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Reducing Deforestation and Trading Emissions: Economic Implications for the post-Kyoto Carbon Market

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  • Sathaye, Jayant A.
  • Anger, Niels
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    Abstract

    This paper quantitatively assesses the economic implications of crediting carbon abatement from reduced deforestation for the emissions market in 2020 by linking a numerical equilibrium model of the global carbon market with a dynamic partial equilibrium model of the forestry sector. We find that integrating avoided deforestation in international emissions trading considerably decreases the costs of post-Kyoto climate policy – even when accounting for conventional abatement options of developing countries under the CDM. At the same time, tropical rainforest regions receive substantial net revenues from exporting carbon-offset credits to the industrialized world. Moreover, reduced deforestation can increase environmental effectiveness by enabling industrialized countries to tighten their carbon constraints without increasing mitigation costs. Regarding uncertainties of this future carbon abatement option, we find both forestry transaction costs and deforestation baselines to play an important role for the post-Kyoto carbon market. --

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    Bibliographic Info

    Paper provided by ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research in its series ZEW Discussion Papers with number 08-016.

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    Date of creation: 2008
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    Handle: RePEc:zbw:zewdip:7225

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    Keywords: Climate Change; Kyoto Protocol; Emissions Trading; Deforestation;

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    1. Klepper, Gernot & Peterson, Sonja, 2006. "Emissions trading, CDM, JI, and more : the climate strategy of the EU," Open Access Publications from Kiel Institute for the World Economy, Kiel Institute for the World Economy (IfW) 3814, Kiel Institute for the World Economy (IfW).
    2. Criqui, Patrick & Mima, Silvana & Viguier, Laurent, 1999. "Marginal abatement costs of CO2 emission reductions, geographical flexibility and concrete ceilings: an assessment using the POLES model," Energy Policy, Elsevier, Elsevier, vol. 27(10), pages 585-601, October.
    3. Löschel, Andreas & Lange, Andreas & Hoffmann, Tim & Böhringer, Christoph & Moslener, Ulf, 2004. "Assessing Emission Allocation in Europe: An Interactive Simulation Approach," ZEW Discussion Papers, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research 04-40, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    4. Jayant Sathaye, Willy Makundi, Larry Dale, Peter Chan, and Kenneth Andrasko, 2006. "GHG Mitigation Potential, Costs and Benefits in Global Forests: A Dynamic Partial Equilibrium Approach," The Energy Journal, International Association for Energy Economics, International Association for Energy Economics, vol. 0(Special I), pages 127-162.
    5. Brent Sohngen & Robert Mendelsohn, 2003. "An Optimal Control Model of Forest Carbon Sequestration," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, Agricultural and Applied Economics Association, vol. 85(2), pages 448-457.
    6. Tavoni, Massimo & Sohngen, Brent & Bosetti, Valentina, 2007. "Forestry and the carbon market response to stabilize climate," Energy Policy, Elsevier, Elsevier, vol. 35(11), pages 5346-5353, November.
    7. Christoph Böhringer & Carsten Vogt, 2003. "Economic and environmental impacts of the Kyoto Protocol," Canadian Journal of Economics, Canadian Economics Association, Canadian Economics Association, vol. 36(2), pages 475-496, May.
    8. Anger, Niels, 2008. "Emissions trading beyond Europe: Linking schemes in a post-Kyoto world," Energy Economics, Elsevier, Elsevier, vol. 30(4), pages 2028-2049, July.
    9. Heal, G., 1999. "Biodiversity as a Commodity," Papers, Columbia - Graduate School of Business 99-7, Columbia - Graduate School of Business.
    10. Christoph Bohringer & Tim Hoffmann & Andreas Lange & Andreas Loschel & Ulf Moslener, 2005. "Assessing Emission Regulation in Europe: An Interactive Simulation Approach," The Energy Journal, International Association for Energy Economics, International Association for Energy Economics, vol. 0(Number 4), pages 1-22.
    11. Michaelowa, Axel & Jotzo, Frank, 2005. "Transaction costs, institutional rigidities and the size of the clean development mechanism," Energy Policy, Elsevier, Elsevier, vol. 33(4), pages 511-523, March.
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    Cited by:
    1. Mechtel, Mario & Potrafke, Niklas, 2009. "Political Cycles in Active Labor Market Policies," MPRA Paper 22780, University Library of Munich, Germany, revised May 2010.
    2. Patrick Laurency & Dirk Schindler, 2011. "International Climate Agreements, Cost Reductions and Convergence of Partisan Politics," CESifo Working Paper Series 3591, CESifo Group Munich.
    3. Mendoza Beltran, Angelica & den Elzen, Michel G.J. & Hof, Andries F. & van Vuuren, Detlef P. & van Vliet, Jasper, 2011. "Exploring the bargaining space within international climate negotiations based on political, economic and environmental considerations," Energy Policy, Elsevier, Elsevier, vol. 39(11), pages 7361-7371.

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