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Linking reduced deforestation and a global carbon market: implications for clean energy technology and policy flexibility

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  • BOSETTI, VALENTINA
  • LUBOWSKI, RUBEN
  • GOLUB, ALEXANDER
  • MARKANDYA, ANIL

Abstract

This study uses a global climate-energy-economy model to investigate potential implications of linking credits from reducing emissions from deforestation and forest degradation in developing countries to a global carbon market, focusing on reducing emissions from deforestation (RED) and effects on energy technology innovation. Integrating RED into a global carbon market lowers the estimated total costs of a policy to achieve 535 ppmv of CO2-equivalent concentrations in 2100 by up to 25 per cent. Alternatively, a global RED program could enable additional reductions of about 20 ppmv by 2100 with no added costs compared with an energy-sector-only policy. The results indicate that market linkage of RED induces modest reductions in clean energy innovation overall but slightly enhances development of particular technologies, including carbon capture and storage. We also find that RED in combination with credit banking encourages greater mitigation in the near term, enhancing flexibility to potentially tighten emission targets at lower cost in response to future information.

Suggested Citation

  • Bosetti, Valentina & Lubowski, Ruben & Golub, Alexander & Markandya, Anil, 2011. "Linking reduced deforestation and a global carbon market: implications for clean energy technology and policy flexibility," Environment and Development Economics, Cambridge University Press, vol. 16(4), pages 479-505, August.
  • Handle: RePEc:cup:endeec:v:16:y:2011:i:04:p:479-505_00
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    Cited by:

    1. Andrey Krasovskii & Nikolay Khabarov & Ruben Lubowski & Michael Obersteiner, 2019. "Flexible Options for Greenhouse Gas-Emitting Energy Producer," Energies, MDPI, vol. 12(19), pages 1-20, October.
    2. van Kooten, G. Cornelis, 2017. "Forest carbon offsets and carbon emissions trading: Problems of contracting," Forest Policy and Economics, Elsevier, vol. 75(C), pages 83-88.
    3. Mykola Gusti & Nicklas Forsell & Petr Havlik & Nikolay Khabarov & Florian Kraxner & Michael Obersteiner, 2019. "The sensitivity of the costs of reducing emissions from deforestation and degradation (REDD) to future socioeconomic drivers and its implications for mitigation policy design," Mitigation and Adaptation Strategies for Global Change, Springer, vol. 24(6), pages 1123-1141, August.
    4. Alice Favero & Robert Mendelsohn, 2013. "Evaluating the Global Role of Woody Biomass as a Mitigation Strategy," Working Papers 2013.37, Fondazione Eni Enrico Mattei.
    5. Perrings, Charles, 2014. "Environment and development economics 20 years on," Environment and Development Economics, Cambridge University Press, vol. 19(3), pages 333-366, June.
    6. Indrajaya, Yonky & van der Werf, Edwin & Weikard, Hans-Peter & Mohren, Frits & van Ierland, Ekko C., 2016. "The potential of REDD+ for carbon sequestration in tropical forests: Supply curves for carbon storage for Kalimantan, Indonesia," Forest Policy and Economics, Elsevier, vol. 71(C), pages 1-10.
    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. Cho, Seong-Hoon & Lee, Juhee & Roberts, Roland & Yu, Edward T. & Armsworth, Paul R., 2018. "Impact of market conditions on the effectiveness of payments for forest-based carbon sequestration," Forest Policy and Economics, Elsevier, vol. 92(C), pages 33-42.
    9. Eriksson, Mathilda & Brännlund, Runar & Lundgren, Tommy, 2018. "Pricing forest carbon: Implications of asymmetry in climate policy," Journal of Forest Economics, Elsevier, vol. 32(C), pages 84-93.
    10. Kaushal , Kevin R. & Rosendahl, Knut Einar, 2019. "Optimal REDD+ in the carbon market," Working Paper Series 3-2019, Norwegian University of Life Sciences, School of Economics and Business.
    11. George A. Gonzalez, 2016. "Transforming Energy: Solving Climate Change with Technology Policy . New York : Cambridge University Press . 360 pages. ISBN 9781107614970, $29.99 paperback. Anthony Patt , 2015 ," Review of Policy Research, Policy Studies Organization, vol. 33(1), pages 111-113, January.
    12. van Kooten, G. Cornelis & Bogle, Tim & de Vries, Frans P., 2012. "Rent Seeking and the Smoke and Mirrors Game in the Creation of Forest Sector Carbon Credits: An Example from British Columbia," Working Papers 137659, University of Victoria, Resource Economics and Policy.
    13. Andrey Krasovskii & Nikolay Khabarov & Michael Obersteiner, 2014. "Impacts of the Fairly Priced REDD-based CO2 Offset Options on the Electricity Producers and Consumers," Economy of region, Centre for Economic Security, Institute of Economics of Ural Branch of Russian Academy of Sciences, vol. 1(3), pages 273-288.
    14. 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, vol. 39(11), pages 7361-7371.
    15. Golub, Alexander & Lubowski, Ruben & Piris-Cabezas, Pedro, 2017. "Balancing Risks from Climate Policy Uncertainties: The Role of Options and Reduced Emissions from Deforestation and Forest Degradation," Ecological Economics, Elsevier, vol. 138(C), pages 90-98.
    16. Ren, Xiaohang & Li, Yiying & yan, Cheng & Wen, Fenghua & Lu, Zudi, 2022. "The interrelationship between the carbon market and the green bonds market: Evidence from wavelet quantile-on-quantile method," Technological Forecasting and Social Change, Elsevier, vol. 179(C).
    17. Koch, Nicolas & Reuter, Wolf Heinrich & Fuss, Sabine & Grosjean, Godefroy, 2017. "Permits vs. offsets under investment uncertainty," Resource and Energy Economics, Elsevier, vol. 49(C), pages 33-47.
    18. Eriksson, Mathilda, 2020. "Afforestation and avoided deforestation in a multi-regional integrated assessment model," Ecological Economics, Elsevier, vol. 169(C).

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