Guidance for the Improved Forest Management on Private Land federal offset protocol

Introduction

The Improved Forest Management on Private Land federal offset protocol (the Protocol) was published under the Canadian Greenhouse Gas Offset Credit Regulations (the Regulations), which establish Canada’s Greenhouse Gas (GHG) Offset Credit System (the Offset System).

The Protocol incentivizes projects that improve forest carbon outcomes through changes in forest management practices to generate GHG emission reductions and removals (GHG reductions) for which federal offset credits may be issued, provided all requirements under the Regulations and the Protocol are met.

This guidance is intended for proponents implementing projects following the Protocol. It is also intended for related stakeholders, such as forestland owners, Indigenous governments and organizations, consultants, and verification bodies.

This guidance provides clarification, explanation, and/or justification regarding some of the provisions in the Protocol in order to help proponents understand requirements and facilitate project implementation and compliance. This guidance is neither an overview of the Protocol nor a free-standing document. It is meant to be used along with the Protocol and the Regulations.

It is important to note that the information contained within this guidance is not legal advice and does not provide an interpretation of the Protocol or the Regulations. In the event of any conflict or discrepancy between the information in this guidance and the Protocol or the Regulations, the Protocol or the Regulations shall prevail. Proponents are advised to become familiar with the Protocol and the Regulations to ensure a full understanding of legal obligations.

In addition to this guidance, other resources provide additional supporting information for proponents interested in implementing projects following the Protocol. These are available through the Protocol main webpage.

Overview of main elements

Table 1: Overview of main elements for Improved Forest Management (IFM) on Private Land projects

Protocol element	Description
Eligible project activities	Forest management activities that enhance carbon stocks relative to the baseline scenario (e.g., increasing rotation age, reducing harvest intensity, implementing partial cutting instead of clearcutting).
Ineligible activities	Activities that change land use or land cover (e.g., afforestation, reforestation, avoided conversion) are not eligible. GHG reductions from salvage harvesting or avoided burning of slash are also not eligible.
Applicability	The Protocol is applicable to projects on private land across Canada, including lands where a First Nation has exclusive use and occupation. It is not applicable to projects on provincial or federal Crown lands, or to public lands in the territories. The Protocol does not apply in provinces or territories that already have an approved IFM protocol, as listed in the table on the main webpage for federal offset protocols.
Project structure	A project is implemented on a defined project site (which may be contiguous or non-contiguous) with a single proponent. The project must also have a single forest operator, who is responsible for the forest management of the project site. The proponent and forest operator may be the same entity, or different entities.
Aggregation	Aggregating projects is enabled under this Protocol, see the section on aggregation below.
Authorizations and exclusive entitlement	If the proponent is not the forest operator, the proponent must obtain written authorization from the operator to carry out the project activities. In all cases, the proponent must have the exclusive entitlement to claim the credits issued for the GHG reductions generated by the project.

Baseline conditions

A project implemented following the Protocol must meet the baseline conditions set out in Section 3.1 of the Protocol. These conditions ensure that offset credits are only issued for GHG reductions from projects where changes to forest management are additional (see Section 5.0 of the Protocol).

Recently harvested areas

All areas within the project site must meet the definition of managed forestland. However, areas that were harvested within the last 10 years which, at the time of the project registration in the Offset System, do not meet this definition may still be included if the proponent can demonstrate that forestland will be re-established during the crediting period (e.g., demonstration of planned or completed regeneration activities or satellite imagery showing progression of tree growth), and that project activities will be applied/extended into these areas. This requirement is to ensure that stands that were recently harvested are still able to be part of a project under the Protocol, while stands that have remained unforested for longer periods of time are excluded, as this would be considered reforestation.

Sustainable forest management

A project site does not need to be currently carrying out sustainable forest management for the project to be eligible, but the proponent must demonstrate that the project site could be certified under the Forest Stewardship Council or the Sustainable Forestry Initiative if harvests will be carried out as a part of the project. This ensures that the project is implemented on lands capable of supporting consistent and periodic forest management activities, which is essential for establishing a credible baseline scenario and demonstrating additionality.

This requirement also acts to safeguard the environment, ensuring that any harvests occurring during the project meet the definition of sustainable forestry in the Protocol. How the proponent demonstrates this requirement has been met will depend on the proponent and/or forest operator, as well as the planned project activities. For example, if the forest operator is a First Nation, the proponent could demonstrate that there is a land use management plan that is being adhered to that indicates sustained yield and natural forest management.

Conservation mechanisms

Land already under a conservation easement that restricts land use and forest management is not eligible, as there is no risk of harvest or intensive management and therefore additionality cannot be demonstrated. By contrast, land under working land easement where forest management can continue – and any easement that does not meet the Protocol’s definition of a conservation easement – are eligible.

Examples of a restriction that mandates conservation could include conservation easements, Other Effective Area-based Conservation Measures (OECMs) and Indigenous-led Area-based Conservation Measures. However, if a mechanism was put in place less than one year prior to the project start date, the project is still eligible if the proponent can demonstrate the mechanism was for the purpose of implementing the project. For example, a conservation easement may be put in place to help ensure the permanence of GHG reductions and to obtain the corresponding discount to the contribution to the environmental integrity account (EIA) as per Section 11.0 of the Protocol.

Indigenous Protected and Conserved Areas

Since Indigenous Protected and Conserved Areas^{Footnote 1} (IPCAs) differ in the degree to which present and future land uses are restricted, having an IPCA in place in the project area does not necessarily qualify as a conservation mechanism that restricts eligibility under the Protocol.

Baseline scenario

The baseline scenario for a project is the carbon stocks associated with the forest management activities that would have most likely been carried out within the project site in the absence of the project and that leads to the most carbon storage over a 100-year period. It is the counterfactual condition against which the project scenario is compared to determine additionality and to quantify the GHG reductions achieved by the project.

