Oscar Cacho (School of Economics, University of New England, Australia) Leslie Lipper (Agricultural and Development Economics Division, Food and Agriculture Organization)
Abstract
Agroforestry projects have the potential to help mitigate global warming by acting as sinks for greenhouse gasses. However, participation in carbon-sink projects may be constrained by high costs. This problem may be particularly severe for projects involving smallholders in developing countries. Of particular concern are the transaction costs incurred in developing projects, measuring, certifying and selling the carbon-sequestration services generated by such projects. This paper addresses these issues by analysing the implications of transaction and abatement costs in carbon-sequestration projects. A model of project participation is developed, which accounts for the conditions under which both buyers and sellers would be willing to engage in a carbon transaction that involves a long-term commitment. The model is used to identify critical project-design variables (minimum project size, farm price of carbon, minimum area of participating farms). A project feasibility frontier (PFF) is derived, which shows the minimum project size that is feasible for any given market price of carbon. The PFF is used to analyse how the transaction costs imposed by the Clean Development Mechanism of the Kyoto Protocol affect project feasibility.
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Publisher Info
Paper provided by Agricultural and Development Economics Division of the Food and Agriculture Organization of the United Nations (FAO - ESA) in its series Working Papers with number
06-13.
Length: 28 pages Date of creation: 2006 Date of revision: Handle: RePEc:fao:wpaper:0613
Contact details of provider: Postal: Agricultural Sector in Economic Development Service FAO Viale delle Terme di Caracalla 00153 Rome Italy Phone: +39(6) 57051 Fax: +39 06 57055522 Email: Web page: http://www.fao.org/es/esa/ More information through EDIRC
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Find related papers by JEL classification: Q23 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Forestry Q57 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Ecological Economics O1 - Economic Development, Technological Change, and Growth - - Economic Development O13 - Economic Development, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
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