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Should forests be used as uncertain carbon sinks or uncertain fossil fuel substitutes in the EU Roadmap to 2050?

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Author Info

  • Elofsson, Katarina

    ()
    (Department of Economics, Swedish University of Agricultural Sciences)

  • Gren, Ing-Marie

    ()
    (Department of Economics, Swedish University of Agricultural Sciences)

Abstract

This study investigates the contribution of forest carbon sequestration to a cost-efficient EU climate policy from 2010 to 2050 under conditions of uncertainty. We note that there is a trade-off between sequestration and alternative uses of forests such as bioenergy and timber production. A dynamic and probabilistic cost-minimization model is developed, which includes fossil fuel use within the EU Emissions Trading System and forest management in the EU-27 countries. The results suggest that if policy makers wish to meet emissions targets with 80% certainty, this goal will be eight times more expensive than when they were unconcerned with uncertainty. Policy makers’ risk attitudes affect forest management strategy primarily through the inclusion of wood products, where potential carbon emissions reductions are high but also highly uncertain. Excluding wood products from a climate strategy can be expensive if policy maker are insensitive to uncertainty.

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Bibliographic Info

Paper provided by Department Economics, Swedish University of Agricultural Sciences in its series Working Paper Series with number 2013:8.

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Length: 36 pages
Date of creation: 12 Sep 2013
Date of revision:
Handle: RePEc:hhs:slueko:2013_008

Contact details of provider:
Postal: Department of Economics, Box 7013, Swedish University of Agricultural Sciences, SE-750 07 Uppsala, Sweden
Phone: 018-67 1724
Fax: 018-67 3502
Web page: http://www.slu.se/ekonomi
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Related research

Keywords: uncertainty; carbon sequestration; bioenergy; wood products; climate policy; cost-efficiency; EU.;

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  1. Geijer, Erik & Bostedt, Göran & Brännlund, Runar, 2011. "Damned if you do, damned if you do not--Reduced Climate Impact vs. Sustainable Forests in Sweden," Resource and Energy Economics, Elsevier, vol. 33(1), pages 94-106, January.
  2. Valentina Bosetti & Ruben Lubowski & Alexander Golub & Anil Markandya, 2010. "Linking Reduced Deforestation and a Global Carbon Market: Impacts on Costs, Financial Flows, and Technological Innovation," Working Papers 2009-01, BC3.
  3. Gren, Ing-Marie & Carlsson, Mattias & Elofsson, Katarina & Munnich, Miriam, 2012. "Stochastic carbon sinks for combating carbon dioxide emissions in the EU," Energy Economics, Elsevier, vol. 34(5), pages 1523-1531.
  4. Gren, Ing-Marie & Munnich, Miriam & Carlsson, Mattias & Elofsson, Katarina, 2009. "A numerical model for cost effective mitigation of CO2 in the EU with stochastic carbon sink," Department of Economics publications 9327, Swedish University of Agricultural Sciences, Department of Economics.
  5. Newell, Richard G. & Stavins, Robert N., 2000. "Climate Change and Forest Sinks: Factors Affecting the Costs of Carbon Sequestration," Journal of Environmental Economics and Management, Elsevier, vol. 40(3), pages 211-235, November.
  6. Robert N. Stavins, 1999. "The Costs of Carbon Sequestration: A Revealed-Preference Approach," American Economic Review, American Economic Association, vol. 89(4), pages 994-1009, September.
  7. Schlegel Stephanie & Kaphengst Timo, 2007. "European Union Policy on Bioenergy and the Role of Sustainability Criteria and Certification Systems," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 5(2), pages 1-19, December.
  8. A. Charnes & W. W. Cooper, 1959. "Chance-Constrained Programming," Management Science, INFORMS, vol. 6(1), pages 73-79, October.
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