Abatement and Transaction Costs of Carbon-Sink Projects Involving Smallholders
AbstractAgroforestry 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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Bibliographic InfoPaper provided by Fondazione Eni Enrico Mattei in its series Working Papers with number 2007.27.
Date of creation: Mar 2007
Date of revision:
Agroforestry; Climate Policy; Carbon Sequestration Costs;
Other versions of this item:
- Oscar Cacho & Leslie Lipper, 2006. "Abatement and Transaction Costs of Carbon-Sink Projects Involving Smallholders," Working Papers 06-13, Agricultural and Development Economics Division of the Food and Agriculture Organization of the United Nations (FAO - ESA).
- 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
This paper has been announced in the following NEP Reports:
- NEP-AGR-2007-04-09 (Agricultural Economics)
- NEP-ALL-2007-04-09 (All new papers)
- NEP-ENE-2007-04-09 (Energy Economics)
- NEP-ENV-2007-04-09 (Environmental Economics)
- NEP-PPM-2007-04-09 (Project, Program & Portfolio Management)
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