Leakage Accounting in Forest Carbon Projects

Updated 2026-11-02 · 4 min read · By the akar.earth specialist team

Leakage in forest carbon explained: activity shifting, market and ecological leakage, how methodologies deduct it, and how to manage it in Indonesian projects.

Leakage is any increase in greenhouse gas emissions outside a project’s boundary that the project itself causes. In forest carbon, it usually means deforestation, logging or farming that moves elsewhere because the project stopped it inside its own area, and every credible methodology requires projects to estimate it and deduct it from credited tonnes.

Leakage is one of the main reasons buyers question avoided-deforestation credits. A project that protects 10,000 hectares while the same clearing happens next door has not reduced emissions.

Three types of leakage

How methodologies handle leakage

• Monitoring leakage areas. Older REDD+ methods such as VM0007 used a leakage belt around the project, where deforestation above expected levels counted as leakage.
• Jurisdictional approaches. VM0048 and jurisdictional programmes reduce the problem by accounting across a whole jurisdiction. Leakage within the jurisdiction is captured by jurisdiction-wide monitoring. Leakage outside it still needs treatment.
• Default deductions. Market leakage is often estimated with factors linked to where replacement production comes from. VM0010 uses this approach for stopped logging.
• Displacement of pre-project activities. ARR methodologies estimate leakage from cropping or grazing displaced by planting. Under CDM rules a dedicated tool handled this. VM0047 has its own leakage provisions.
• Ecological leakage is usually handled by design: hydrological buffers so that rewetting does not harm or drain neighbouring land.

How to assess leakage step by step

1. Identify the agents. Who did the baseline activity? Smallholders, companies, migrants, loggers?
2. Identify the drivers. Why did they do it? Food, cash crops, timber, speculation? Read drivers of deforestation in Indonesia.
3. Estimate mobility. Can those agents move? Do they have other land? Is there accessible forest nearby?
4. Choose the methodology’s approach. Monitoring, default factors or modelling.
5. Design mitigation. Livelihood programmes, agricultural intensification and alternative income reduce activity shifting.
6. Monitor. Track the leakage area or proxy indicators each period.
7. Deduct. Apply the leakage deduction to net results.

Indonesia and Southeast Asia application

Leakage in Indonesia is shaped by specific drivers:

• Smallholder expansion. Oil palm, rubber, cocoa and food crops expand into forest edges. If a project blocks expansion, households may clear elsewhere unless their needs are met.
• Company concessions. If a project stops a planned plantation, the company may develop another area. Market leakage depends on whether other land is available.
• Logging. Stopping a concession’s harvest may raise harvest elsewhere in Indonesia or abroad.
• Mangroves and ponds. Restoring ponds to mangroves may push aquaculture to other coastal areas.

Mitigation works best when it addresses livelihoods directly. Agroforestry and intensification on existing farmland can reduce pressure on forest. Read coffee agroforestry carbon and cocoa agroforestry carbon.

Pitfalls verifiers flag

• Agents and drivers not identified, so leakage cannot be assessed.
• Leakage belts too small or not comparable to the project.
• Market leakage ignored for projects that stop commercial production.
• Mitigation activities claimed without monitoring.
• Zero leakage claimed without evidence.

Livelihood measures that reduce leakage

Measures that lower leakage pressure in Indonesian landscapes include:

• intensifying existing farms through better seedlings, fertiliser and agronomy;
• agroforestry on degraded land that adds income from fruit, coffee, cocoa or timber;
• support for legal land titles and social forestry permits, which reduce pressure to clear new land;
• non-farm income such as processing, ecotourism or employment in project activities.

Each measure should be targeted at the agents who would otherwise clear forest. Monitor participation and outcomes, so that you can show the measure worked. A livelihood programme that reaches the wrong households does not reduce leakage, however well it is run.

Leakage in grouped and smallholder projects

In grouped projects, leakage is assessed for each new instance as it joins. If new farms are planted on land that was previously cropped, the displaced cropping must be checked each time. Simple screening questions during farmer registration, such as what the land was used for and where that use will move, make this manageable.

Leakage and buyers

Raters and buyers review leakage closely. A credible leakage assessment supports better ratings, and ratings move price. Read carbon credit rating agencies and baseline setting. Our carbon modelling service models agents, drivers and leakage. More on the standards hub and the forest carbon hub.