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Forest carbon offsets and carbon emissions trading: Problems of contracting

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  • van Kooten, G. Cornelis

Abstract

The process of monitoring and measuring the carbon fluxes associated with forestry is complex and costly, and the process is subject to asymmetric information, perverse incentives and inadequate institutions. The upshot is that any trade in forestry related carbon credits is likely to involve unwarranted acts of faith. This means that, since carbon credits are a de facto fiat currency, their exchange value is likely to be unstable. Contracting requires good governance, which is often lacking. Meanwhile, parties to a contract to provide offsets for sale in carbon markets have misaligned incentives in addition to asymmetric information. This leads to a principal-agent problem that delays successful contracting and quite often leads to incompatible claims regarding the creation of carbon offsets. At worse, it results in corruption.

Suggested Citation

  • van Kooten, G. Cornelis, 2017. "Forest carbon offsets and carbon emissions trading: Problems of contracting," Forest Policy and Economics, Elsevier, vol. 75(C), pages 83-88.
    • Handle: RePEc:eee:forpol:v:75:y:2017:i:c:p:83-88
    DOI: 10.1016/j.forpol.2016.12.006
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    References listed on IDEAS

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    1. Engel, Stefanie & Palmer, Charles & Taschini, Luca & Urech, Simon, 2012. "Cost-effective payments for reducing emissions from deforestation under uncertainty," LSE Research Online Documents on Economics 44837, London School of Economics and Political Science, LSE Library.
    2. G. C. van Kooten & Andrew Schmitz, 1992. "Preserving Waterfowl Habitat on the Canadian Prairies: Economic Incentives versus Moral Suasion," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 74(1), pages 79-89.
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    7. G. Cornelis van Kooten & Clark S. Binkley & Gregg Delcourt, 1995. "Effect of Carbon Taxes and Subsidies on Optimal Forest Rotation Age and Supply of Carbon Services," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 77(2), pages 365-374.
    8. G. C. van Kooten, 2004. "Climate Change Economics," Books, Edward Elgar Publishing, number 3424.
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    Cited by:

    1. Kooten, G. Cornelis Van, 2022. "The Impact of Carbon on Optimal Forest Rotation Ages: An Application to Coastal Forests in British Columbia," 2022 Annual Meeting, July 31-August 2, Anaheim, California 322612, Agricultural and Applied Economics Association.
    2. Bhubaneswor Dhakal & Narendra Chand & Him Lal Shrestha & Anita Shrestha & Nischal Dhakal & Bikash Adhikari & Shyam Krishna Shrestha & Krishna Bahadur Karki & Padam Bhandari, 2022. "Paradoxes of Aggravated Vulnerability, Marginalization, and Peril of Forest-Based Communities after Increasing Conservative Forest and Protected Areas in Nepal: A Policy Lesson on Land-Based Climate C," World, MDPI, vol. 3(3), pages 1-31, August.
    3. G. Cornelis van Kooten, 2023. "Determining optimal forest rotation ages and carbon offset credits: Accounting for post‐harvest carbon storehouses," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 71(2), pages 255-272, June.
    4. Susann Stritzke & Malcolm Bricknell & Matthew Leach & Samir Thapa & Yesmeen Khalifa & Ed Brown, 2023. "Impact Financing for Clean Cooking Energy Transitions: Reviews and Prospects," Energies, MDPI, vol. 16(16), pages 1-26, August.
    5. Chu, Long & Grafton, R. Quentin & Nguyen, Hai, 2022. "A global analysis of the break-even prices to reduce atmospheric carbon dioxide via forest plantation and avoided deforestation," Forest Policy and Economics, Elsevier, vol. 135(C).
    6. Permadi, Dwiko B. & Burton, Michael & Pandit, Ram & Race, Digby & Walker, Iain, 2018. "Local community's preferences for accepting a forestry partnership contract to grow pulpwood in Indonesia: A choice experiment study," Forest Policy and Economics, Elsevier, vol. 91(C), pages 73-83.
    7. G. Cornelis van Kooten & Rebecca Zanello, 2023. "Carbon offsets and agriculture: Options, obstacles, and opinions," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 71(3-4), pages 375-391, September.

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