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Long Term Versus Temporary Certified Emission Reductions in Forest Carbon-Sequestration Programs

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  • Gregmar I. Galinato
  • Aaron Olanie
  • Shinsuke Uchida
  • Jonathan K. Yoder

    () (School of Economic Sciences, Washington State University)

Abstract

Under the Clean Development Mechanism (CDM) of the Kyoto Protocol, forest projects can receive returns for carbon sequestration via two credit instruments: temporary (tCERs) or long-term certified emission reductions (lCERs). This article develops a theoretical model of optimal harvesting strategies that compares private optimal harvest decision under these two instruments. We find that risk neutral landowners are likely to prefer instituting lCERs over tCERs to maximize surplus. A particular type of early harvest penalty implemented under the lCERs is critical in determining the length of rotation intervals and the carbon credit supply. When this penalty is an increasing function of the difference in biomass before and after harvesting across verification periods, the landowner may choose longer or shorter rotation intervals compared to the Faustmann rotation. The resulting supply curve may have a backward bending region over a range of carbon prices.

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File URL: http://faculty.ses.wsu.edu/WorkingPapers/Galinato/WP2009_20.pdf
File Function: First version, 2009
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Bibliographic Info

Paper provided by School of Economic Sciences, Washington State University in its series Working Papers with number 2009-20.

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Length: 38 pages
Date of creation: Dec 2009
Date of revision:
Handle: RePEc:wsu:wpaper:galinato-2

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Keywords: forest rotation; long term certified emission reductions (lCERs); carbon sequestration;

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  1. Gregmar I. Galinato & Shinsuke Uchida, 2011. "The Effect of Temporary Certified Emission Reductions on Forest Rotations and Carbon Supply," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 59(1), pages 145-164, 03.
  2. Olschewski, Roland & Benítez, Pablo C. & de Koning, G.H.J. & Schlichter, Tomás, 2005. "How attractive are forest carbon sinks? Economic insights into supply and demand of Certified Emission Reductions," Journal of Forest Economics, Elsevier, vol. 11(2), pages 77-94, September.
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