-carbon benefits. In voluntary markets, buyers' participation is primarily driven by corporate social responsibility, achieving climate action goals, demonstrating industry leadership, and enhancing a green image or retail sales. A survey of the effectiveness of 92 projects showed that 78 project areas protected 376 endangered species, 75 projects enhanced local community benefits, 53 projects employed 7,700 local residents and provided technical training to over 5,000, 42 projects improved regional water security, 31 projects strengthened climate resilience, and 26 projects promoted forest tenure reform. Data collection, extensive publicity, and promotion of these projects' non-carbon benefits have also been crucial factors in the widespread proliferation of forestry carbon sequestration projects around the world over the past 20 years.
2 Development Status and Main Challenges of Forestry Carbon Sink Trading in my country
2.1 Progress of Forestry Carbon Sequestration Project Transactions
my country's forestry carbon sink trading is all project-level certified emission reduction (CER) trading. There are three main types of projects: forestry carbon sink projects under the Clean Development Mechanism (CDM), forestry CCER projects, and other voluntary projects. BCER and FFCER projects fall under the category of forestry CCER projects, which have undergone changes in management procedures. PHCER forestry projects are primarily voluntary, but converted to provincial-level PHCERs, they are, in principle, equivalent to CCERs and can be used by Guangdong's regulated enterprises to offset their compliance obligations.
Since 2004, the National Development and Reform Commission has approved six forestry CDM projects: the Novartis Southwest Sichuan Forestry Carbon Sequestration, Community and Biodiversity Afforestation and Reforestation Project, the Inner Mongolia Horqin Shengle Ecological Demonstration Area Degraded Land Reforestation Project, the Northwestern Guangxi Degraded Land Reforestation Project, the Northwestern Sichuan Degraded Land Afforestation and Reforestation Project, the Guangxi Pearl River Basin Reforestation Project, and the Liaoning Kangping Desertification Combating Small-Scale Afforestation Project. While the first five projects have been successfully registered with the Clean Development Mechanism (CDM) Executive Board (EB), only the first tranche of certified carbon emission reductions (CERs) from the two Guangxi projects have been issued by the EB. The World Bank's Biocarbon Fund purchased CERs from the Pearl River Basin Reforestation and Reforestation Project.
As of the end of March 2017, the China Voluntary Emission Reduction Trading Information Platform had published design documents for 95 forestry CCER projects, including 67 carbon sink afforestation projects, 22 forest management projects, one bamboo afforestation project, and five bamboo management projects. Currently, 13 projects have been registered, and certified emission reductions (CCERs) have been issued for three projects. Among them, the first phase of 5,208 tons of certified emission reductions issued by the Guangdong Chimelong Carbon Sink Afforestation Project was sold to Guangdong Power Group at 20 yuan per ton. There have been no reports of trading of emission reductions issued by the Jiangxi Fenglin Carbon Sink Afforestation Project and the Saihanba Mechanized Forest Farm Afforestation Carbon Sink Project. Furthermore, the BCER pathway pre-issued 60% of the first phase of certified emission reductions for three projects: 1,197 tons for the Shunyi District Carbon Sink Afforestation Project Phase I, 96,000 tons for the Fengning County Qiansongba Forest Farm Carbon Sink Afforestation Project Phase I, and 1,500 tons for the Fangshan District Shilou Town Carbon Sink Afforestation Project. This resulted in a cumulative trading volume of 72,615 tons, a turnover of 2.655 million yuan, and an average price of 36.6 yuan per ton. The FFCER pathway registered seven projects implemented by the Shunchang County State-owned Forest Farm, the Dehua County Forestry Bureau, and the Yangkou State-owned Forest Farm, issuing 1.18 million tons of certified emission reductions. Twenty-one projects are currently in the application and filing process. By the end of 2017, 274,000 tons of FFCERs had been traded, with a turnover of 5.25 million yuan.
