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Impact of market conditions on the effectiveness of payments for forest-based carbon sequestration

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  • Cho, Seong-Hoon
  • Lee, Juhee
  • Roberts, Roland
  • Yu, Edward T.
  • Armsworth, Paul R.

Abstract

This research analyzes the effects of market conditions on the performance of incentive payment approaches for forest-based carbon sequestration. We develop supply curves for sequestered carbon using the relationship between deforestation for urbanization and the relative returns from forest products and urban uses under two different market conditions. The empirical results for an 18-county case study show that a hypothetical payment system was effective and the marginal cost of carbon sequestration increased with the target level of carbon sequestration during the 2001–2006 real estate upturn, while the same system was ineffective during the 2006–2011 period that included a real estate downturn. Our study is the first to examine the role of temporal changes in market conditions on the performance of incentive payment approaches. Although a first step, our snapshot, static approach shows the value in thinking of the dynamic role of changing market conditions in evaluating incentive payment systems.

Suggested Citation

  • Cho, Seong-Hoon & Lee, Juhee & Roberts, Roland & Yu, Edward T. & Armsworth, Paul R., 2018. "Impact of market conditions on the effectiveness of payments for forest-based carbon sequestration," Forest Policy and Economics, Elsevier, vol. 92(C), pages 33-42.
    • Handle: RePEc:eee:forpol:v:92:y:2018:i:c:p:33-42
    DOI: 10.1016/j.forpol.2018.03.009
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    Cited by:

    1. Rong Li & Brent Sohngen & Xiaohui Tian, 2022. "Efficiency of forest carbon policies at intensive and extensive margins," American Journal of Agricultural Economics, John Wiley & Sons, vol. 104(4), pages 1243-1267, August.
    2. Seong-Hoon Cho & Bijay P. Sharma, 2020. "Optimal spatial budget distribution of forest carbon payments that balances the returns and risks associated with conservation costs," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 22(8), pages 7239-7267, December.
    3. Hou, Guolong & Delang, Claudio O. & Lu, Xixi & Olschewski, Roland, 2020. "Optimizing rotation periods of forest plantations: The effects of carbon accounting regimes," Forest Policy and Economics, Elsevier, vol. 118(C).
    4. Graves, Rose A. & Nielsen-Pincus, Max & Haugo, Ryan D. & Holz, Andrés, 2022. "Forest carbon incentive programs for non-industrial private forests in Oregon (USA): Impacts of program design on willingness to enroll and landscape-scale program outcomes," Forest Policy and Economics, Elsevier, vol. 141(C).
    5. Lee, Young Gwan & Zhu, Gengping & Sharma, Bijay P. & English, Burton C. & Cho, Seong-Hoon, 2021. "Role of complementary and competitive relationships among multiple objectives in conservation investment decisions," Forest Policy and Economics, Elsevier, vol. 131(C).

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