Advanced Search
MyIDEAS: Login to save this paper or follow this series

Life’s a breach! Ensuring ‘permanence’ in forest carbon sinks under incomplete contract enforcement

Contents:

Author Info

Abstract

As carbon sinks, forests play a critical role in helping to mitigate the growing threat from anthropogenic climate change. Forest carbon offsets transacted between GHG emitters in industrialised countries and sellers in developing countries have emerged as a useful climate policy tool. A model is developed that investigates the role of incentives in forestry carbon sequestration contracts. It considers the optimal design of contracts to ensure landowner participation and hence, permanence in forest carbon sinks in a context of uncertain opportunity costs and incomplete contract enforcement. The optimal contract is driven by the quality of the institutional framework in which the contract is executed, in particular, as it relates to contract enforcement. Stronger institutional frameworks tend to distort the seller’s effort upwards away from the full enforcement outcome. This also leads to greater amounts of carbon sequestered and higher conditional payments made to the seller. Further, where institutions are strong, there is a case for indexing the payment to the carbon market price if permanence is to be ensured. That is, as the carbon price increases, the payment could be raised and vice versa.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.cer.ethz.ch/research/WP-09-113.pdf
Download Restriction: no

Bibliographic Info

Paper provided by CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich in its series CER-ETH Economics working paper series with number 09/113.

as in new window
Length: 32 pages
Date of creation: Jul 2009
Date of revision:
Handle: RePEc:eth:wpswif:09-113

Contact details of provider:
Postal: Zürichbergstrasse 18, ZUE, CH-8092 Zürich
Phone: +41 44 632 03 87
Fax: +41 44 632 13 62
Email:
Web page: http://www.cer.ethz.ch
More information through EDIRC

Related research

Keywords: forest carbon offsets; permanence; contract design; incomplete enforcement;

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. JunJie Wu & Bruce A. Babcock, 1995. "Optimal Design of a Voluntary Green Payment Program Under Asymmetric Information," Center for Agricultural and Rural Development (CARD) Publications 95-wp131, Center for Agricultural and Rural Development (CARD) at Iowa State University.
  2. Kim, Man-Keun & McCarl, Bruce A. & Murray, Brian C., 2008. "Permanence discounting for land-based carbon sequestration," Ecological Economics, Elsevier, Elsevier, vol. 64(4), pages 763-769, February.
  3. Pablo C. Ben�tez & Timo Kuosmanen & Roland Olschewski & G. Cornelis van Kooten, 2006. "Conservation Payments under Risk: A Stochastic Dominance Approach," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, Agricultural and Applied Economics Association, vol. 88(1), pages 1-15.
  4. Feng, Hongli, 2007. "Green payments and dual policy goals," Journal of Environmental Economics and Management, Elsevier, vol. 54(3), pages 323-335, November.
  5. Engel, Stefanie & Pagiola, Stefano & Wunder, Sven, 2008. "Designing payments for environmental services in theory and practice: An overview of the issues," Ecological Economics, Elsevier, Elsevier, vol. 65(4), pages 663-674, May.
  6. Lubowski, Ruben N. & Plantinga, Andrew J. & Stavins, Robert N., 2006. "Land-use change and carbon sinks: Econometric estimation of the carbon sequestration supply function," Journal of Environmental Economics and Management, Elsevier, vol. 51(2), pages 135-152, March.
  7. Shavell, Steven, 1984. "The Design of Contracts and Remedies for Breach," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 99(1), pages 121-48, February.
  8. JunJie Wu & Bruce A. Babcock, 1996. "Contract Design for the Purchase of Environmental Goods from Agriculture," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, Agricultural and Applied Economics Association, vol. 78(4), pages 935-945.
  9. Bourgeon, Jean-Marc & Jayet, Pierre-Alain & Picard, Pierre, 1995. "An incentive approach to land set-aside programs," European Economic Review, Elsevier, Elsevier, vol. 39(8), pages 1487-1509, October.
  10. Steven Shavell, 1980. "Damage Measures for Breach of Contract," Bell Journal of Economics, The RAND Corporation, The RAND Corporation, vol. 11(2), pages 466-490, Autumn.
  11. Andrew Moxey & Ben White & Adam Ozanne, 1999. "Efficient Contract Design for Agri-Environment Policy," Journal of Agricultural Economics, Wiley Blackwell, Wiley Blackwell, vol. 50(2), pages 187-202.
  12. Feder, Gershon & Feeny, David, 1991. "Land Tenure and Property Rights: Theory and Implications for Development Policy," World Bank Economic Review, World Bank Group, World Bank Group, vol. 5(1), pages 135-53, January.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Edward J. Balistreri & Russell H. Hillberry & Thomas F. Rutherford, 2009. "Trade and Welfare: Does Industrial Organization Matter?," CER-ETH Economics working paper series, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich 09/119, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
  2. Salas, Paula Cordero & Roe, Brian E. & Sohngen, Brent, 2012. "Addressing Additionality in REDD Contracts when Formal Enforcement is Absent," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington, Agricultural and Applied Economics Association 124505, Agricultural and Applied Economics Association.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:eth:wpswif:09-113. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.