EU carbon finance could reward more resilient forest management
Europe is developing a new way to value carbon stored in forests, potentially creating an additional income source for forest owners.
Christian Holzleitner, Head of Unit at the European Commission’s Directorate-General for Climate, sees the EU’s Carbon Removals and Carbon Farming (CRCF) framework as a way to reward forest management that increases carbon storage while helping forests adapt to a changing climate.
The CRCF framework establishes common rules for certifying carbon removals, carbon farming and carbon storage in products. The aim is to ensure that claimed climate benefits are measurable, credible and transparent.
In July 2026, the European Commission adopted the framework’s first three certification methodologies, covering agriculture and agroforestry on mineral soils, peatland rewetting and restoration, and afforestation.
“These methodologies are designed not only to support carbon storage and emissions reductions, but also to strengthen climate resilience, biodiversity and the long‑term supply of biomass for the bioeconomy,” Holzleitner says.
Forest management methodology to shape the next phase of EU carbon certification
“The next major step forward is the development of a methodology for forest management,” Holzleitner says.
Unlike afforestation, which creates new forests on land that was not previously forested, forest management concerns forests that already exist. To qualify for certification, forest owners would need to show that management changes result in additional carbon storage compared with what would have occurred without the intervention.
For Holzleitner, the central challenge for the emerging EU carbon-certification system is proving that a forest-management measure delivers genuine additional carbon storage. Additionality—the requirement that a claimed climate benefit would not have occurred without the intervention—is a key principle in carbon crediting.
“Our biggest challenge is determining the counterfactual: what would have happened without the intervention and establishing a credible baseline.”
Holzleitner stresses that the Commission does not intend to prescribe a single forestry model. Instead, the CRCF is designed to reward measures that go beyond business as usual and exceed what national law requires.
Potentially certifiable measures could include improved thinning, longer rotation periods, biodiversity set-asides and actions that help forests adapt to climate change.
Holzleitner expects the methodology for certifying forest-management activities to be completed next year.
Peatland restoration presents a major opportunity for Finland
The practical relevance of the emerging EU framework becomes particularly clear in Finland, where peatland restoration could offer significant opportunities to reduce land-sector emissions, Holzleitner says.
The importance of peatlands is especially pronounced in Finland. According to the European Environment Agency (EEA), cultivated peatlands cover around 10 per cent of the country’s agricultural land but account for an estimated 50–60 per cent of agricultural greenhouse-gas emissions.
“Drained peatlands are a major source of greenhouse-gas emissions from agriculture and rewetting them could significantly reduce emissions while also improving water management,” Holzleitner says.
“The Commission’s decision to include peatland rewetting and restoration in the new carbon-farming methodology is therefore particularly relevant to Finland.”
Holzleitner sees strong potential in landscape-level projects, where forestry continues in some areas while water management or restoration takes place elsewhere.
“This reflects a broader principle of the CRCF: climate action does not necessarily mean taking productive forests out of use. Different measures can be combined across a landscape to deliver climate and environmental benefits,” he explains.
Holzleitner will discuss these broader links between climate action and the bioeconomy when he visits Finland later this month for the fifth Forest Academy for EU Decision Makers, organised by the Finnish Forest Association.
The Forest Academy takes place on 21–23 September. Holzleitner’s presentation will focus on the benefits of a circular bioeconomy for climate neutrality, with particular attention to carbon storage in buildings and the role of wood and other bio-based materials in keeping carbon stored over the long term.
Small forest holdings could make carbon certification challenging in Finland
Holzleitner says one challenge in heavily forested Finland will be making CRCF certification economically viable for the country’s many small private forest holdings. Monitoring and verification can be costly, while an individual holding may not generate enough additional carbon storage to cover the costs.
“Monitoring and verification require resources, and a single small forest may not generate enough additional carbon storage to cover those costs,” Holzleitner says.
Finland’s ownership structure helps explain the challenge. Forests cover about 26 million hectares, or 75 per cent of the country’s land area, according to the Natural Resources Institute Finland (Luke).
At the same time, ownership is highly fragmented: around 600,000 private individuals own forest land, while more than 800,000 Finns have a stake in a forest property. Many holdings are only a few dozen hectares, making it difficult for individual owners to generate enough additional carbon storage to make certification economically viable.
Holzleitner therefore emphasises the importance of combining several forest holdings into larger, landscape-scale projects.
“Local organisations and advisory groups could help forest owners join such initiatives, making certification more accessible.”
The Commission is also exploring remote sensing, modelling and national forest-growth models to reduce monitoring costs and improve the potential returns for forest owners, he says.
Climate impacts complicate measurement
Measuring the impact of forest management can be complicated by factors beyond the forest owner’s control, Holzleitner continues. Weather conditions, drought, storms, pests and other disturbances can significantly affect forest growth and carbon storage.