As per Section 3.2 of the Protocol, the proponent of a project must determine two separate baseline scenarios: a regional forest management baseline scenario and a project-specific baseline scenario. Each baseline scenario captures different aspects of what would most likely occur in the absence of the project:

• the regional forest management baseline scenario represents practices commonly carried out by comparable forest operators within the same geographic area as the project site
• the project-specific baseline scenario captures details unique to the project site, including past or planned management actions that indicate the potential future management decisions of the forest operator

The final baseline scenario selected for the project is the most conservative of the two baseline scenarios (i.e., the one that results in greater long-term carbon storage over 100 years). This comparison-based approach to determining the baseline scenario has many advantages, notably ensuring that the resulting baseline scenario is conservative and reduces the likelihood of issuing credits for non-additional GHG reductions. Historical or projected management may not continue into the future, while regional averages may not be fully representative of a specific forest operator’s management decisions, influences, or constraints.

The proponent uses a 100-year horizon to capture multiple harvest cycles to ensure a more accurate and realistic comparison between baseline scenarios.

Regional forest management baseline scenario

As per Step 1 in Section 3.2.1 of the Protocol, the proponent of a project must determine the regional forest management baseline scenario for the project. This scenario is derived from matched forestlands that are used to identify the typical forest management practices for the reconciliation unit in which the project is located. 

Determine the reference forestlands

To determine the regional forest management baseline scenario, the proponent of a project must first identify a pool of reference forestlands. These reference forestlands must share ownership and management characteristics with the project site. For example, small private woodlots would be compared with other small private holdings, and Indigenous-controlled lands would be compared with other Indigenous-controlled lands, where possible. This requirement ensures that the proponent is comparing the project site to areas that face similar influences on management decisions to those of the forest operator as they are more likely to share similar management goals.

The reference forestlands must also be located in the same reconciliation unit^{Footnote 2} as the project site. This requirement ensures that the proponent is comparing the project site to areas that share some similar site characteristics to that of the project site as a result of being in the same EcoZone^{Footnote 3} .

Acceptable records that can be used to identify reference forestlands include, but are not limited to:

• aerial photographs or remote sensing (e.g., Landsat, Sentinel-2, LiDAR)
• national or sub-national forest database information (e.g., Canada’s National Forest Inventory, Ontario Forest Resource Inventory, etc.)
• landowner statements/surveys
• land title records

Determine matched forestlands

After the proponent has identified the reference forestlands, they must identify a subset of forestlands from the reference forestlands, referred to as matched forestlands. The matched forestlands are what are ultimately used to determine the common forest management practices for the project’s geographic area. These lands share numerous characteristics to the project site and therefore can be reasonably assumed to be subjected to similar influences on forest management. Because they must be reasonably comparable to the project site, the matched forestlands are selected using a structured statistical matching process.  

Matching reduces bias by ensuring that the lands used to infer the regional forest management activities are biophysically similar to the project site. While all reference forestlands are located in the same reconciliation unit, this criterion alone does not ensure comparability. Similarity in key biophysical characteristics increases confidence that the resulting matched forestlands are likely to be subject to similar management influences as these characteristics are used as the basis for growth modelling and harvesting plans.

The Protocol requires the use of a k-nearest neighbor (k-NN) statistical algorithm to determine the matched forestlands. The project site is treated as a data point described by several attributes (i.e., covariates) and each reference forestland is also a data point described by those same attributes. Then, the k-NN algorithm identifies the “nearest” (i.e., most similar) reference forestlands to the project site based on a chosen distance metric. This approach improves transparency, replicability, and statistically robustness in identifying comparable forestlands.

The k-NN analysis must use the Mahalanobis distance. This accounts for correlations among variables (e.g., species composition and age are not independent), standardizes variables so a single variable does not dominate due to differing scales, and measures similarity in multivariate space rather than along a single dimension. As a result, the Mahalanobis distance improves match quality by ensuring the selected matched forestlands are genuinely similar across all included biophysical characteristics.

In the analysis, the proponent must at a minimum include species composition and average age as the attributes used to assess similarity, as these are core determinants of forest growth, harvesting cycles, and stand development. However, other variables such as stand density, even- vs uneven-aged management, and area of forestland are encouraged to also be used where available to strengthen the matching process by capturing more of the ecological and structural factors that influence management. This can reduce residual bias and improve the overall match quality.

The Protocol does not prescribe specific software for implementing the k-NN matching with Mahalanobis distance. In the software R, this can be performed using commonly available packages (see Figure 1 for example code in R). For example, the MASS package can calculate Mahalanobis distances directly, and optmatch allows for more complex optimal matching structures. However, for the purposes of the Protocol, where matching involves selecting the nearest reference forestlands to a single project site, a simpler approach is typically sufficient. Packages such as MatchIt provide an accessible interface for k-NN matching with Mahalanobis distance and include built-in diagnostic functions (e.g., standardized difference of means) that align well with the requirements of the Protocol. The proponent may use any software capable of implementing the required method, provided the resulting outputs reflect the k-NN approach and Mahalanobis distance specified in the Protocol.

Figure 1: Example code for matching analysis in R

After the proponent has run the analysis in the selected software and produced a ranked list of reference forestlands based on nearness, the proponent must confirm that the highest-ranked forestlands include a minimum of three valid matches. This review ensures that the matched forestlands are both statistically defensible and consistent with Protocol requirements. A match is valid if the standardized difference of means for each covariate used in the matching process is ≤ 0.25. The standardized difference of means is a common balance diagnostic used to assess how similar two groups are after matching. In this context, it measures how different the project site is from the matched forestlands for each covariate, relative to the variability in the reference pool. A value of 0.25 or less indicates that any remaining differences are small and fall within an acceptable range for establishing comparability. This threshold provides a transparent, quantitative check to ensure that the matched forestlands are sufficiently similar to the project site for the purpose of inferring business-as-usual forest management. The proponent must retain the balance statistics generated during this validation step as part of their project documentation.

