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Rent Seeking and the Smoke and Mirrors Game in the Creation of Forest Sector Carbon Credits: An Example from British Columbia

  • G. Cornelis van Kooten
  • Tim Bogle
  • Frans P. de Vries

From a cost standpoint and as demonstrated in this paper, it is beneficial to permit forest-sector carbon offsets in lieu of carbon dioxide emissions reduction. Such offsets play a role in voluntary markets and Europe’s Emission Trading System. However, problems related to additionality, leakages, duration and impermanence, high transaction costs, and governance raise important questions about the validity of most carbon offset credits from forestry. Using data for a forest estate in south-eastern British Columbia owned by the Natural Conservancy of Canada (NCC), we construct a forest management model to demonstrate that the planned NCC management program yields questionable forest carbon offsets. NCC management results in slightly less annual carbon sequestration than leaving the forest as wilderness, but sustainable commercial management of the site sequesters between 8 and 270 thousand tonnes of CO2 more per year than NCC management. Because commercial exploitation was the counterfactual used to justify the NCC carbon offsets, offsets were subsequently sold to non-arms-length buyers, and numbers of carbon offsets are highly sensitive to assumptions, one can only conclude that the carbon offsets generated by this (and probably many other) forest conservation projects are simply spurious.

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File URL: http://web.uvic.ca/~repa/publications/REPA%20working%20papers/WorkingPaper2012-06.pdf
File Function: Final version, 2012
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Paper provided by University of Victoria, Department of Economics, Resource Economics and Policy Analysis Research Group in its series Working Papers with number 2012-06.

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Length: 42 pages
Date of creation: Aug 2012
Date of revision:
Handle: RePEc:rep:wpaper:2012-06
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  1. Sathaye, Jayant & Andrasko, Kenneth & Chan, Peter, 2011. "Emissions scenarios, costs, and implementation considerations of REDD-plus programs," Environment and Development Economics, Cambridge University Press, vol. 16(04), pages 361-380, August.
  2. Brant Abbott & G. Cornelis van Kooten, 2008. "Can Domestication of Wildlife Lead to Conservation? The Economics of Tiger Farming in China," Working Papers 2009-01, University of Victoria, Department of Economics, Resource Economics and Policy Analysis Research Group.
  3. Bosetti, Valentina & Lubowski, Ruben & Golub, Alexander & Markandya, Anil, 2011. "Linking reduced deforestation and a global carbon market: implications for clean energy technology and policy flexibility," Environment and Development Economics, Cambridge University Press, vol. 16(04), pages 479-505, August.
  4. Carolyn Fischer, 2010. "Does Trade Help or Hinder the Conservation of Natural Resources?," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 4(1), pages 103-121, Winter.
  5. Couture, Stéphane & Reynaud, Arnaud, 2011. "Forest management under fire risk when forest carbon sequestration has value," Ecological Economics, Elsevier, vol. 70(11), pages 2002-2011, September.
  6. Fischer, Carolyn, 2004. "The complex interactions of markets for endangered species products," Journal of Environmental Economics and Management, Elsevier, vol. 48(2), pages 926-953, September.
  7. Rose, Steven K. & Sohngen, Brent, 2011. "Global forest carbon sequestration and climate policy design," Environment and Development Economics, Cambridge University Press, vol. 16(04), pages 429-454, August.
  8. Henk Folmer & G. Cornelis van Kooten, 2006. "Deforestation," Working Papers 2006-06, University of Victoria, Department of Economics, Resource Economics and Policy Analysis Research Group.
  9. Bosetti, Valentina & Rose, Steven K., 2011. "Reducing carbon emissions from deforestation and forest degradation: issues for policy design and implementation," Environment and Development Economics, Cambridge University Press, vol. 16(04), pages 357-360, August.
  10. Dieter Helm, 2003. "The Assessment: Climate-Change Policy," Oxford Review of Economic Policy, Oxford University Press, vol. 19(3), pages 349-361.
  11. Dieter Helm, 2010. "Government failure, rent-seeking, and capture: the design of climate change policy," Oxford Review of Economic Policy, Oxford University Press, vol. 26(2), pages 182-196, Summer.
  12. Ann Ingerson, 2011. "Carbon storage potential of harvested wood: summary and policy implications," Mitigation and Adaptation Strategies for Global Change, Springer, vol. 16(3), pages 307-323, March.
  13. G. Cornelis van Kooten & Robert A. Schipper, 2002. "Forest Conservation in Costa Rica when Nonuse Benefits are Uncertain but Rising," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 84(1), pages 150-160.
  14. Kurt Niquidet & Brad Stennes & G.Cornelis van Kooten, 2008. "Bio-energy from Mountain Pine Beetle Timber and Forest Residuals: The Economics Story," Working Papers 2008-11, University of Victoria, Department of Economics, Resource Economics and Policy Analysis Research Group.
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