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Long Term Versus Temporary Certified Emission Reductions in Forest Carbon-Sequestration Programs

Author

Listed:
  • Galinato, Gregmar I.
  • Olanie, Aaron
  • Uchida, Shinsuke
  • Yoder, Jonathan K.

Abstract

Under the Clean Development Mechanism (CDM) of the Kyoto Protocol, forest projects can receive returns for carbon sequestration via two credit instruments: temporary (tCERs) or long-term certified emission reductions (lCERs). This article develops a theoretical model of optimal harvesting strategies that compares private optimal harvest decision under these two instruments. We find that risk neutral landowners are likely to prefer instituting lCERs over tCERs to maximize surplus. A particular type of early harvest penalty implemented under the lCERs is critical in determining the length of rotation intervals and the carbon credit supply. When this penalty is an increasing function of the difference in biomass before and after harvesting across verification periods, the landowner may choose longer or shorter rotation intervals compared to the Faustmann rotation. The resulting supply curve may have a backward bending region over a range of carbon prices.

Suggested Citation

  • Galinato, Gregmar I. & Olanie, Aaron & Uchida, Shinsuke & Yoder, Jonathan K., 2010. "Long Term Versus Temporary Certified Emission Reductions in Forest Carbon-Sequestration Programs," 2010 Annual Meeting, July 25-27, 2010, Denver, Colorado 60744, Agricultural and Applied Economics Association.
    • Handle: RePEc:ags:aaea10:60744
    DOI: 10.22004/ag.econ.60744
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    1. Michael Dutschke & Bernhard Schlamadinger & Jenny L.P. Wong & Michael Rumberg, 2005. "Value and risks of expiring carbon credits from afforestation and reforestation projects under the CDM," Climate Policy, Taylor & Francis Journals, vol. 5(1), pages 109-125, January.
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    7. Gregmar I. Galinato & Shinsuke Uchida, 2011. "The Effect of Temporary Certified Emission Reductions on Forest Rotations and Carbon Supply," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 59(1), pages 145-164, March.
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    11. G. Cornelis van Kooten & Clark S. Binkley & Gregg Delcourt, 1995. "Effect of Carbon Taxes and Subsidies on Optimal Forest Rotation Age and Supply of Carbon Services," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 77(2), pages 365-374.
    12. Olschewski, Roland & Benítez, Pablo C. & de Koning, G.H.J. & Schlichter, Tomás, 2005. "How attractive are forest carbon sinks? Economic insights into supply and demand of Certified Emission Reductions," Journal of Forest Economics, Elsevier, vol. 11(2), pages 77-94, September.
    13. Gregmar Galinato & Shinsuke Uchida, 2010. "Evaluating Temporary Certified Emission Reductions in Reforestation and Afforestation Programs," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 46(1), pages 111-133, May.
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    Cited by:

    1. David Walker, 2014. "The Economic Potential for Forest-Based Carbon Sequestration under Different Emissions Targets and Accounting Schemes," Working Papers 2014.02, School of Economics, La Trobe University.
    2. Zhang, Yue-Jun & Liu, Jing-Yue & Woodward, Richard T., 2023. "Has Chinese Certified Emission Reduction trading reduced rural poverty in China?," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 67(03), April.
    3. Hou, Guolong & Delang, Claudio O. & Lu, Xixi & Olschewski, Roland, 2020. "Optimizing rotation periods of forest plantations: The effects of carbon accounting regimes," Forest Policy and Economics, Elsevier, vol. 118(C).
    4. Juutinen, Artti & Ahtikoski, Anssi & Lehtonen, Mika & Mäkipää, Raisa & Ollikainen, Markku, 2018. "The impact of a short-term carbon payment scheme on forest management," Forest Policy and Economics, Elsevier, vol. 90(C), pages 115-127.
    5. Mandaloufas, Melissa & Lamas, Wendell de Queiroz & Brown, Scott & Irizarry Quintero, Anamari, 2015. "Energy balance analysis of the Brazilian alcohol for flex fuel production," Renewable and Sustainable Energy Reviews, Elsevier, vol. 43(C), pages 403-414.
    6. Cacho, Oscar J. & Lipper, Leslie & Moss, Jonathan, 2013. "Transaction costs of carbon offset projects: A comparative study," Ecological Economics, Elsevier, vol. 88(C), pages 232-243.

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    JEL classification:

    • Q2 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q23 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Forestry

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