The Voluntary Carbon Standard (VCS) database shows that by the end of 2017, six Chinese projects had been registered under the VCS standard, and two projects had received certified emission reductions: the Le'an Forestry Carbon Sequestration Project in Jiangxi Province (108,545 tons) and the Yingjing County Reforestation Project in Sichuan Province (1,207 tons). VCS project owners in Yunnan, Fujian, and Inner Mongolia signed carbon trading agreements with related companies, with the Inner Mongolia Zhuoer Forestry Bureau earning 400,000 yuan in carbon sequestration revenue. In 2017, 242,343 tons of provincial-level PHCERs (Physical Heart and Emission Reductions) generated by five pilot projects in Shaoguan City within the Guangdong regional carbon market generated over 3 million yuan in trading revenue. These included the state-owned Liuzhangjiashan Forest Farm's Forestry Carbon Benefit Forest Protection Project A (26,284 tons) and Project B (11,328 tons), as well as the Zhankeng Village Forestry Project in Wengcheng Town, Wengyuan County (3,046 tons). In May 2018, PHCERs from the Dongjiang Forest Farm's Forest Protection Carbon Sink Project (34,254 tons) and Forest Management Carbon Sink Project (27,161 tons) also generated 900,000 yuan in trading revenue. Furthermore, certified carbon emission reductions generated by the first 42 farmer forest management projects in Lin'an, Zhejiang Province, the Yichun Forest Management Carbon Sink Project in Heilongjiang Province, and the first Panda Standard Bamboo Afforestation Carbon Sink Project were also traded between 2011 and 2014. The China Green Carbon Foundation is a promoter and advocate of these voluntary trading activities. Since its establishment in 2010, the China Green Carbon Foundation has been continuously exploring and expanding domestic voluntary carbon trading models. It has organized and implemented a series of afforestation carbon sink projects and 39 carbon neutrality projects, conducted extensive carbon sink education and education activities, and established over 70 individual-funded carbon sink afforestation and publicity and display bases (data from the China Green Carbon Foundation website). There have also been sporadic reports of other innovative carbon sink trading initiatives, such as purchasing carbon sink car stickers to offset private car emissions, using online platforms to purchase carbon sinks to fulfill tree planting obligations, and the Ant Forest tree planting and carbon reduction program.
2.2 Challenges facing my country’s forestry carbon trading
Since demand for CDM projects in the current international carbon market has essentially vanished, the prospects for continued development of forestry CDM projects are slim in the short term unless further reforms are implemented. Furthermore, since the National Development and Reform Commission suspended all CCER project filings in March 2017 and the national unified carbon market has yet to launch CCER offsets, the monetization of forestry CCERs will likely be limited to regional pilot markets or voluntary markets over the next two to three years. Consequently, many regulated companies and investment institutions are cautious about participating in forestry CCER projects. Coupled with the competitive pricing of CCERs from other project types, forestry CCER projects currently lack issuance volume and face difficulties in significantly increasing market demand in the short term. While BCERs, FFCERs, and PHCERs are trading in the market, their development and offsetting obligations are subject to strict regional restrictions, leading to a clear trend towards localization. Furthermore, for voluntary projects like VCS, since the international carbon market has long been dominated by buyers, some buyers prefer forestry carbon emission reductions outside of Asia. Consequently, VCS forestry projects developed across China may face challenges such as lengthy filing cycles, difficulty finding international buyers, and difficulty realizing project returns. With the coordinated advancement of ecological civilization construction, green environmental protection, and energy conservation and emission reduction efforts in China, demand for carbon sinks in the domestic voluntary market is likely to increase in the future. However, such transactions are typically brokered or organized by intermediaries, with diverse participation and a low trading volume. Without long-term regulatory pressure and supporting incentive policies, the outlook for increased demand is not optimistic.
At present, mandatory safeguards for forestry carbon trading have not yet been issued, and market players lack the motivation to purchase; there is also a lack of national-level coordinated planning and regulatory mechanisms, the roles of participating institutions and personnel overlap, and various projects are mixed, making it difficult to unify project quality, which has affected the confidence of enterprises and the public to participate; the trading support system needs to be improved, and more policy, market and technology-related research is urgently needed.
3 Revelation
3.1 Multiple mechanisms develop in parallel
Currently, global carbon pricing initiatives are being promoted through a coordinated mix of mechanisms, including emissions trading systems, carbon taxes, offset mechanisms, emission reduction funds, carbon price floor mechanisms, and results-based climate finance. Different countries and regions are choosing either a single mechanism or developing multiple mechanisms in parallel based on their specific circumstances. International forestry carbon trading, as a crucial component of carbon pricing, has also seen the emergence of a variety of mechanisms. In recent years, regulated and voluntary markets have developed side by side, with some systems beginning to transform and connect with each other. Project-based emission reduction trading and forestry carbon quota trading each have their own distinct characteristics, while emission reduction fund mechanisms and results-based payment initiatives have gradually expanded. Global forestry carbon trading is exhibiting a diversified development trend. my country's regions differ significantly in resource endowments and socioeconomic development levels, and public awareness and practice of carbon sequestration vary widely. Therefore, in the initial stages of the national carbon market, it is unlikely that forestry carbon trading will adopt a one-size-fits-all policy and standard. Numerous mechanisms, including project-based and quota-based ones, regulated offsets and voluntary compensation, and independent and regionally coordinated pilot programs, can be piloted under the coordinated planning of national and industry regulatory authorities. We should increase demand based on the domestic market, especially vigorously promote regional carbon sink benefit horizontal compensation and voluntary carbon neutrality actions, so as to explore and summarize practical and feasible operating models.
