Estimating the opportunity costs of reducing carbon dioxide emissions via avoided deforestation,using integrated assessment modelling

Estimates show that, in recent years, deforestation and forest degradation accounted for about 17% of global greenhouse gas emissions. The implementation of REDD (Reducing Emissions from Deforestation and Forest Degradation in Developing Countries) is suggested to provide substantial emission reductions at low costs, although cost estimates show large uncertainty. Cost estimates can differ, as they depend on the approach chosen, for example: giving an economic stimulus to entire countries, taking landowners as actors in a REDD framework, or starting from protecting carbon-rich areas. This last approach was chosen for this analysis. Proper calculation of the economic cost requires an integrated modelling approach involving biophysical impact calculations and their associated economic effects. To date, only a few global modelling studies have applied such an approach. In modelling REDD measures, the actual implementation of REDD can take many forms, with implications for the results. This study assumes that non-Annex I countries will protect carbon-rich areas against deforestation, and therefore will refrain from using these areas as agricultural land. The opportunity costs of reducing deforestation within the framework of REDD were assessed using an integrated economic and land-use modelling approach comprising the global economic LEITAP model and the biophysical IMAGE model. One of the main methodological challenges is the representation of land use and the possibility to convert woodlands land into agricultural land. We endogenised the availability of agricultural land by introducing a flexible land supply curve, and represented the implementation of REDD policies as a reduction in the maximum amount of unmanaged land that potentially would be available for conversion to agriculture, in various regions in the world. In a series of model experiments, carbon-rich areas in non-Annex I countries were protected from deforestation. In each consecutive scenario the protected area was increased, starting off with the most carbon rich lands, worldwide systematically working down to areas with less carbon storage. The associated opportunity costs, expressed in terms of GDP reduction, were calculated with the economic LEITAP model. The resulting net reduction in carbon dioxide emissions from land-use change was calculated with the IMAGE model. From the sequence of experiments, marginal cost curves were constructed, relating carbon dioxide emission reductions to the opportunity costs. The results showed that globally a maximum of around 2.5 Gt carbon dioxide emissions could be avoided, annually. However, regional differences in opportunity costs are large and were found to range from about 0 to 3.2 USD per tonne carbon dioxide in Africa, 2 to 9 USD in South America and Central America, and 20 to 60 USD in Southeast Asia. These results are comparable to other studies that have calculated these costs, in terms of both opportunity costs and the regional distribution of emissions reduction.     

Forest carbon benefits,costs and leakage effects of carbon reserve scenarios in the United States

This study evaluated the potential effectiveness of future carbon reserve scenarios, where U.S. forest landowners would hypothetically be paid to sequester carbon on their timberland and forego timber harvests for 100 years. Scenarios featured direct payments to landowners of $0 (baseline), $5, $10, or $15 per metric ton of additional forest carbon sequestered on the set aside lands, with maximum annual expenditures of $3 billion. Results indicated that from 1513 to 6837 Tg (Teragrams) of additional carbon (as carbon dioxide equivalent, CO₂e) would be sequestered on U.S. timberlands relative to the baseline case over the next 50 years (30–137 Tg CO₂e annually). These projected amounts of sequestered carbon on timberlands take into account projected increases in timber removal and forest carbon losses on other timberlands (carbon leakage effects). Net effectiveness of carbon reserve scenarios in terms of overall net gain in timberland carbon stocks from 2010 to 2060 ranged from 0.29 tCO₂e net carbon increase for a payment of $5/tCO₂e to the landowner (71% leakage), to 0.15 tCO₂e net carbon increase for a payment of $15/tCO₂e to the landowner (85% leakage). A policy or program to buy carbon credits from landowners would need to discount additions to the carbon reserve by the estimated amount of leakage. In the scenarios evaluated, the timber set-asides reduced timberland area available for harvest up to 35% and available timber inventory up to 55%, relative to the baseline scenario over the next 50 years, resulting in projected changes in timber prices, harvest levels, and forest product revenues for the forest products sector.     

