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Abatement and transaction costs of carbon-sink projects involving smallholders

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  • Cacho, Oscar
  • Lipper, Leslie

Abstract

Agroforestry projects have the potential to help mitigate global warming by acting as sinks for greenhouse gasses. However, participation in carbon-sink projects may be constrained by high costs. This problem may be particularly severe for projects involving smallholders in developing countries. Of particular concern are the transaction costs incurred in developing projects, measuring, certifying and selling the carbon-sequestration services generated by such projects. This paper addresses these issues by analysing the implications of transaction and abatement costs in carbon-sequestration projects. A model of project participation is developed, which accounts for the conditions under which both buyers and sellers would be willing to engage in a carbon transaction that involves a long-term commitment. The model is used to identify critical project-design variables (minimum project size, farm price of carbon, minimum area of participating farms). A project feasibility frontier (PFF) is derived, which shows the minimum project size that is feasible for any given market price of carbon. The PFF is used to analyse how the transaction costs imposed by the Clean Development Mechanism of the Kyoto Protocol affect project feasibility.

Suggested Citation

  • Cacho, Oscar & Lipper, Leslie, 2006. "Abatement and transaction costs of carbon-sink projects involving smallholders," ESA Working Papers 289054, Food and Agriculture Organization of the United Nations, Agricultural Development Economics Division (ESA).
    • Handle: RePEc:ags:faoaes:289054
    DOI: 10.22004/ag.econ.289054
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    Cited by:

    1. Lee, Jean, 2017. "Farmer participation in a climate-smart future: Evidence from the Kenya Agricultural Carbon Project," Land Use Policy, Elsevier, vol. 68(C), pages 72-79.
    2. World Agroforestry centre, 2010. "Pro-poor compensation and rewards for environmental services in the tropics: saving the commons in Asia, Africa and Latin America?," Working Papers b16863, World Agroforestry Centre, Library Department.
    3. Cacho, Oscar J., 2008. "Carbon markets, transaction costs and bioenergy," 2008 Conference (52nd), February 5-8, 2008, Canberra, Australia 6007, Australian Agricultural and Resource Economics Society.
    4. Wells, Geoff & Fisher, Janet A. & Porras, Ina & Staddon, Sam & Ryan, Casey, 2017. "Rethinking Monitoring in Smallholder Carbon Payments for Ecosystem Service Schemes: Devolve Monitoring, Understand Accuracy and Identify Co-benefits," Ecological Economics, Elsevier, vol. 139(C), pages 115-127.

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    Keywords

    Community/Rural/Urban Development;

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