Sliced: Lessons from the First American Forest Foundation Carbon Auction

Gordian Knot Strategies partnered with long-time collaborator American Forest Foundation (AFF) to host the first-ever AFF Carbon Auction for carbon credits generated from AFF’s Family Forest Carbon Program (FFCP).

This months-long collaboration provided an opportunity to test new ideas and gather feedback from buyers, investors, and other stakeholders in the voluntary carbon market. While the auction – held from March 12 to 19 – did not meet our expectations, the lessons learned will be instrumental in shaping the future of carbon markets, particularly as everyone works to adapt to the evolving political landscape and market dynamics.

At Gordian Knot Strategies (GKS), we’ve long been committed to improving the efficiency, transparency, and accessibility of carbon markets. Our goal is to mobilize $1 billion per year in climate finance by 2030. Over several months of collaboration with AFF and support from The Data Economics Company (DECO), we aimed to create a streamlined platform built on Lydion Vault technology, to simplify buying and selling carbon credits. Our goal was to shorten timelines and facilitate smoother transactions for all parties involved. While the auction didn’t result in the sale of carbon credits, the feedback we received has been invaluable. The initiative provided clear insights into the market’s needs and helped us identify areas to refine our approach to better align with buyer requirements.

One key takeaway from the auction was the clear interest in prepayment contracts, a model that allows buyers to provide upfront financing for carbon projects. This approach was well-received, as it enables early-stage funding, which is especially critical for smaller projects that face significant financial barriers. AFF has already secured several prepayment contracts outside the auction and plans to continue offering this model moving forward. Prepayment contracts are particularly vital for scaling small-holder carbon projects and will play a role in the growth of the carbon market because they offer both flexibility and stability to project developers.

Another success of the auction was the Data Room, which streamlined the due diligence process for registered buyers. By consolidating and organizing all the necessary documents into a single, centralized location, buyers were able to quickly access key information, resulting in a streamlined process. This efficiency not only reduced administrative overhead but also enhanced transparency, an essential factor in building trust within the carbon market. Moving forward, the Data Room will remain a permanent resource for those interested in FFCP credits, providing a convenient and transparent platform for engaging with the program.

However, the auction itself revealed that the format did not fully meet the procurement needs or timelines of many potential buyers. Despite strong pre-auction engagement – with over 250 organizations participating in the lead-up to the event and 45 bidders registering – no bids were placed during the one-week auction. Many buyers noted that while they were interested in the credits offered, the auction format did not align with their internal procurement processes or purchasing cycles. This is particularly relevant in light of the current political landscape, which is influencing how companies and organizations approach sustainability and carbon purchasing. As regulatory pressures grow and climate commitments evolve, buyers are dealing with varied timelines and new challenges in achieving their environmental goals. This dynamic environment added complexity to the auction’s timing and format.

Despite these challenges, the feedback we received points to a promising future for bilateral agreements in carbon credit transactions. Several registered auction buyers have already reached out to AFF to negotiate directly for FFCP credits. This shows that while the auction format may not have worked for everyone, there is still strong interest in these high-quality, nature-based carbon credits.

We salute AFF in their committed pursuit as a learning organization, willing to go where others won’t.

Looking ahead, GKS will continue to work alongside AFF and other partners to evolve the voluntary carbon market. We are focused on exploring new ways to scale the market and adapt to the changing political and regulatory landscape, helping safeguard that carbon credits continue to be a viable and effective tool for helping us achieve climate goals.