“The drought of 2018–19 demonstrated how strongly weather can influence forest development. The longer‑term effects of climate change are even harder to predict,” he says.
Holzleitner argues that the CRCF model must create incentives for actions that improve carbon storage now and strengthen resilience over the coming decades.
“Mixed‑species forests, for example, may be better able to withstand drought, pests and other disturbances.”
However, he stresses that decisions about tree species and forest structures must reflect local conditions: “What works in one part of Europe may not work in another, and local foresters are best placed to judge which measures are suitable.”
Managing permanence and risk
Climate change raises a fundamental question for forest-based carbon finance: what happens when forests burn or are damaged by storms, drought or pests? If stored carbon is released, the permanence of the claimed climate benefit is put at risk.
“Forest owners can only make a claim as long as the carbon is there; otherwise, it turns into greenwashing,” Holzleitner stresses.
“The CRCF framework needs mechanisms to manage this risk, including liability rules, insurance and buffer pools.”
One approach is to pool reversal risks, so that carbon losses from individual forests do not undermine the credibility of the wider system.
“The Commission is exploring options for a European-level insurance mechanism,” Holzleitner says.
Can carbon payments make forest management worthwhile?
For forest owners, the economic viability of carbon projects is a central question. The value of the carbon payment needs to be high enough to make additional climate measures worthwhile, while still allowing timber production to continue where appropriate.
Holzleitner estimates that projects carried out alongside commercial forestry could potentially be viable at around €30–50 per tonne of CO₂. If a forest were taken completely out of production, however, the carbon payment would also need to compensate for lost timber income. In that case, prices could need to approach €100 per tonne.
“These figures are not proposed EU prices, but rough estimates based on projects seen so far.”
The underlying principle, Holzleitner says, is that carbon payments should complement timber revenues rather than replace them.
“The intention is that carbon income complements timber revenues rather than replaces them.”
From forests to buildings: keeping carbon stored for longer
The CRCF framework extends beyond the forest itself. Holzleitner says the Commission is developing a separate methodology for measuring carbon storage in buildings, focusing on long-lived harvested wood products such as timber used in multi-storey construction.
Why focus on multi-storey timber buildings?
“Because they are still relatively uncommon, it is easier to demonstrate that the carbon storage they provide is additional,” Holzleitner says.
The aim is to quantify how much additional carbon can be stored in buildings when more wood is used than the average, he explains.
“We want to quantify how much additional carbon is stored in buildings when more wood is used than the average,” he says.
Could carbon finance connect the entire forest value chain?
Changes in forest management can affect the type and supply of wood available to industry.
“This means that sawmills and timber-product processors may also need to adapt,” Holzleitner says.
He also sees a role for companies further down the value chain, including major users of paper and packaging. They could help cover the cost of more sustainable forest management by purchasing CRCF units.
“If they were all paying a little bit or buying a certain amount of CRCF credits to contribute to the sustainability of the whole value chain, we could already be a good step ahead.”
This is where the emerging EU CRCF Buyers’ Club could play a role. The voluntary platform is intended to bring buyers and suppliers of certified carbon-removal and carbon-farming units together, aggregate demand and help channel public and private investment into projects at scale.
In this model, Holzleitner says, carbon finance would become part of the wider economics of the forest-based value chain rather than a separate market alongside it.
In the longer term, this could create a more integrated system in which carbon finance supports both forest management and carbon storage in long-lived wood products, while connecting these activities with other parts of the bioeconomy, including biochar and bioenergy.
Beyond the harvesting debate: building a resilient forest bioeconomy
Holzleitner highlights how the CRCF intersects with one of Europe’s most contentious forest-policy debates: how much wood should be harvested.
The debate has become increasingly polarised, including in Finland. Holzleitner argues that the focus should instead be on building resilient forests while supporting the wider bioeconomy—not on choosing between harvesting and protection.
He also has a direct message for forest owners who fear that European climate policy could eventually restrict harvesting: “We don’t want you to stop harvesting.”
In the longer term, demand for biomass could even increase as Europe moves away from fossil carbon and towards a more circular bioeconomy.
“If we use less fossil carbon in the future, we need to rely more on the bioeconomy, more on biogenic carbon.”
A new source of income for forest owners
For forest owners, the emerging CRCF system could turn carbon finance from a potential constraint on forestry into an additional source of income. If implemented well, it could help finance climate-resilient forest management while creating new opportunities for forest owners and supporting the wider bioeconomy.
In the longer term, carbon finance could become part of a more integrated system linking forest management with carbon storage in long-lived wood products and other bioeconomy applications, from biochar to bioenergy.
For Holzleitner, this could ultimately become a competitive advantage for Europe—and for forest-rich countries such as Finland.