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Forest-based carbon sequestration, and the role of forward, futures, and carbon-lending markets: A comparative institutions approach

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  • Coleman, Andrew

Abstract

The sequestration of CO2 in forests is often suggested as a means to offset greenhouse gas emissions. New Zealand’s experience suggests the effects of government programmes to provide carbon credits to forest owners could be enhanced if forward markets, futures markets, or carbon-lending markets were used to manage risks. This paper provides a comparative institutions approach based on the history of commodity markets to argue that carbon lending markets, not forward or futures markets, are likely to be the most convenient form of a forestry carbon market. A carbon lending market will raise the total returns from forestry investments with minimal risks to forest owners, and simultaneously reduce the risks facing other firms contemplating carbon reducing investments. For this reason, governments wishing to include forest sequestration in an Emissions Trading Scheme may wish to encourage the development of a carbon lending market.

Suggested Citation

  • Coleman, Andrew, 2018. "Forest-based carbon sequestration, and the role of forward, futures, and carbon-lending markets: A comparative institutions approach," Journal of Forest Economics, Elsevier, vol. 33(C), pages 95-104.
    • Handle: RePEc:eee:foreco:v:33:y:2018:i:c:p:95-104
    DOI: 10.1016/j.jfe.2018.12.002
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    Cited by:

    1. Xuexiang Li & Wanlin Hu & Fan Zhang & Jinxin Zhang & Feng Sheng & Xiangyu Xu, 2022. "Carbon Sink Cost and Influence Factors Analysis in a National Afforestation Project under Different Investment Modes," IJERPH, MDPI, vol. 19(13), pages 1-15, June.
    2. Chris Kenyon & Mourad Berrahoui & Andrea Macrina, 2022. "Transparency principle for carbon emissions drives sustainable finance," Papers 2202.07689, arXiv.org.
    3. Ifeoma Lynda Okpala, 2024. "Carbon Accounting and Financial Performance: A Comparative Study of Retail and Public Sector Institutions," International Journal of Scientific Research and Modern Technology, Prasu Publications, vol. 3(5), pages 56-64.

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    JEL classification:

    • Q23 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Forestry
    • Q55 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Technological Innovation

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