If the match results indicate a difference in means for each covariate greater than 0.25, the proponent must repeat the matching procedure and, if necessary, expand the reference pool by adding additional forestlands that meet the Protocol’s conditions for reference forestlands. If the proponent still cannot obtain at least three valid matches, additional reference forestlands may be incorporated from within the reconciliation unit, provided they are managed forestlands with adequate records to determine past management activities and growth characteristics. The k-NN analysis is then repeated with the expanded pool. If valid matches remain insufficient, the search boundary may be extended beyond the reconciliation unit into the same ecozone, as long as the additional forestlands satisfy all conditions for reference forestlands. See Figure 2 for an overview of the matching process.

4.1.2.1 Examples

Example #1 – Public data available:

In a jurisdiction that has a well-developed ecological and forest classification system, such as Nova Scotia, the proponent may choose to use Nova Scotia’s Forest Ecosystem Classification (FEC) system to select the matched forestlands. This system defines a set of ecological units based on various characteristics and embeds information about local productivity to provide a structured ecological framework that proponents can use to identify and justify the most appropriate matched forestlands for their project. For example, a proponent with a small private woodlot could identify the FEC unit(s) that correspond to their identified reference forestlands. The proponent would then identify the project’s matched forestlands using the biophysical information provided for each ecological unit by the FEC.

A proponent can make good use of publicly available information to establish the reference and matched forestlands, which can simplify the approach to determine the baseline scenario and avoid onerous information gathering for smaller projects.

Example #2 – No public data available:

For a project that has a large project area and is located in a jurisdiction where there is no publicly available data or established reference areas that could be used to determine the reference or the matched forestlands, the proponent could establish reference and matched forestlands using a mix of remote sensing, provincial inventories, and landowner records. For example, the proponent could use land title data to confirm ownership type to ensure it is similar to that of the forest operator to establish the reference forestlands. They could also use Landsat data to determine species composition to then determine the matched forestlands.

Figure 2: Overview of the process for identifying matched forestlands

Assess the typical forest management activities for the matched forestlands

Once the proponent has their matched forestlands, they use information about how these lands are being managed to determine the typical forest management activities. The Protocol includes a list of information that the proponent must gather in order to determine the forest management activities of the matched forestlands. However, all the information listed does not have to be used, only the relevant information to the project site and matched forestlands. This may also be informed by what information is available for the matched forestlands. The most important information for determining the baseline scenario is the amount of harvest, so at a minimum the proponent should determine annual harvest volumes for the past 5 years prior to the project start date.

To reduce the burden on proponents, the Protocol permits the use of various types of supporting information regarding the typical forest management activities of the matched forestlands. For example, advice from a Registered Professional Forester on how they would typically recommend the matched forestlands be managed would be acceptable. Further, proponents can utilize remote sensing or satellite imagery to determine how the matched forestlands have been managed over time. This type of information can be ideal for those following a dynamic baseline scenario approach, as new data can be more easily gathered during the update period to be used in updating the regional forest management baseline scenario.

Once the proponent has gathered the forest management information for the matched forestlands, that information is then applied to the project site (Step 1d in the Protocol; see next section).

Assess feasibility at the project site

The proponent must assess whether the forest management practices observed on matched forestlands are both operationally and financially feasible for the project site. This assessment ensures that the forest management activities in the baseline scenario are realistic.

The proponent uses the forest management information from the matched forestlands and applies it to the project site. For example, if matched forestlands use whole-tree chipping for pulp, but no pulp mills exist near the project site, this practice cannot be included in the baseline scenario. In this case, the pulp could not be processed locally, and transporting it to the nearest suitable pulp mill outside the region would be cost prohibitive relative to the market value of the pulp. Even if the forest operator could technically ship the material, doing so would not represent a realistic or profitable practice under the conditions.

The proponent can use a variety of information to demonstrate that the practices are financially and operationally feasible, including, but not limited to:

• financial feasibility – timber prices, market demand, and mill accessibility, demonstrating that the practice could generate a reasonable profit under current or expected market conditions
• operational feasibility – suitability of the terrain within the project site to support the practices, access to appropriate infrastructure, and availability of equipment or contractors

The proponent must always assess the feasibility within the project site’s reconciliation unit. This requirement helps to ensure that what the proponent assesses is realistic for the project site. However, there may be cases where it is common practice for the forest operator to operate in markets outside the reconciliation unit as they may be close to a border of a reconciliation unit or produce a product that has a larger market, and this is economically viable for the forest operator (e.g., transport costs do not exceed profit margins). If the proponent can demonstrate that this is typical for the forest operator and is financially feasible, there may be consideration for market conditions outside the project site’s reconciliation unit. To demonstrate this, the proponent may gather the following information, for example:

• historical mill receipts or waybills showing that timber from the project site (or the same operator) has been delivered to mills outside the reconciliation unit
• market studies or price data showing comparable profitability
• professional attestations confirming that such practices are typical and financially feasible for the operator

Determine the regional forest management baseline scenario

At this stage, the proponent knows which forest management activities are typically practiced within comparable forestlands (from the matching analysis) and which of these are operationally and financially feasible within the project site (from the feasibility assessment). These collectively form the final list of baseline forest management activities applicable to the project to be reflected in the regional forest management baseline scenario.

The baseline scenario is then modelled in accordance with the requirements outlined in Section 9.0 of the Protocol. This provides the carbon stocks over the 100-year period associated with the regional forest management baseline scenario to be used in the assessment of conservativeness in Step 3 in Section 3.2.1 of the Protocol.

Project-specific baseline scenario

As per Step 2 in Section 3.2.1 of the Protocol, the proponent must also determine the project-specific baseline scenario for the project site. This scenario is derived from historical and current information on forest management within the project site. The proponent assesses what planned practices would be carried out in the future (projected forest management activities) and compares this to practices that have been carried out in the past within the project site (historical practices).  

