Economic value of carbon sequestration in forests under multiple sources of uncertainty
The purpose of this paper is to calculate the value of stochastic carbon sequestration in climate change mitigation when also carbon dioxide emissions from fossil fuels and abatement costs are stochastic. The replacement cost method is used where the value of carbon sink is calculated as associated cost savings from replacement of more expensive mitigation options for achieving a given emission target. Minimum costs with and without carbon sinks are derived with a safety-first approach in a chance constrained programming framework which also accounts for variability in control costs. The theoretical results show that for high enough risk discount, carbon sink is not included in a cost effective mitigation program even when the carbon sink cost is zero. The empirical application to the EU independent commitment of 20% reduction in carbon dioxides shows large variation in carbon sink value depending on risk discount. Under no uncertainty, the value can correspond to 0.33% of total GDP in EU, but it declines due to the uncertainty associated with forest carbon sink and is zero for high probability levels in achieving the target. Thus, whether or not to recommend the inclusion of carbon sink in the EU climate policy depends on the uncertainty of carbon sinks in relation to other sources and on the importance of reaching stipulated emission reduction targets.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 19 (2013)
Issue (Month): 2 ()
|Contact details of provider:|| Web page: http://www.elsevier.com/wps/find/journaldescription.cws_home/701775/description#description|
|Order Information:|| Postal: http://www.elsevier.com/wps/find/journaldescription.cws_home/701775/bibliographic|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Pyle, David H & Turnovsky, Stephen J, 1970. "Safety-First and Expected Utility Maximization in Mean-Standard Deviation Portfolio Analysis," The Review of Economics and Statistics, MIT Press, vol. 52(1), pages 75-81, February.
- Böhringer, Christoph & Rutherford, Thomas F. & Tol, Richard S. J., 2009. "The EU 20/20/2020 Targets: An Overview of the EMF22 Assessment," Papers WP325, Economic and Social Research Institute (ESRI).
- Antle, John & Capalbo, Susan & Mooney, Sian & Elliott, Edward & Paustian, Keith, 2003. "Spatial heterogeneity, contract design, and the efficiency of carbon sequestration policies for agriculture," Journal of Environmental Economics and Management, Elsevier, vol. 46(2), pages 231-250, September.
- Stankeviciute, Loreta & Kitous, Alban & Criqui, Patrick, 2008.
"The fundamentals of the future international emissions trading system,"
Elsevier, vol. 36(11), pages 4272-4286, November.
- Loreta Stankeviciute & Alban Kitous & Patrick Criqui, 2008. "The fundamentals of the future international emissions trading system," Post-Print halshs-00172290, HAL.
- Siddiqui, Afzal & Fleten, Stein-Erik, 2008.
"How to Proceed with Competing Alternative Energy Technologies: a Real Options Analysis,"
15502, University Library of Munich, Germany, revised 04 May 2009.
- Siddiqui, Afzal & Fleten, Stein-Erik, 2010. "How to proceed with competing alternative energy technologies: A real options analysis," Energy Economics, Elsevier, vol. 32(4), pages 817-830, July.
- Capros, Pantelis & Mantzos, Leonidas & Parousos, Leonidas & Tasios, Nikolaos & Klaassen, Ger & Van Ierland, Tom, 2011. "Analysis of the EU policy package on climate change and renewables," Energy Policy, Elsevier, vol. 39(3), pages 1476-1485, March.
- G. Cornelis van Kooten & Alison Eagle & James Manley & Tara Smolak, 2004. "How Costly are Carbon Offsets? A Meta-Analysis of Forest Carbon Sinks," Working Papers 2004-01, University of Victoria, Department of Economics, Resource Economics and Policy Analysis Research Group.
- McSweeny, William T. & Shortle, James S., 1990. "Probabilistic Cost Effectiveness in Agricultural Nonpoint Pollution Control," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 22(01), pages 95-104, July.
- Valentina Bosetti & Ruben Lubowski & Alexander Golub & Anil Markandya, 2009.
"Linking Reduced Deforestation and a Global Carbon Market: Impacts on Costs, Financial Flows, and Technological Innovation,"
2009.56, Fondazione Eni Enrico Mattei.
- Valentina Bosetti & Ruben Lubowski & Alexander Golub & Anil Markandya, 2010. "Linking Reduced Deforestation and a Global Carbon Market: Impacts on Costs, Financial Flows, and Technological Innovation," Working Papers 2009-01, BC3.
- Gren, Ing-Marie, 2008. "Adaptation and mitigation strategies for controlling stochastic water pollution: An application to the Baltic Sea," Ecological Economics, Elsevier, vol. 66(2-3), pages 337-347, June.
- Stavins, Robert, 1997. "Policy Instruments for Climate Change: How Can National Governments Address a Global Problem?," Discussion Papers dp-97-11, Resources For the Future.
- Luenberger, David G., 1997. "Investment Science," OUP Catalogue, Oxford University Press, number 9780195108095, December.
- G. Rothwell, 2007. "Managing Advanced Technology System Deployment: An Optimal Allocation Between R&D And Prototype Funding," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 16(6), pages 419-432.
- Michetti, Melania & Rosa, Renato, 2012. "Afforestation and timber management compliance strategies in climate policy. A computable general equilibrium analysis," Ecological Economics, Elsevier, vol. 77(C), pages 139-148.
- Scott Barrett & Robert Stavins, 2003.
"Increasing Participation and Compliance in International Climate Change Agreements,"
International Environmental Agreements: Politics, Law and Economics,
Springer, vol. 3(4), pages 349-376, December.
- Barrett, Scott & Stavins, Robert, 2002. "Increasing Participation and Compliance in International Climate Change Agreements," Working Paper Series rwp02-031, Harvard University, John F. Kennedy School of Government.
- McSweeny, William T. & Shortle, James S., 1990. "Probabilistic Cost Effectiveness In Agricultural Nonpoint Pollution Control," Southern Journal of Agricultural Economics, Southern Agricultural Economics Association, vol. 22(01), July.
- Lubowski, Ruben N. & Plantinga, Andrew J. & Stavins, Robert N., 2006.
"Land-use change and carbon sinks: Econometric estimation of the carbon sequestration supply function,"
Journal of Environmental Economics and Management,
Elsevier, vol. 51(2), pages 135-152, March.
- Lubowski, Ruben & Plantinga, Andrew & Stavins, Robert, 2005. "Land-Use Change and Carbon Sinks: Econometric Estimation of the Carbon Sequestration Supply Function," Working Paper Series rwp05-001, Harvard University, John F. Kennedy School of Government.
- 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.
- Melania Michetti & Renato Nunes Rosa, 2011. "Afforestation and Timber Management Compliance Strategies in Climate Policy. A Computable General Equilibrium Analysis," Working Papers 2011.04, Fondazione Eni Enrico Mattei.
- David Bigman, 1996. "Safety-First Criteria and Their Measures of Risk," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 78(1), pages 225-235.
- Fernandez, Pablo & Aguirreamalloa, Javier & Corres, Luis, 2011. "Market risk premium used in 56 countries in 2011: A survey with 6,014 answers," IESE Research Papers D/920, IESE Business School.
- Robert N. Stavins, 1999. "The Costs of Carbon Sequestration: A Revealed-Preference Approach," American Economic Review, American Economic Association, vol. 89(4), pages 994-1009, September.
When requesting a correction, please mention this item's handle: RePEc:eee:foreco:v:19:y:2013:i:2:p:174-189. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Shamier, Wendy)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.