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Contracting for Impure Public Goods: Carbon Offsets and Additionality

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

Abstract

Governments contracting with private agents for the provision of an impure public good must contend with agents who would potentially supply the good absent any payments. This additionality problem is centrally important in the use of carbon offsets as part of climate change mitigation. Analyzing optimal contracts for forest carbon sequestration, an important offset category, we conduct a national-scale simulation using results from an econometric model of land-use change. The results indicate that for an increase in forest area of 50 million acres, annual government expenditures with optimal contracts are about $4 billion lower compared than under a uniform subsidy.

Suggested Citation

  • Mason, Charles F. & Plantinga, Andrew J., 2011. "Contracting for Impure Public Goods: Carbon Offsets and Additionality," Sustainable Development Papers 101290, Fondazione Eni Enrico Mattei (FEEM).
    • Handle: RePEc:ags:feemdp:101290
    DOI: 10.22004/ag.econ.101290
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    Cited by:

    1. Mariano Mezzatesta & David A. Newburn & Richard T. Woodward, 2013. "Additionality and the Adoption of Farm Conservation Practices," Land Economics, University of Wisconsin Press, vol. 89(4), pages 722-742.
    2. Cho, Seong-Hoon & Kim, Heeho & Roberts, Roland K. & Kim, Taeyoung & Lee, Daegoon, 2014. "Effects of changes in forestland ownership on deforestation and urbanization and the resulting effects on greenhouse gas emissions," Journal of Forest Economics, Elsevier, vol. 20(1), pages 93-109.
    3. Cho, Seong-Hoon & Lee, Juhee & Roberts, Roland & Yu, Edward T. & Armsworth, Paul R., 2018. "Impact of market conditions on the effectiveness of payments for forest-based carbon sequestration," Forest Policy and Economics, Elsevier, vol. 92(C), pages 33-42.
    4. Ben Ayara, Amine & Cho, Seong-Hoon & Clark, Christopher & Lambert, Dayton & Armsworth, Paul, 2016. "Spatial and Temporal Variation in the Optimal Provision of Forest-based Carbon Storage," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 236005, Agricultural and Applied Economics Association.
    5. Suzi C. Kerr, 2013. "The Economics of International Policy Agreements to Reduce Emissions from Deforestation and Degradation," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 7(1), pages 47-66, January.
    6. Soh, Moonwon & Cho, Seong-Hoon & Yu, Edward & Boyer, Christopher & English, Burton, 2018. "Targeting Payments for Ecosystem Services Given Ecological and Economic Objectives," 2018 Annual Meeting, February 2-6, 2018, Jacksonville, Florida 266502, Southern Agricultural Economics Association.
    7. Jimena González-Ramírez & Catherine L. Kling & Adriana Valcu, 2012. "An Overview of Carbon Offsets from Agriculture," Annual Review of Resource Economics, Annual Reviews, vol. 4(1), pages 145-160, August.
    8. Sharma, Bijay P. & Khanna, Madhu & Miao, Ruiqing, 2022. "Designing Efficient Payments to Incentivize GHG Mitigation Using Energy Crops," 2022 Annual Meeting, July 31-August 2, Anaheim, California 322361, Agricultural and Applied Economics Association.
    9. Claassen, Roger & Duquette, Eric & Horowitz, John & Kohei, Ueda, 2014. "Additionality in U.S. Agricultural Conservation and Regulatory Offset Programs," Economic Research Report 180414, United States Department of Agriculture, Economic Research Service.
    10. Lee, Juhee & Cho, Seong-Hoon & Kim, Taeyoung & Yu, Tun-Hsiang & Armsworth, Paul Robert, 2015. "Exploring tax-based payment approach for forest carbon sequestration," 2015 Annual Meeting, January 31-February 3, 2015, Atlanta, Georgia 196873, Southern Agricultural Economics Association.
    11. Seong-Hoon Cho & Bijay P. Sharma, 2020. "Optimal spatial budget distribution of forest carbon payments that balances the returns and risks associated with conservation costs," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 22(8), pages 7239-7267, December.
    12. Cho, Seong-Hoon & Soh, Moonwon & English, Burton C. & Yu, T. Edward & Boyer, Christopher N., 2019. "Targeting payments for forest carbon sequestration given ecological and economic objectives," Forest Policy and Economics, Elsevier, vol. 100(C), pages 214-226.
    13. Sharma, Bijay P. & Cho, Seong-Hoon, 2021. "Analyzing how forest-based amenity values and carbon storage benefits affect spatial targeting for conservation investment," Forest Policy and Economics, Elsevier, vol. 131(C).
    14. Suzi Kerr & Adam Millard-Ball, 2012. "Cooperation To Reduce Developing Country Emissions," Climate Change Economics (CCE), World Scientific Publishing Co. Pte. Ltd., vol. 3(04), pages 1-30.
    15. Taeyoung Kim & Christian Langpap, 2015. "Incentives for Carbon Sequestration Using Forest Management," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 62(3), pages 491-520, November.
    16. Kelly J. Wendland & Matthias Baumann & David J. Lewis & Anika Sieber & Volker C. Radeloff, 2015. "Protected Area Effectiveness in European Russia: A Postmatching Panel Data Analysis," Land Economics, University of Wisconsin Press, vol. 91(1), pages 149-168.

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    More about this item

    Keywords

    Environmental Economics and Policy;

    JEL classification:

    • Q2 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality

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