Assess projected forest management activities

The proponent must assess available forward-looking records such as forest management plans, land-use management plans and/or licenses/permits, and contracts or signed offers from mills/harvesters. This also includes written offers to purchase the project site itself if the likely intent is harvest – in such cases, the offer is treated as equivalent to a harvest contract.

No single document needs to contain all the projected forest management information; multiple records may be used. For example, the proponent may have more than one document that indicates the planned harvest volumes, and there may be additional documentation that outlines a feasibility analysis to demonstrate the planned harvests are financially and operationally feasible.

Assess historical practices within the project site

The proponents must also assess the historical practices previously implemented within the project site. This assessment must cover at least the last 10 years prior to the project start date. If the most recent harvest did not occur within the last 10 years prior to the project start date, the proponent would use a lookback period that extends to the most recent harvest, as this would result in a longer and more complete lookback period.

Similarly to the projected forest management activities, the proponent must assess the forest management and silvicultural activities and harvest volumes that were carried out in the historical lookback period. As there may be conditions in the past that may not continue into the future, the proponent must also make note of any environmental or socio-economic factors that may have resulted in the forest operator carrying out forest management activities or harvest volumes that are not typical for the project site. This could include natural disturbances like prolonged drought or wildfires, or major economic fluctuations like the COVID-19 pandemic. If there are severe outlier years in the historical lookback period, it may be appropriate to exclude these years from the assessment.

Exclusion of the historical practices assessment

The Protocol outlines the exceptions that may apply to a project that could result in the proponent excluding the assessment of historical practices. These are the only cases in which the assessment of historical practices can be excluded, and no other reason that has not been listed in the Protocol can be used as justification to exclude this assessment.

Ownership changes – In some cases, the project site may have been purchased for the purpose of implementing an offset project, or the ownership of the project site recently changed, resulting in a different forest operator being responsible for forest management at the project start date. If ownership has changed within the last 10 years, 10 years of forest management information associated with the new forest operator may not be available to meet the requirement to use a minimum 10-year lookback period for assessing historical practices. As a result, the Protocol permits the proponent to use records from the prior owner to demonstrate historical management practices.

Absence of records – In some cases, there may be no management records for the project site. Such cases may be where there has not been historical management within the project site or ownership changed in the last 10 years, but the forest management information associated with the previous forest operator is not available. In these instances, the proponent can use the data from other controlled lands of the same forest type and under the same operational control to infer plausible historical management. These records can be used when the proponent can demonstrate similar management would have occurred within the project site, such as demonstrating that similar forest products are produced or the controlled lands share similar characteristics to the project site that are important in determining management decisions (e.g., species composition, forest age, stand density, etc.).

Indigenous-controlled lands – For Indigenous-controlled lands, such as First Nation reserves, historical practices (or a lack thereof) may not be representative of how the lands would be managed into the future. For example, the lands were not previously controlled by Indigenous peoples or there were previous socio-economic constraints. Regardless of the reason, the assessment of historical practices can be excluded on these lands.

Determine the project-specific baseline scenario

At this stage, the proponent may have both projected and historical forest management information. However, these assessments may not yield the same results, leading to contrasting harvest volumes and/or forest management activities, making it not possible to produce a single project-specific baseline scenario. In this case, the proponent will use only the projected forest management activities (Step 2a in Section 3.2.1 of the Protocol) to determine the project-specific baseline scenario. Since this information was gathered more recently and is more likely to reflect the current project site and market conditions, it is prioritized over the historical practice information. There may be cases where the historical practice information and the projected forest management activities are complementary, in which case both assessments can be used to determine the project-specific baseline scenario.

There may also be cases where the proponent only has the projected forest management activities or information on historical practices. In these cases, the proponent solely uses the information that is available.

Once the proponent has identified the information that will be used to determine the project-specific baseline scenario, the proponent uses this information to determine a 100-year growth and harvesting regime. The resulting baseline scenario is then modelled in accordance with the requirements outlined in Section 9.0 of the Protocol. This will give the carbon stocks over the 100-year period associated with the project-specific baseline scenario to be used in the assessment of conservativeness in Step 3 in Section 3.2.1 of the Protocol.

Final baseline scenario selection

As per Step 3 in Section 3.2.1 of the Protocol, and once both the regional forest management baseline scenario (i.e., Step 1) and the project-specific baseline scenario (i.e., Step 2) have been determined and modelled to determine the carbon stocks associated with each scenario, the proponent must select the scenario that is the most conservative, i.e., the one that results in the highest carbon stocks over the 100-year period. To determine which baseline scenario has the highest carbon stocks, the proponent compares the average annual carbon stocks over the 100-year period.

Updating the baseline scenario

For a proponent who has chosen to dynamically update the baseline scenario throughout the crediting period, they repeat the process to determine the baseline scenario (Steps 1 to 3 in the Protocol) using updated information. For the project-specific baseline scenario (Step 2), this can include new or updated information on the projected forest management activities, such as a new forest management plan for the project site or an update to the existing plan to reflect current environmental and market conditions. However, the proponent does not re-assess the historical lookback period, as this is fixed to the project start date. Since this approach is based on assuming a continuation of historical activities, the proponent determines the historical practices that would have taken place over the same period as the update to the baseline scenario.

Project scenario

The project scenario consists of the set of forest management practices that are carried out within the project site (i.e., the eligible project activities, see the section below) during the crediting period and that result in measurable carbon stocks increases beyond the baseline scenario. The specific project activities carried out by the proponent will depend on the forest carbon management objectives, the current condition of the forest, and how the land has been managed historically.

Types of eligible project activities

As per Section 4.2 of the Protocol, there is not an exclusive list of eligible project activities. Unless stated otherwise (see Section 4.3 of the Protocol), any forest management activity that can maintain or increase the carbon stocks within the project site relative to the baseline scenario are eligible. Some project activities may be present in both the project and baseline scenarios but may be carried out to varying degrees of intensity or scale. For example, partial harvest retention may be expanded to cover a greater area within the project site, or the percentage of retained trees can be increased. Ultimately, it is most important that each selected project activity represents a purposeful change in forest management that results in greater carbon storage than would have occurred in the absence of the project.

