Economics of Forest Ecosystem Carbon Sinks: A Review

Abstract

Carbon terrestrial sinks are seen as a low-cost alternative to fuel switching and reduced fossil fuel use for lowering atmospheric CO 2 . In this study, we review issues related to the use of terrestrial forestry activities to create CO 2 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 CO 2 -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 tCO 2 , indicating that the costs of creating CO 2 -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/tCO 2 . Indeed, Europe is the highest cost region, with costs in the range of $50-$280 per tCO 2 . This might explain why Europe has generally opposed biological sinks as a substitute for emissions reductions, while countries rush to finance forestry sector clean development mechanism projects. In Canada and the U.S., carbon sequestration costs range from a low of about $2 to nearly $80 per tCO 2 . One conclusion is obvious: some forestry projects to sequester carbon are worthwhile undertaking, but certainly not all. * The authors wish to thank Tom Tietenberg, Henk Folmer, Peter Parks, Bengt Kriström, Zhou Wenchou, and an anonymous reviewer for their helpful comments and suggestions; Alison Eagle, Karen Crawford, Qian Chen, and Linda Voss for their research assistance; and BIOCAP/SSHRC and the SFM Network for funding support.

Effects of climate change on natural resources and communities: a compendium of briefing papers

“…For example, Richards et al (1993) found that increasing the discount rate from 3 to 7 percent doubled the marginal cost of sequestration. However, van Kooten and Sohngen (2007) found that the discount rate had no statistically significant influence on financial costs in their meta-analysis of 68 forest offset cost studies. They attribute this to the fact that most of the financial costs occur in the earliest years of forestry projects, reducing the importance of discounting.…”

On the economics of boreal Scots pine management under climate change

“…Their results show that the optimal number of trees in the stand increases with carbon price. In addition, they find carbon storage costs to be low in comparison with figures presented in earlier meta-analyses (Richards and Stokes 2004;van Kooten and Sohngen 2007). The study of Zhou (2001) analyzes the optimal stand management of Scots pine in Sweden, fixing the number of thinnings to one, but optimizing the initial density.…”

A Review of Performance Bonding in Forest Policy Settings

“…Landowners can influence the stock of carbon that is sequestered over time through management and harvesting plans, while more extensive changes in land use types (land conversion) carry permanent changes in potential carbon stocks [118][119][120]. Carbon sequestration is an example of point source positive externality and potentially amenable to incentive-based policy approaches like the ones we have been discussing.…”