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Contracting for Impure Public Goods: Carbon Offsets and Additionality

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  • Charles Mason
  • Andrew Plantinga

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 to the use of carbon offsets to mitigate climate change. We analyze optimal contracts for forest carbon, an important offset category. A novel national-scale simulation of the contracts is conducted that uses econometric results derived from micro data. For a 50 million acre increase in forest area, annual government expenditures with optimal contracts are found to be about $4 billion lower compared to costs with a uniform subsidy.

Suggested Citation

  • Charles Mason & Andrew Plantinga, 2011. "Contracting for Impure Public Goods: Carbon Offsets and Additionality," NBER Working Papers 16963, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:16963
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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. 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.
    4. 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.
    5. 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.
    6. Suzi Kerr & Adam Millard-Ball, 2012. "Cooperation to Reduce Developing Country Emissions," Working Papers 12_03, Motu Economic and Public Policy Research.
    7. 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.
    8. 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.

    More about this item

    JEL classification:

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

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