Uncertainty Discounting for Land-Based Carbon Sequestration
AbstractThe effect of stochastic factors on soil carbon makes the quantity of carbon generated under a sequestration project uncertain. Hence, the quantity of sequestered carbon may need to be discounted to avoid liability from shortfalls. We present a potentially applicable uncertainty discount and discuss difficulties that might arise in empirical use. We insist that the variance in historical crop yields across geographical areas is used to derive a proxy variance for forming an uncertainty discount for carbon projects. Application of our approach suggests that project level uncertainty discounts would be 15â€“20% for the East Texas region.
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Bibliographic InfoArticle provided by Southern Agricultural Economics Association in its journal Journal of Agricultural and Applied Economics.
Volume (Year): 41 (2009)
Issue (Month): 01 (April)
carbon sequestration; discount; uncertainty; Agribusiness; Land Economics/Use; Research and Development/Tech Change/Emerging Technologies; H43; Q54;
Find related papers by JEL classification:
- H43 - Public Economics - - Publicly Provided Goods - - - Project Evaluation; Social Discount Rate
- Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters
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