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Reducing Deforestation and Trading Emissions: Economic Implications for the post-Kyoto Carbon Market

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  • Sathaye, Jayant A.
  • Anger, Niels

Abstract

This paper quantitatively assesses the economic implications of crediting carbon abatement from reduced deforestation for the emissions market in 2020 by linking a numerical equilibrium model of the global carbon market with a dynamic partial equilibrium model of the forestry sector. We find that integrating avoided deforestation in international emissions trading considerably decreases the costs of post-Kyoto climate policy – even when accounting for conventional abatement options of developing countries under the CDM. At the same time, tropical rainforest regions receive substantial net revenues from exporting carbon-offset credits to the industrialized world. Moreover, reduced deforestation can increase environmental effectiveness by enabling industrialized countries to tighten their carbon constraints without increasing mitigation costs. Regarding uncertainties of this future carbon abatement option, we find both forestry transaction costs and deforestation baselines to play an important role for the post-Kyoto carbon market.

Suggested Citation

  • Sathaye, Jayant A. & Anger, Niels, 2008. "Reducing Deforestation and Trading Emissions: Economic Implications for the post-Kyoto Carbon Market," ZEW Discussion Papers 08-016, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  • Handle: RePEc:zbw:zewdip:7225
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    File URL: https://www.econstor.eu/bitstream/10419/24710/1/dp08016.pdf
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    Citations

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    Cited by:

    1. Dixon, Alistair & Anger, Niels & Holden, Rachel & Livengood, Erich, 2008. "Integration of REDD into the international carbon market: Implications for future commitments and market regulation," ZEW Expertises, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research, number 110512.
    2. Gren, Ing-Marie & Zeleke, Abenezer Aklilu, 2016. "Policy design for forest carbon sequestration: A review of the literature," Forest Policy and Economics, Elsevier, vol. 70(C), pages 128-136.
    3. Patrick Laurency & Dirk Schindler, 2011. "International Climate Agreements, Cost Reductions and Convergence of Partisan Politics," CESifo Working Paper Series 3591, CESifo Group Munich.
    4. Mechtel, Mario & Potrafke, Niklas, 2009. "Political Cycles in Active Labor Market Policies," MPRA Paper 14270, University Library of Munich, Germany.
    5. Mendoza Beltran, Angelica & den Elzen, Michel G.J. & Hof, Andries F. & van Vuuren, Detlef P. & van Vliet, Jasper, 2011. "Exploring the bargaining space within international climate negotiations based on political, economic and environmental considerations," Energy Policy, Elsevier, vol. 39(11), pages 7361-7371.
    6. Anger, Niels & Dixon, Alistair & Livengood, Erich, 2009. "Interactions of Reduced Deforestation and the Carbon Market: The Role of Market Regulations and Future Commitments," ZEW Discussion Papers 09-001, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    7. Ojea, Elena & Loureiro, Maria L. & Alló, Maria & Barrio, Melina, 2016. "Ecosystem Services and REDD: Estimating the Benefits of Non-Carbon Services in Worldwide Forests," World Development, Elsevier, vol. 78(C), pages 246-261.

    More about this item

    Keywords

    Climate Change; Kyoto Protocol; Emissions Trading; Deforestation;

    JEL classification:

    • Q23 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Forestry
    • C60 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - General
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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