Examples of eligible project activities

The following examples illustrate common types of forest management activities that may be eligible under the Protocol.

Changes to harvest practices, such as extending rotation ages, reducing harvest intensity (e.g., retaining higher residual basal area after partial cuts) or shifting from clearcut to partial harvest systems. For example, a forest operator shifts from clearcut harvesting to partial cutting, leaving 40% of the stand basal area as residual trees. This change reduces the decrease of carbon stocks and maintains a larger standing inventory of live biomass compared to the baseline (clearcutting).

Silvicultural improvements, such as planting genetically improved stock with verified growth advantages, implementing site preparation methods to improve regeneration success, or pre-commercial thinning to promote higher-value, faster-growing residual trees. For example, following a harvest, a forest operator plants genetically improved spruce seedlings with higher growth rates and survival compared to the region’s standard stock. This action accelerates forest regeneration and results in higher long-term carbon stocks relative to the baseline scenario (which would have used unimproved stock).

Conservation-oriented changes, such as transitioning actively managed forests to a no-harvest or limited-harvest regime or implementing long-term protection on stands that would have been harvested under the baseline scenario. For example, a forest operator with a history of harvesting every 40 years adopts a conservation-oriented plan that suspends harvests for the duration of the crediting period. In the absence of the project, the baseline scenario represents continued harvest activity. By deferring or eliminating harvests, the project scenario maintains carbon stocks that would otherwise have been reduced.

Types of ineligible project activities

As per Section 4.3 of the Protocol, afforestation, reforestation and avoided conversion of forestlands are ineligible. Additionally, while activities like salvage harvesting and avoided slash burning may occur within project sites, their GHG reductions are not eligible for crediting. This is because the fate of the material collected for salvage harvesting is not always certain and may be used for the creation of biofuel; therefore, the GHG emissions from not burning slash in the forest would not truly be avoided.

The following are other examples of ineligible activities under the Protocol:

• a land trust has held a conservation easement on a forest property for 20 years and wants to continue implementing the easement on the property
• establishing tree rows on agricultural field edges
• a landowner prevents a forest from being rezoned into agricultural or residential land

Legal additionality

As per Section 5.1 of the Protocol, the proponent of a project is responsible for identifying all legal requirements that are applicable to the project site in the province or territory where the project is taking place (e.g. from federal, provincial, or territorial regulations, municipal by-laws, other permits, etc.). This is needed to ensure GHG reductions generated by the project are legally additional under the Protocol.

In general, there are very few legal requirements applicable to private forestlands in Canada and those that do exist are unlikely to mandate direct GHG reductions. Relevant obligations that may apply to activities that influence forest carbon stocks include retention rules, reforestation standards, or harvest regulations.

Because of this, the assessment of legal additionality must ensure that:

• any existing legal requirements appear in the baseline scenario, as these represent practices that would occur in the absence of the project (and cannot generate credits), and
• project activities demonstrably go beyond those legal requirements, resulting in greater carbon storage than required by law

Examples of legal requirements

The following examples demonstrate how legal additionality should be assessed under the Protocol.

1. Minimum legal obligations vs enhanced practices: A province requires that harvested areas be replanted to achieve at least 70% seedling survival. By contrast, genetically improved stocks at higher densities are planted in a project, resulting in faster growth and greater seedling survival of 85%. The baseline scenario would reflect the minimum required 70% seedling survival, and the project would generate GHG reductions from the additional 15% of seedlings that survived.

2. Harvest regulations vs extended rotations: A landowner is subject to a forest practices regulation that sets a minimum harvest age or limits annual harvest volume. As part of a project, rotation lengths are voluntarily extended or harvest intensity is reduced beyond those limits, maintaining higher carbon stocks. Only these additional GHG reductions – those achieved by going beyond the legal requirement – are eligible for crediting.

Changes in legal requirements during the crediting period

During the crediting period, new or amended legal requirements may affect the legal additionality of a project. In the context of IFM projects, these situations generally fall into two categories:

1. Introduction of new legal requirements

If new legal requirements are introduced into a law that require forest-management activities that were previously voluntary – such as mandatory rotation extensions, harvest deferrals, or minimum retention levels – then these activities are no longer additional after the legal requirements come into force, and the baseline scenario must be updated to reflect the new legal requirements. Offset credits issued before the new legal requirements came into force are unaffected

2. Establishment of conservation mechanisms

The implementation of a conservation easement, an OECM, or an Indigenous-led Area-based Conservation Measure within one year of the project start date or at any point during the crediting period does not constitute a legal requirement that requires an update to the baseline scenario. These mechanisms are often implemented as a part of the offset project to implement conservation-based project activities and to maintain permanence of the GHG reductions. As a result, implementing these mechanisms is treated as carrying out the project activities and is not considered a new legal requirement

General requirements

Project start date

As per Section 6.1 of the Protocol, the project start date corresponds to either the registration date or the date of initiation of the forest carbon inventory if it is initiated after the registration date. It can be difficult demonstrating the exact start date for some project activities if there is little evidence associated with carrying out the activity (e.g., conservation, increasing the rotation age, etc.). Therefore, the registration date or the date of initiation of the forest carbon inventory serves as an easily identifiable start date for the project activities and has clear records associated with them.

The proponent has flexibility in what records they use to identify the initiation of the forest carbon inventory. For example, the proponent could use the date a contract was signed with an entity carrying out the forest carbon inventory measurements or the first date measurements were taken.

Crediting period

As per Section 6.2 of the Protocol, the crediting period is 25 years. Although the Regulations allow a sequestration project related to forestry to have a crediting period of up to 30 years, a 25-year crediting period was chosen to simplify period renewal, align with maximum reporting periods, and better ensure the environmental integrity of the baseline scenario. The crediting period can be renewed up to a maximum length of 100 years, meaning the crediting period can be renewed a maximum of three times.