The potential and cost of increasing forest carbon sequestration in Sweden

This paper examines the potential and the cost of promoting forest carbon sequestration through a tax/subsidy to land owners for reducing/increasing carbon storage in their forests. We use a partial equilibrium model based on intertemporal optimization to estimate the impacts of carbon price (the tax/subsidy rate) on timber harvest volume and price in different time periods and on the change of forest carbon stock over time. The results show that a higher carbon price would lead to higher forest carbon stocks. The tax/subsidy induced annual net carbon sequestration is declining over time. The net carbon sequestration during 2015–2050 would increase by 30.2 to 218.3 million tonnes of CO₂, when carbon price increases from 170 SEK to 1428 SEK per tonne of CO₂. The associated cost, in terms of reduced total benefits of timber and other non-timber goods, ranges from 80 SEK to 105.8 SEK per tonne of CO₂. The change in carbon sequestration (as compared with the baseline case) beyond 2050 is small when carbon price is 680 SEK per tonne of CO₂ or lower. With a carbon price of 1428 SEK per tonne of CO₂, carbon sequestration will increase by 70 million tonnes of CO₂ from the baseline level during 2050-2070, and by 64 million tonnes during 2070–2170.     

Marginal abatement costs of greenhouse gas emissions: broadacre farming in the Great Southern Region of Western Australia

Broadacre agriculture is a major emitter of greenhouse gases (GHG). To improve efficiency of climate change policies, we need to know the marginal abatement costs of agricultural GHG. This article combines calculations of on‐farm GHG emissions with an input‐based distance function approach to estimate the marginal abatement costs for a broadacre farming system in the Great Southern Region of Western Australia. The results show that, in the study region, the average marginal abatement cost for the 1998–2005 periods was $29.3 per tonne CO₂‐e. Farms with higher crop output shares were found to have higher marginal abatement costs. Overall, our results indicate that broadacre agriculture is among the lowest cost sources of GHG mitigation.     

The economics of drought: A review of impacts and costs

Although a growing body of literature studies drought impacts, papers providing a comprehensive review of drought's social and economic impacts are scarce. This paper fills this gap by exploring the consequences of drought on societies based on research findings in Australia—a large country used to experiencing severe droughts. To do this, we propose a framework to categorise drought impacts in three dimensions: individuals/households (including health), productive sectors and system (including economic and ecosystem) impacts. The framework then guides a systematic literature review and discussion of studies looking at diverse drought impacts and their related costs. By analysing and discussing the findings from this literature, we emphasise different policy considerations, empirical challenges and research needs to support robust analysis and estimates of the true cost of droughts. We conclude by proposing an expanded framework to identify drought impacts and a discussion of the implications of the review for policy development.     

The influence of crediting and permanence periods on Australian forest-based carbon offset supply

Governments globally are developing increasingly ambitious carbon emissions reduction schemes that include significant emissions offset credits for forest-based carbon sequestration. Such strategies can present significant challenges in highly modified and intensively farmed regions where forest land use opportunity and establishment costs are high. This article evaluates the economics of land-use change via active afforestation for local carbon abatement in the Australian state of South Australia, a region with high supply costs representative of long-established temperate farming regions. We found that there is no economically viable abatement below $38 tCO₂e⁻¹, however up to 154 Mt CO₂e of abatement could be available up to prices of $50 tCO₂e⁻¹.Variation in current Australian Emissions Reduction Fund (ERF) policy parameters related to permanence and crediting periods were also assessed. Recent ERF contracts involve a 100-year land-use change commitment (permanence period) and a 25-year crediting period where payments for growth in carbon from the land-use change is contracted. We compared outcomes of this arrangement to a scenario with equal 100-year permanence and crediting periods. We found substantial differences in carbon supply at some price points for a 25 rather than a 100-year crediting period. Under ERF parameters the first economically viable revegetation options occur at $42 tCO₂e⁻¹, however, we found a 69 percent reduction in economically viable supply at a carbon price of $50 tCO₂e⁻¹. The results highlight the role offset crediting policy can have on dis-incentivising land-use change and the need for landholders to be compensated fully for temporal opportunity costs.     

