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Long Term Versus Temporary Certified Emission Reductions in Forest Carbon-Sequestration Programs

Author

Listed:
  • Gregmar I. Galinato
  • Aaron Olanie
  • Shinsuke Uchida
  • Jonathan K. Yoder

    (School of Economic Sciences, Washington State University)

Abstract

Under the Clean Development Mechanism (CDM) of the Kyoto Protocol, forest projects can receive returns for carbon sequestration via two credit instruments: temporary (tCERs) or long-term certified emission reductions (lCERs). This article develops a theoretical model of optimal harvesting strategies that compares private optimal harvest decision under these two instruments. We find that risk neutral landowners are likely to prefer instituting lCERs over tCERs to maximize surplus. A particular type of early harvest penalty implemented under the lCERs is critical in determining the length of rotation intervals and the carbon credit supply. When this penalty is an increasing function of the difference in biomass before and after harvesting across verification periods, the landowner may choose longer or shorter rotation intervals compared to the Faustmann rotation. The resulting supply curve may have a backward bending region over a range of carbon prices.

Suggested Citation

  • Gregmar I. Galinato & Aaron Olanie & Shinsuke Uchida & Jonathan K. Yoder, 2009. "Long Term Versus Temporary Certified Emission Reductions in Forest Carbon-Sequestration Programs," Working Papers 2009-20, School of Economic Sciences, Washington State University.
    • Handle: RePEc:wsu:wpaper:galinato-2
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    File URL: http://faculty.ses.wsu.edu/WorkingPapers/Galinato/WP2009_20.pdf
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    Cited by:

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    2. Zhang, Yue-Jun & Liu, Jing-Yue & Woodward, Richard T., 2023. "Has Chinese Certified Emission Reduction trading reduced rural poverty in China?," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 67(03), April.
    3. Hou, Guolong & Delang, Claudio O. & Lu, Xixi & Olschewski, Roland, 2020. "Optimizing rotation periods of forest plantations: The effects of carbon accounting regimes," Forest Policy and Economics, Elsevier, vol. 118(C).
    4. Mandaloufas, Melissa & Lamas, Wendell de Queiroz & Brown, Scott & Irizarry Quintero, Anamari, 2015. "Energy balance analysis of the Brazilian alcohol for flex fuel production," Renewable and Sustainable Energy Reviews, Elsevier, vol. 43(C), pages 403-414.
    5. David Walker, 2014. "The Economic Potential for Forest-Based Carbon Sequestration under Different Emissions Targets and Accounting Schemes," Working Papers 2014.02, School of Economics, La Trobe University.
    6. Juutinen, Artti & Ahtikoski, Anssi & Lehtonen, Mika & Mäkipää, Raisa & Ollikainen, Markku, 2018. "The impact of a short-term carbon payment scheme on forest management," Forest Policy and Economics, Elsevier, vol. 90(C), pages 115-127.
    7. Cacho, Oscar J. & Lipper, Leslie & Moss, Jonathan, 2013. "Transaction costs of carbon offset projects: A comparative study," Ecological Economics, Elsevier, vol. 88(C), pages 232-243.

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    Keywords

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    JEL classification:

    • Q2 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q23 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Forestry

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