3.2 Attach great importance to non-carbon benefits
Emission reduction and carbon sink enhancement are only a small part of the many ecological services provided by forest systems. Therefore, in promoting the forestry approach in global climate governance, all stakeholders prioritize not only the carbon reduction benefits of forests, but also the multiple benefits that accrue. This is one of the key factors that have enabled voluntary global forest carbon trading to flourish years ahead of regulated markets. Regardless of the financing method, most investors prioritize the co-benefits of forest carbon projects, particularly community poverty alleviation, skills training, livelihood improvement, women's employment, biodiversity conservation, climate adaptation, forest land tenure, and water security. Therefore, we should fully draw on international experience to strengthen the foundation of incentive policies, participation pathways, management models, publicity and guidance, and technical support. We should continuously research, quantify, analyze, verify, and publicize the non-carbon benefits of various forestry projects, thereby gradually enhancing the competitiveness of the forestry carbon market.
3.3 Actively expand financing channels
Financing for international forestry carbon sink projects has diversified. In particular, regulated market-based financing and results-based payment initiatives are expanding and will become the primary channels for future forestry carbon financing. The latter already holds a dominant position in REDD+ project financing and is increasingly integrated with various local financing options, forming a nested development model. Funding for international forestry carbon sink projects has shifted from relying primarily on investor purchases to a variety of sources, including project loans, public sector grants, non-profit grants, matching funds from local finance departments, and private sector investment. Various carbon finance products, including carbon retail, carbon options, and carbon futures, are also being trialed in forestry carbon sink trading. However, financing channels for my country's current forestry carbon sink projects remain relatively limited. CCER projects primarily rely on government funding, while other projects rely on public welfare donations. This often makes it difficult to secure funding for subsequent monitoring, verification, and operational management during the project's crediting period. We should coordinate and formulate phased goals for cultivating the forestry carbon sink trading market, flexibly use incentive policy mechanisms, pilot attempts to broaden project financing channels, combine market approaches with non-market means, combine public sector funds with private sector investment, and nest project activities with local action funds. We should develop carbon financial products to serve the forestry industry, and better achieve industry development goals while promoting the participation of the whole society in carbon sink enhancement and emission reduction actions.
3.4 Continue to explore advancement paths
The carbon trading system is a systematic project that evolves through theoretical research, practical exploration, and continuous improvement. Implementation results may vary significantly across countries, regions, industries, and sectors. This is not only due to the diverse range of carbon pricing technologies, but also closely linked to the socioeconomic development of the implementing entities. Since its implementation in 2005, the EU ETS, the world's longest-running carbon trading system, has continuously learned from experience and adapted to new circumstances, but it remains far from mature. The development of a unified carbon market system in my country cannot be achieved overnight; it requires continuous revision and improvement as domestic and international emission reduction trends and policy objectives evolve and as implementation experience accumulates. Given the lack of clear links between the CDM, joint implementation mechanisms, and voluntary markets and the new approaches and mechanisms in the Paris Agreement, the sluggish international demand and uncertain prospects, and the difficulty of achieving large-scale domestic trading, how should my country's forestry carbon sink market be nurtured? Which model will most effectively support the modernization of the industry, highlight the long-term nature and importance of its development, and contribute to national strategies? This is a crucial top-level design issue. Especially in the process of parallel advancement of multiple policy systems such as ecological civilization construction, ecological poverty alleviation development, rural revitalization strategy, green and low-carbon economic transformation, energy conservation and environmental protection, and climate change response, the development of forestry carbon sink trading and the operation of other mechanisms will inevitably have cross-influences. It is necessary to enhance the integrity, coordination, and systematicness of these policies at a higher level, and widely explore and deeply demonstrate the perfect path for cultivating and evolving the carbon sink market.