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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

Abstract

Under the Clean Development Mechanism (CDM) of the Kyoto Protocol, forest projects can receive returns for carbon sequestration via two crediting instruments: temporary or long-term certified emission reductions (tCERs or lCERs). This study shows the effect of lCERs on the private owner’s forest rotation intervals decision and carbon credit generation in afforestation and reforestation projects. A credit verification mechanism with a harvest penalty implemented under the lCERs policy distorts the timber harvesting decision and the corresponding carbon credit supply. Two opposing incentives are created by the lCERs mechanism which leads to either longer or shorter rotations compared to the Faustmann rotation, depending on which incentive prevails. Our numerical results show that both lCERs and tCERs seem to have similar impacts on harvesting incentives, but the resulting carbon supply differs among the instruments owing to the credit verification mechanism. The tCERs carbon supply curve is monotonically increasing in the carbon price, while a lCERs carbon supply is non-monotonic and may have a backward bending region over a range of carbon prices.
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  • Gregmar I. Galinato & Aaron Olanie & Shinsuke Uchida & Jonathan K. Yoder, 2011. "Long‐term versus temporary certified emission reductions in forest carbon sequestration programs," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 55(4), pages 537-559, October.
    • Handle: RePEc:bla:ajarec:v:55:y:2011:i:4:p:537-559
    DOI: j.1467-8489.2011.00555.x
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    1. Michael Dutschke & Bernhard Schlamadinger & Jenny L.P. Wong & Michael Rumberg, 2005. "Value and risks of expiring carbon credits from afforestation and reforestation projects under the CDM," Climate Policy, Taylor & Francis Journals, vol. 5(1), pages 109-125, January.
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    12. 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.
    13. Gregmar Galinato & Shinsuke Uchida, 2010. "Evaluating Temporary Certified Emission Reductions in Reforestation and Afforestation Programs," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 46(1), pages 111-133, May.
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    Cited by:

    1. Zhang, Yue-Jun & Liu, Jing-Yue & Woodward, Richard T., 2023. "Has Chinese Certified Emission Reduction trading reduced rural poverty in China?," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 67(03), April.
    2. Hou, Guolong & Delang, Claudio O. & Lu, Xixi & Olschewski, Roland, 2020. "Optimizing rotation periods of forest plantations: The effects of carbon accounting regimes," Forest Policy and Economics, Elsevier, vol. 118(C).
    3. Mandaloufas, Melissa & Lamas, Wendell de Queiroz & Brown, Scott & Irizarry Quintero, Anamari, 2015. "Energy balance analysis of the Brazilian alcohol for flex fuel production," Renewable and Sustainable Energy Reviews, Elsevier, vol. 43(C), pages 403-414.
    4. David Walker, 2014. "The Economic Potential for Forest-Based Carbon Sequestration under Different Emissions Targets and Accounting Schemes," Working Papers 2014.02, School of Economics, La Trobe University.
    5. Juutinen, Artti & Ahtikoski, Anssi & Lehtonen, Mika & Mäkipää, Raisa & Ollikainen, Markku, 2018. "The impact of a short-term carbon payment scheme on forest management," Forest Policy and Economics, Elsevier, vol. 90(C), pages 115-127.
    6. Cacho, Oscar J. & Lipper, Leslie & Moss, Jonathan, 2013. "Transaction costs of carbon offset projects: A comparative study," Ecological Economics, Elsevier, vol. 88(C), pages 232-243.

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    More about this item

    JEL classification:

    • Q2 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q23 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Forestry

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