Forest carbon buffers and sustainability-linked price premiums: Advancing climate resilience in Uttarakhand’s Himalayan forests

Climate change is escalating forest fire risks, threatening the durability of forest-based carbon offsets and undermining long-term climate mitigation efforts. Voluntary Carbon Market (VCM) projects commonly establish buffer pools to safeguard against carbon loss, with buyers offering price premiums for credits that include such provisions. However, forest-dependent communities often lack adequate financial incentives to maintain large buffer areas, which limits participation in these programs. This study examines whether ecosystem services provided by buffer forests, particularly hydrological benefits, can be incorporated into sustainability-linked carbon price premiums to encourage larger buffers and reduce fire exposure. Using a bioeconomic optimization model calibrated for Uttarakhand, India, we analyze how communities allocate land between oak forests and agriculture while managing fuelwood harvesting. The model accounts for income from carbon sequestration and payments for water-based ecosystem services (PES), and it endogenizes fire risk as a function of forest species composition, which is shaped by harvesting and buffer management. Buffer zones and species composition also affect groundwater recharge and streamflow, thereby influencing PES revenues. Results show that carbon premiums tied to buffer size enhance conservation outcomes by promoting reduced harvesting, expanding buffer areas, and lowering fire risks. When high-intensity fires are anticipated, communities tend to allocate more land to buffers as insurance against carbon leakage. However, in high-risk contexts, a resource discounting effect may suppress buffer investments unless additional PES incentives, particularly those linked to downstream water benefits, are provided. These findings highlight the importance of integrating carbon and water-based payments into sustainability-linked price premiums that reflect multiple ecosystem services, thereby enhancing buffer effectiveness, strengthening project integrity, and promoting long-term community engagement in forest conservation.