IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

The additionality problem with offsets: Optimal contracts for carbon sequestration in forests

  • Mason, Charles F.
  • Plantinga, Andrew J.

Carbon offsets are a frequently discussed tool for reducing the costs of an emissions reduction policy. However, offsets have a basic problem stemming from asymmetric information. Sellers of offsets have private information about their opportunity costs, leading to concerns about whether offsets are additional. Non-additional offsets can undermine a cap-and-trade program or, if the government purchases them directly, result in enormous government expenditures. We analyze contracts for carbon sequestration in forests that mitigate the asymmetric information problem. Landowners are offered a menu of two-part contracts that induces them to reveal their type. Under this scheme, the government is able to identify ex post how much additional forest each landowner contributes and minimize ex ante its expenditures on carbon sequestration. To explore the performance of the contracting scheme, we conduct a national-scale simulation using an econometric model of land-use change. The results indicate that for an increase in forest area of 61 million acres, government expenditures are $5.3 billion lower under the contracting approach compared to a uniform subsidy offered to all landowners. This compares to an increase in private opportunity costs of just $110 million dollars under the contracts. Thus, the contracting scheme is preferable from society's perspective.

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.

File URL: http://www.sciencedirect.com/science/article/pii/S0095069613000193
Download Restriction: Full text for ScienceDirect subscribers only

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.

Article provided by Elsevier in its journal Journal of Environmental Economics and Management.

Volume (Year): 66 (2013)
Issue (Month): 1 ()
Pages: 1-14

as
in new window

Handle: RePEc:eee:jeeman:v:66:y:2013:i:1:p:1-14
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622870

No references listed on IDEAS
You can help add them by filling out this form.

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:eee:jeeman:v:66:y:2013:i:1:p:1-14. 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: (Zhang, Lei)

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.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.