It is important to note there may be cases where the crediting period may be less than 25 years, as per subsections 5(4) and 5(5) of the Regulations.

Entitlement to the GHG reductions and interaction with other financial incentives

Financial incentives and cost-share programs can provide additional funding to help support projects under the Protocol. However, if the proponent of a project has received funding from programs that provide compensation directly linked to GHG outcomes and wish to claim the GHG reductions achieved by the project, they may face additional requirements or even compromise compliance with the exclusive entitlement requirement.

Paragraph 8(1)(b) of the Regulations requires that the proponent of an offset project has exclusive entitlement to claim the offset credits issued for the GHG reductions achieved by the project. Entitlement means a contractual right to, or ownership of, federal offset credits generated as a result of the project. At the project registration, the proponent must attest that they have this exclusive entitlement to meet conditions for registration.

Despite this requirement, if a proponent only has partial entitlement (for example, they retain entitlement to the portion they provided in a cost-share agreement in a funding program), this does not prevent them from being able to register a project. The Offset System created a pathway in the Regulations to recognize the portion of the GHG reductions claimed by a funding program. The Regulations specify that a percentage of credits could be forgone to represent the externally funded portion of GHG reductions. This mechanism ensures the environmental integrity of the Offset System will be upheld if the entitlement to GHG reductions is already claimed by other funding sources, where applicable.

This mechanism also allows programs to work synergistically to enhance climate ambition, including in the sectors of agriculture and forestry, and to avoid double claiming of GHG reductions, and potential environmental integrity concerns. In the case of projects under the Protocol, an example of a relevant funding program where entitlement could be partially restricted is the federal Nature Smart Climate Solutions Fund.

If at any point during the crediting period funding is received to implement new or existing project activities and entitlement is restricted by the funding program, the proponent must report this change as an update to the project information in their project report to reflect the percentage of credits that must be forgone.

Quantification

As per Section 8.0 of the Protocol, the GHG reductions generated by a project are quantified as the difference between the year-over-year change in carbon stored in the baseline scenario compared to the year-over-year change in carbon stored in the project scenario. The proponent has the option to directly measure the change in carbon stocks in the project scenario through updating the forest carbon inventory, or can use a combination of measurements and models. However, the change in carbon stocks in the baseline scenario are always exclusively modelled.

Sources, sinks and reservoirs

Section 7.0 of the Protocol outlines the sources, sinks and reservoirs (SSRs) that must be included or excluded in quantification of the GHG reductions achieved by a project. Additionally, there are some SSRs that are optional; specifically, the forest carbon pools for lying dead tree carbon (SSR5), litter and forest floor (SSR6) and soil carbon (SSR7). The proponent may want to exclude these SSRs when their project is unlikely to result in any significant gains to the carbon stored in these forest carbon pools and the additional costs associated with quantification make it not worth including these SSRs. However, to ensure quantification is conservative, these SSRs can only be excluded when the project activities are unlikely to result in significant losses of carbon from these pools. As a result, the proponent will need to provide justification if the SSRs are excluded from quantification. Examples of acceptable justification could include, but are not limited to:

• the project activities reduce harvest levels relative to the baseline scenario, which would decrease disturbance to these pools and therefore result in less carbon loss compared to the baseline scenario
• the project activities will increase the carbon stored in these pools by leaving non-merchantable or low-quality stem parts, such as crowns and branches, to decay naturally after harvest
• the project will not involve any site preparation activities – such as disc trenching or breaking up hardpans – or the construction of forest roads, avoiding any loss of soil carbon, especially if these activities were going to occur in the baseline scenario

The SSR for biological emissions from site preparation (SSR12) is included as per the Protocol. However, this SSR is never directly quantified. Emissions from this SSR would result in a loss of soil carbon within the project site and are therefore captured through the quantification of the soil carbon pool (SSR7).

The SSR for biomass combustion (SSR10) must always be included in quantification, but this does not mean that there will always be emissions associated with this SSR. Some projects may not involve burning, either during a period covered by a project report or throughout the entire crediting period, and therefore the emissions associated with this SSR would be zero.

Uncertainty

As per Section 8.3 of the Protocol, the uncertainty calculations are only related to sampling (measurement) uncertainty associated with the forest carbon inventory and there is no deduction for model uncertainty. As a result, there is only an uncertainty deduction in the project scenario, as the baseline scenario is exclusively modelled.

Uncertainty factor updates

The proponent must update the uncertainty factor when the forest carbon inventory is updated in full at the latest. An inventory updated in full means all plots have been remeasured, irrespective of whether they were all remeasured in the same reporting period or in different reporting periods.

This is the minimum requirement for when to update the uncertainty factor. The proponent does not always have to update the entire forest carbon inventory in a single reporting period. However, when a partial update to the inventory occurs in a given reporting period (e.g., 10% of the inventory plots are remeasured each year), the proponent is encouraged to update the uncertainty factor to be applied to each calendar year covered by the current reporting period. This is to ensure conservativeness of the project scenario’s carbon stocks estimates and mitigate the risks of having over-estimated carbon stocks as a result of model overestimation, which could result in a voluntary reversal.

Leakage

As per Section 8.4 of the Protocol, the proponent of a project must address two types of leakage: activity shifting leakage and market leakage.

Activity-shifting leakage

Activity-shifting leakage occurs when harvest displaced from the project area shifts to other forestlands under the control of the forest operator. No deduction is required if the proponent can demonstrate that activity-shifting is not occurring using the acceptable evidence listed in Section 8.4.1 of the Protocol.

If activity-shifting leakage cannot be ruled out, the proponent must calculate the deduction using Equation 28 in the Protocol. The values for SC_{ProjectCL,dm,i,C} and SC_{BaselineCL,dm,i,C} are calculated the same way as SC_{Project,dm,i,C} and SC_{Baseline,dm,i,C} for the project site, but instead use information from the controlled lands in Equations 20 or 21 and 8 or 9.

