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Uncertainty Discounting for Land-Based Carbon Sequestration

Author

Listed:
  • Kim, Man-Keun
  • McCarl, Bruce A.

Abstract

The effect of stochastic factors on soil carbon makes the quantity of carbon generated under a sequestration project uncertain. Hence, the quantity of sequestered carbon may need to be discounted to avoid liability from shortfalls. We present a potentially applicable uncertainty discount and discuss difficulties that might arise in empirical use. We insist that the variance in historical crop yields across geographical areas is used to derive a proxy variance for forming an uncertainty discount for carbon projects. Application of our approach suggests that project level uncertainty discounts would be 15–20% for the East Texas region.

Suggested Citation

  • Kim, Man-Keun & McCarl, Bruce A., 2009. "Uncertainty Discounting for Land-Based Carbon Sequestration," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 0(Number 1), pages 1-11, April.
  • Handle: RePEc:ags:joaaec:48754
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    File URL: http://ageconsearch.umn.edu/record/48754/files/jaae157.pdf
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    Citations

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    Cited by:

    1. 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.
    2. Amy W. Ando & Shibashis Mukherjee, 2012. "Benefits of pollution monitoring technology for greenhouse gas offset markets," Economics Bulletin, AccessEcon, vol. 32(1), pages 122-136.
    3. Santiago Bucaram & Mario Fernandez & Diego Grijalva, 2016. "Sell the oil deposits! A financial proposal to keep the oil underground in the Yasuni National Park, Ecuador," WIDER Working Paper Series 014, World Institute for Development Economic Research (UNU-WIDER).
    4. Springborn, Michael & Yeo, Boon-Ling & Lee, Juhwan & Six, Johan, 2013. "Crediting uncertain ecosystem services in a market," Journal of Environmental Economics and Management, Elsevier, vol. 66(3), pages 554-572.
    5. repec:gam:jsusta:v:9:y:2017:i:11:p:2056-:d:118140 is not listed on IDEAS
    6. Kocoloski, Matt & Mullins, Kimberley A. & Venkatesh, Aranya & Michael Griffin, W., 2013. "Addressing uncertainty in life-cycle carbon intensity in a national low-carbon fuel standard," Energy Policy, Elsevier, vol. 56(C), pages 41-50.
    7. Gren, Ing-Marie & Zeleke, Abenezer Aklilu, 2016. "Policy design for forest carbon sequestration: A review of the literature," Forest Policy and Economics, Elsevier, vol. 70(C), pages 128-136.
    8. Suzi Kerr, 2013. "Managing Risks and Tradeoffs Using Water Markets," Working Papers 13_13, Motu Economic and Public Policy Research.
    9. McCarl, Bruce A. & Attavanich, Witsanu & Musumba, Mark & Mu, Jianhong E. & Aisabokhae, Ruth, 2011. "Land Use and Climate Change," MPRA Paper 83993, University Library of Munich, Germany, revised 2014.
    10. Kim, Man-Keun & Peralta, Denis & McCarl, Bruce A., 2014. "Land-based greenhouse gas emission offset and leakage discounting," Ecological Economics, Elsevier, vol. 105(C), pages 265-273.

    More about this item

    Keywords

    Agribusiness; Land Economics/Use; Research and Development/Tech Change/Emerging Technologies;

    JEL classification:

    • H43 - Public Economics - - Publicly Provided Goods - - - Project Evaluation; Social Discount Rate
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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