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Dual discounting in climate change mitigation in the forest sector

  • Sjølie, Hanne K.
  • Latta, Greg S.
  • Solberg, Birger
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    The efficiency of potential climate change mitigation is predicated on future costs and benefits and thus heavily influenced by the discount scheme. Dual discounting involves discounting carbon and monetary values differently; stand level modeling efforts show that it improves the profitability of afforestation projects. However, these stand level results may not hold across other age classes and stocking levels. Using a partial, spatial equilibrium model of the Norwegian forest sector, we analyze the impacts of a dual discounting scheme on climate change mitigation efforts. Dual discounting results in less mitigation efforts in the first decades but substantially higher long-term mitigation efforts.

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    Article provided by Elsevier in its journal Journal of Forest Economics.

    Volume (Year): 19 (2013)
    Issue (Month): 4 ()
    Pages: 416-431

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    Handle: RePEc:eee:foreco:v:19:y:2013:i:4:p:416-431
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    1. Tol, Richard S. J., 2004. "On dual-rate discounting," Economic Modelling, Elsevier, vol. 21(1), pages 95-98, January.
    2. Hepburn, Cameron J. & Koundouri, Phoebe, 2007. "Recent advances in discounting: Implications for forest economics," Journal of Forest Economics, Elsevier, vol. 13(2-3), pages 169-189, August.
    3. Ben Groom & Cameron Hepburn & Phoebe Koundouri & David Pearce, 2005. "Declining Discount Rates: The Long and the Short of it," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 32(4), pages 445-493, December.
    4. Stavins, Robert & Newell, Richard, 1999. "Climate Change and Forest Sinks: Factors Affecting the Costs of Carbon Sequestration," Discussion Papers dp-99-31-rev, Resources For the Future.
    5. William D. Nordhaus, 2007. "A Review of the Stern Review on the Economics of Climate Change," Journal of Economic Literature, American Economic Association, vol. 45(3), pages 686-702, September.
    6. Weikard, Hans-Peter & Zhu, Xueqin, 2005. "Discounting and environmental quality: When should dual rates be used?," Economic Modelling, Elsevier, vol. 22(5), pages 868-878, September.
    7. Schelling, Thomas C, 1995. "Intergenerational discounting," Energy Policy, Elsevier, vol. 23(4-5), pages 395-401.
    8. Saez, Carmen Almansa & Requena, Javier Calatrava, 2007. "Reconciling sustainability and discounting in Cost-Benefit Analysis: A methodological proposal," Ecological Economics, Elsevier, vol. 60(4), pages 712-725, February.
    9. Petersen, Ann Kristin & Solberg, Birger, 2005. "Environmental and economic impacts of substitution between wood products and alternative materials: a review of micro-level analyses from Norway and Sweden," Forest Policy and Economics, Elsevier, vol. 7(3), pages 249-259, March.
    10. Yang, Zili, 2003. "Dual-rate discounting in dynamic economic-environmental modeling," Economic Modelling, Elsevier, vol. 20(5), pages 941-957, September.
    11. Nathaniel O. Keohane, 2009. "Cap and Trade, Rehabilitated: Using Tradable Permits to Control U.S. Greenhouse Gases," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 3(1), pages 42-62, Winter.
    12. G. Cornelis van Kooten & Sabina Lee Shaikh & Pavel Suchánek, 2002. "Mitigating Climate Change by Planting Trees: The Transaction Costs Trap," Land Economics, University of Wisconsin Press, vol. 78(4), pages 559-572.
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