Market leakage

Market leakage occurs when reduced harvest within the project area leads to increased harvest elsewhere on lands not controlled by the forest operator. The Protocol provides two options to apply the regional market leakage factor to address this type of leakage:

Option 1 – Apply the leakage factor to the total GHG reductions achieved by the project

This option is often best suited for conservation-oriented projects, where nearly all GHG reductions come from avoided harvest. For these projects, enhanced GHG removals that do not come with the same leakage risks contribute little to total GHG reductions achieved by the project. Applying the leakage factor to all the GHG reductions simplifies quantification without the risk that the deduction is applied to GHG reductions that do not have a leakage risk.

Option 2 – Apply the leakage factor only to the avoided-harvest portion of GHG reductions achieved by the project

This option is best suited for projects that generate GHG reductions from enhanced GHG removals (e.g., tree improvements, thinning, increasing stand density). Although this approach adds complexity to quantifying market leakage, only applying the leakage factor to avoided-harvest removals ensures that enhanced GHG removals without a leakage risk are not discounted. As a result, there is a benefit for projects that continue to harvest in the project scenario. When a project minimizes the difference in the level of harvest between the project and baseline scenarios, the leakage factor is then applied to a smaller amount of the total GHG reductions achieved by the project and therefore there will be a smaller overall deduction for leakage compared to using Option 1. However, this benefit is only realized when there are not considerable differences in the level of harvest in the project and baseline scenarios.

Measurements and data

Forest carbon inventory development

As per Section 9.1.1 of the Protocol, the proponent must develop a forest carbon inventory. The inventory must be consistent with the minimum requirements set out in items 1-10 in Section 9.1.1. There is no specific inventory methodology that the proponent must follow, and they have the flexibility to develop their own methodology as long as it meets these minimum requirements. The proponent may use the methods found in the National Forest Inventory Ground Plot Measurement Guidelines (v5.0) or those in a provincial or territorial standard. The benefit of using these standards is that the proponent will not need to justify their inventory method with peer-reviewed literature or other reputable sources. However, it is not a requirement to use a government-developed standard.

There are several key considerations in the design of a forest carbon inventory. The inventory must be stratified, and the proponent must provide the pre- and post-stratification rules. It is up to the proponent to select what conditions will be used to set strata boundaries, such as age class, vegetation type or management regime. This decision will be important for the calculation of sampling uncertainty in Section 8.3 of the Protocol, as efficient stratification design can help reduce the uncertainty associated with the carbon stock estimates.

Plots used for sampling in the inventory are monumented, meaning they are fixed plots for the entire crediting period. The proponent must randomly generate the plot locations, but it is possible that plot locations will be inaccessible or hazardous at the time of initially developing the inventory or at some point during the crediting period as a result of changing conditions within the project site, such as after a natural disturbance. In these cases, the proponent can select a new randomly generated plot location as a replacement plot.

Soil carbon

The proponent must collect soil carbon measurements, such as soil samples, bulk density measurements or soil texture, following Canada’s National Forest Inventory Ground Sampling Guidelines and any other requirements listed in the Protocol. However, the methods used to determine the carbon content of the soil are selected by the proponent. Typically, soil samples will be sent for laboratory analysis, and methods such as dry combustion or loss-in-ignition are used to determine soil carbon content.

Soil carbon is an optional SSR, but it must be included when significant disturbance to forest soils will occur, including when the project activities result in compaction. When this SSR must be included, even if increases occur to the soil carbon pool it is not possible to generate credits from these increases. Therefore, soil carbon is only ever included as a source of GHG emissions that will end up being subtracted from the total project scenario carbon stocks.

Only the initial forest carbon inventory must include soil carbon measurements, and subsequently soil carbon stocks are modelled in the project scenario using the Carbon Budget Model of the Canadian Forest Sector (CBM-CFS3). Baseline scenario soil carbon stocks are held constant at the initial inventory levels.

Permanence and reversals

Reversal risk management plan

As per Section 10.1 of the Protocol, the proponent must develop a reversal risk management plan that describes the mitigation measures in place to reduce the risk of potential carbon stock losses from the project site. The proponent identifies which mitigation measures are necessary based on the reversal risks applicable to the project site (fire, pest and disease, drought, etc.). Examples of reversal risk mitigation measures could include, but are not limited to:

• community-based monitoring programs
• annual FireSmart or Emergency Management Plans
• physical interventions such as the removal of diseased or infested trees, fuel load reduction, prescribed burning, or firebreak creation
• site selection considerations, such as proximity to emergency fire services or avoidance of high-risk areas
• use of remote sensing or other monitoring technologies to detect forest disturbances, and
• maintenance of a healthy and diverse forest structure through appropriate silvicultural practices

The proponent should ensure that these measures are appropriate for the project site and consistent with local management frameworks and best practice recommendations.

Identifying a reversal

A reversal occurs when the difference between the GHG removals in the project and the baseline scenarios falls below the level reported at the end of the last reporting period (i.e., the last issuance of credits). A project will be issued credits as long as this difference in GHG removals between the project and baseline scenarios continue to increase over time. This means it is possible to have declining carbon stocks in the project scenario, as long as the baseline scenario has declining carbon stocks at a greater rate.

As per Section 10.3 of the Protocol, the proponent must use Equation 34 to assess whether a reversal has occurred in the project, i.e., whether the difference between the project and baseline scenario GHG removals has decreased during the current reporting period compared to the previous reporting period.

During the permanence monitoring period, the proponent is no longer comparing the project scenario GHG removals to the baseline scenario GHG removals, as credits are no longer being issued. As a result, the calculation to identify a reversal must be adjusted to reflect this difference. The proponent must use Equation 37 to determine the magnitude of a reversal during the permanence monitoring period. This calculation involves determining how many GHG removals have been achieved since the crediting period ended; a reversal has only occurred if the magnitude of the reversal was large enough that all GHG reductions generated since the crediting period ended have been lost from the project site.

