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Economics of Forest Ecosystem Carbon Sinks: A Review

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  • G. Cornelis van Kooten
  • Brent Sohngen

Abstract

Carbon terrestrial sinks are seen as a low-cost alternative to fuel switching and reduced fossil fuel use for lowering atmospheric CO2. In this study, we review issues related to the use of terrestrial forestry activities to create CO2 offset credits. To gain a deeper understanding of the confusing empirical studies of forest projects to create carbon credits under Kyoto, we employ meta-regression analysis to analyze conditions under which forest activities generate CO2-emission reduction offsets at competitive ‘prices’. In particular, we examine 68 studies of the costs of creating carbon offsets using forestry. Baseline estimates of costs of sequestering carbon are some US$3–$280 per tCO2, indicating that the costs of creating CO2-emission offset credits through forestry activities vary wildly. Intensive plantations in the tropics could potentially yield positive benefits to society, but in Europe similar projects could cost as much as $195/tCO2. Indeed, Europe is the highest cost region, with costs in the range of $50-$280 per tCO2. This might explain why Europe has generally opposed biological sinks as a substitute for emissions reductions, while countries rush to finance forestry sector CDM projects. In Canada and the U.S., carbon sequestration costs range from a low of about $2 to nearly $80 per tCO2. One conclusion is obvious: some forestry projects to sequester carbon are worthwhile undertaking, but certainly not all.

Suggested Citation

  • G. Cornelis van Kooten & Brent Sohngen, 2007. "Economics of Forest Ecosystem Carbon Sinks: A Review," Working Papers 2007-02, University of Victoria, Department of Economics, Resource Economics and Policy Analysis Research Group.
  • Handle: RePEc:rep:wpaper:2007-02
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    References listed on IDEAS

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    Cited by:

    1. Güssow, Kerstin & Proelss, Alexander & Oschlies, Andreas & Rehdanz, Katrin & Rickels, Wilfried, 2010. "Ocean iron fertilization: Why further research is needed," Marine Policy, Elsevier, pages 911-918.
    2. Renan Ulrich Goetz & Natali Hritonenko & Ruben Mur & Àngels Xabadia & Yuri Yatsenko, 2008. "Climate Change and the Cost of Carbon Sequestration: The Case of Forest Management," Working Papers 329, Barcelona Graduate School of Economics.
    3. G. Cornelis van Kooten, 2008. "Biological Carbon Sequestration and Carbon Trading Re-visited," Working Papers 2008-04, University of Victoria, Department of Economics, Resource Economics and Policy Analysis Research Group.
    4. Indrajaya, Yonky & van der Werf, Edwin & Weikard, Hans-Peter & Mohren, Frits & van Ierland, Ekko C., 2016. "The potential of REDD+ for carbon sequestration in tropical forests: Supply curves for carbon storage for Kalimantan, Indonesia," Forest Policy and Economics, Elsevier, vol. 71(C), pages 1-10.
    5. Monge, Juan J. & Bryant, Henry L. & Gan, Jianbang & Richardson, James W., 2016. "Land use and general equilibrium implications of a forest-based carbon sequestration policy in the United States," Ecological Economics, Elsevier, vol. 127(C), pages 102-120.
    6. Poudyal, Neelam C. & Siry, Jacek P. & Bowker, J.M., 2010. "Urban forests' potential to supply marketable carbon emission offsets: A survey of municipal governments in the United States," Forest Policy and Economics, Elsevier, vol. 12(6), pages 432-438, July.
    7. Vermont, Bruno & De Cara, Stéphane, 2010. "How costly is mitigation of non-CO2 greenhouse gas emissions from agriculture?: A meta-analysis," Ecological Economics, Elsevier, vol. 69(7), pages 1373-1386, May.
    8. 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.
    9. G. Cornelis van Kooten, 2008. "Biological Carbon Sequestration and Carbon Trading Re-visited," Working Papers 2008-04, University of Victoria, Department of Economics, Resource Economics and Policy Analysis Research Group.
    10. Rickels, Wilfried & Rehdanz, Katrin & Oschlies, Andreas, 2012. "Economic prospects of ocean iron fertilization in an international carbon market," Resource and Energy Economics, Elsevier, vol. 34(1), pages 129-150.
    11. Ovando, Paola & Caparrós, Alejandro, 2009. "Land use and carbon mitigation in Europe: A survey of the potentials of different alternatives," Energy Policy, Elsevier, vol. 37(3), pages 992-1003, March.
    12. Jaeger, William K. & Egelkraut, Thorsten M., 2011. "Biofuel economics in a setting of multiple objectives and unintended consequences," Renewable and Sustainable Energy Reviews, Elsevier, vol. 15(9), pages 4320-4333.
    13. Rickels, Wilfried & Rehdanz, Katrin & Oschlies, Andreas, 2009. "Accounting aspects of ocean iron fertilization," Kiel Working Papers 1572, Kiel Institute for the World Economy (IfW).
    14. Maria Nijnik & Guillaume Pajot, 2014. "Accounting for uncertainties and time preference in economic analysis of tackling climate change through forestry and selected policy implications for Scotland and Ukraine," Climatic Change, Springer, vol. 124(3), pages 677-690, June.
    15. Rickels, Wilfried & Rehdanz, Katrin & Oschlies, Andreas, 2010. "Methods for greenhouse gas offset accounting: A case study of ocean iron fertilization," Ecological Economics, Elsevier, vol. 69(12), pages 2495-2509, October.
    16. Michetti, Melania & Rosa, Renato, 2012. "Afforestation and timber management compliance strategies in climate policy. A computable general equilibrium analysis," Ecological Economics, Elsevier, vol. 77(C), pages 139-148.
    17. Nijnik, Maria & Pajot, Guillaume & Moffat, Andy J. & Slee, Bill, 2013. "An economic analysis of the establishment of forest plantations in the United Kingdom to mitigate climatic change," Forest Policy and Economics, Elsevier, vol. 26(C), pages 34-42.
    18. Pajot, Guillaume, 2011. "Rewarding carbon sequestration in South-Western French forests: A costly operation?," Journal of Forest Economics, Elsevier, vol. 17(4), pages 363-377.
    19. Kim, Yoon Hyung & Sohngen, Brent & Golub, Alla A. & Hertel, Thomas W. & Rose, Steven K., 2010. "Impact Of Us And European Biofuel Policies On Forest Carbon," 2010 Annual Meeting, July 25-27, 2010, Denver, Colorado 61456, Agricultural and Applied Economics Association.

    More about this item

    Keywords

    climate change; Kyoto Protocol; meta-regression analysis; carbon-uptake costs; forest sinks;

    JEL classification:

    • Q2 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation
    • Q25 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Water
    • H43 - Public Economics - - Publicly Provided Goods - - - Project Evaluation; Social Discount Rate
    • C19 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Other

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