Reversal monitoring

The Protocol provides flexibility on how a proponent monitors for a reversal during the permanence monitoring period, specifically as it relates to monitoring forest carbon stocks. The biggest benefit is that the proponent can update forest carbon inventory measurements every 20 years. In between these measurements, models, remote sensing technologies and satellite imagery can be used to detect potential reversals. However, if a reversal is identified or suspected, the proponent must update the inventory to determine the exact magnitude of the reversal.

If remote sensing technology is used it should, at a minimum, be capable of:

• detecting significant forest disturbances from remote sensed data (e.g., optical, radar, LiDAR imagery), and
• change-detection analysis (e.g., canopy cover loss, normalized difference vegetation index (NDVI) anomalies, or biomass change) to identify areas of potential carbon loss

Satellite imagery that only shows forest disturbance (e.g., canopy loss) may indicate a possible reversal, but modelling and measurement will be required to confirm whether a reversal has occurred. Therefore, this technology may be less reliable than using remote sensing technologies, which may be able to estimate the magnitude of the reversal before ground measurements are taken.

Aggregation

Projects implemented following the Protocol can be aggregated to pool GHG reduction potential and reduce costs related to project implementation and verification, such as common forest carbon inventories. Aggregation may be beneficial for small forestlands located in relatively proximity to one another.

Requirements specific to aggregations are not contained in one single section in the Protocol. Rather, they are presented in the relevant sections, such as for the baseline scenario determination, project start date, quantification of GHG removals, and the forest carbon inventory.

For most requirements in the Protocol, each project within an aggregation must independently meet the requirements. However, there are some requirements that are applicable at the level of aggregation as outlined in the sections below.

Structure

Projects in an aggregation are distinguished by differing forest operators. This is important so that assumptions about the activities in the baseline scenario are specific to the individual or entity responsible for forest management decisions, ensuring additionality. This means an aggregation will be made up of several different forest operators, but there will only be one proponent that is responsible for all projects of the aggregation. The proponent being the legal entity in the Offset System responsible for all projects in the aggregation does not make the proponent the forest operator.

Site plan

A site plan must be provided for each project in the aggregation, but a single file can be provided displaying the site plan for each project.

Project start date

The possible dates the proponent must use to establish the project start date (i.e., the registration date or the date of the initiation of the forest carbon inventory if initiated after registration) are the same for any projects regardless of whether they are part of an aggregation or not. When a proponent registers an aggregation of projects, all the projects initially part of the aggregation are likely going to have the same project start date. This is because all the projects in the aggregation will have the same registration date and there will likely be a shared forest carbon inventory (see the section below). However, any new project added to an existing aggregation where there is a shared inventory (for registered and new projects) will have a start date of the registration date of the new project.

Despite the provisions above, if a forest carbon inventory is developed for each project in the aggregation, each project can have its own project start date corresponding to the initiation of its forest carbon inventory if it occurs after the registration date of the project.

Baseline scenario

The Protocol provides flexibility as it relates to determining the baseline scenario for projects in an aggregation.

If the projects are in close proximity (such as in the Atlantic provinces) and share similar characteristics to satisfy the conditions to determine the reference forestlands, the proponent can use the same reference and matched forestlands for all the projects in the aggregation to determine the regional forest management baseline scenario. This streamlines the determination of this baseline scenario by allowing the proponent to carry out one analysis to identify reference forestlands and subsequently the matched forestlands. To determine the carbon stocks associated with this baseline scenario, the proponent will still need to model this based on what is operationally and financially feasible at each project site.

Due to the project-specific nature of the project-specific baseline scenario, the assessment in Step 2 of the Protocol is still conducted for each project. However, it is possible that some records may be shared across project sites in the aggregation (e.g., a single forest management plan was developed for all the project sites), which may simplify the assessment for the proponent.

Shared forest carbon inventory

The forest carbon inventory can be shared across all the projects in the aggregation. This means that each project site alone does not have to include enough sample plots to achieve a 90% confidence level with a standard error of ±10% of the mean. Instead, plots can be spread across the project sites within the aggregation to reach the required confidence level.

Stratification of the inventory can also be done at the aggregation level to ensure similar project sites are grouped together to reduce uncertainty. This results in total GHG reductions achieved being calculated across the aggregation. However, an estimate of total GHG reductions achieved must be reported by each project, so the proponent will have to determine a method to apportion the total GHG reductions achieved across the aggregation to each project.

Reversals

Calculations of whether a reversal has occurred are carried out at the project level.

Verification

Site visits

The Protocol does not contain specific requirements for conducting project site visits as part of third-party verifications. However, to ensure a thorough and robust verification of a project report, the verification body is encouraged to perform a visit of the project site that includes:

• observation of the implementation of project activities and environmental safeguards
• observation of any changes to the project site since the last site visit verification
• reviewing the procedures implemented at the project site by the proponent to conduct the forest carbon inventory
• development of a sampling plan indicating how estimates of carbon stocks for included SSRs representing forest carbon pools will be re-measured, and the plan must be developed according to the following:
  • remeasurement of at least 10% of the sample plots used to develop the forest carbon inventory for the project site or at least three sample plots, whichever is greater
  • sample plots remeasured must be randomly selected and take into the account the risk of error, and
  • sample plots used in the site visit verification must be labeled with the date of the verification and the name of the verification body responsible for the verification
• evaluation of proponent estimates of carbon stocks for each included SSR against estimates derived from field measurements by the verification body to ensure plot measurements and update processes are within the required levels of accuracy at the set confidence level

It is also recommended that the site visit takes place within 12 months of the most recent inventory measurements. This will limit the discrepancies between the verification body’s and proponent’s measurements (due to natural growth or mortality) and improve data consistency.

For a project that generates less than 10,000 tonnes of CO2e for any calendar year covered by a project report and for any project part of an aggregation, it is recommended that a project site visit is conducted at least once every 10 years.