Controlling deforestation in the Brazilian Amazon: Regional economic impacts and land-use change

Brazil confirmed targets for reducing greenhouse gas emissions in 2008, including an 80% reduction in deforestation in the Amazon by 2020. With this in mind, we investigated the trade-off between environmental conservation and economic growth in the Amazon. The aim of this study is to project the economic losses and land-use changes resulting from a policy to control deforestation and the rise in land productivity that is necessary to offset those losses. We developed a Dynamic Interregional Computable General Equilibrium Model for 30 Amazon regions with a land module allowing conversion between types of land. The results have shown that the most affected regions would be soybeans and cattle producers as well as regions dominated by family farms. To offset these impacts, it was estimated that an annual gain of land productivity of approximately 1.4% would be required.     

The external costs of pasture weed spread: an economic assessment of serrated tussock control

The external cost associated with the spread of pasture weeds such as serrated tussock (Nassella trichotoma) is an important economic problem. This problem is complicated in many parts of south‐eastern Australia where low rainfall and low soil fertility prevent the economic viability of control of this weed through pasture improvement. A consequence of serrated tussock spread in this region has been calls for increased public intervention in its control. However, because there have been no attempts to measure the external costs of serrated tussock spread, one of the major economic grounds on which this activity might be justified has not been quantified. The purpose of this paper is to provide this information. A stochastic simulation model is developed to determine the size of the external cost associated with the spread of serrated tussock and to evaluate the economic benefits of a range of control scenarios. It is concluded that on low rainfall‐low soil fertility country the socially optimal control option for serrated tussock is to retire land from agriculture and re‐vegetate it with trees.     

Emergence and influence of a new policy regime: The case of forest carbon offsets in British Columbia

The most significant carbon mitigation policy currently targeting BC’s forests is the Forest Carbon Offsets Protocol (FCOP) that outlines the rules regulating forest carbon offsets. By applying the Policy Regime Framework to the FCOP, this paper addresses the following specific questions: what is the extent of the policy change brought by FCOP, and what are the main factors that influenced and shaped this policy change? The paper concludes that policy did change: an offset regime was established and FCOP was adopted to steer the development of forest carbon offsets. It is the executive branch of government, and especially Premier Gordon Campbell, that was most influential during problem definition and the decision making around forest carbon offset policy. In addition, environmentalists and First Nations, by advocating for a conservation economy, and the private sector, by lobbying the government to prioritize their economic interests, also influenced the policy making process. However, the actual magnitude of policy change that occurred with the emergence of the forest carbon policy regime is quite limited. Apart from a few conservation and improved forest management projects that mostly benefited First Nations, very few projects have been successfully implemented to date. This limited policy change was caused by various economic, social and political limitations. In particular, the shift in government in 2011 that led to the decision not to implement a cap and trade program significantly reduced marketing opportunities for BC-based forest offsets. In addition, the negative public opinion towards the credibility and effectiveness of forest carbon offsets, the low international price of carbon, the high transaction costs and the lack of financing options strongly restrained their development.     

The environmental and economic costs of sprawling parking lots in the United States

Urban sprawl is considered by most environmental scientists and urban planners to be a serious environmental problem. However, public perception about parking availability often forces planning offices to recommend parking lot sizes that exceed daily demands. The recent trend of increasing the size of stores, churches and even schools comes with increasing the size of parking lots that service these buildings. The objective of this paper is to analyze space allocation of parking lots in a typical midwestern county and to estimate the supply of parking spaces to potential demand. We also estimate the loss of ecosystem services represented by the area of parking lots in this county. We found that parking lots cover 5.65 km² (1 397 acres) of Tippecanoe County, Indiana which implies that 0.44% of the county area is devoted to parking lots. Our results show that there are approximately 2.2 parking spaces per registered vehicle, that parking lots make up more than 6.57% of the total urban footprint in this county, that the area of parking lots exceeded the area of parks in the city limits by a factor of three and that parking lot runoff and pollutants are significant compared to runoff and pollutants from these areas prior to their conversion to parking lots. As other authors have done before us we lament the poor use of land in urban regions of the United States, and encourage planners to think creatively about the use of land for parking.     

The importance of ‘extremely unlikely’ events: tail risk and the costs of climate change

In assessing the risks associated with climate change, ‘tail risks’ (low‐probability extreme events) often play a much larger role than their probability alone might indicate. There are three main reasons for this: the linear relationship between sensitivity and warming; the convexity of the damage function; and the concavity of the utility function. Ignoring the upper tail of the distribution of possible outcomes will result in serious underestimates of the social cost of carbon dioxide (CO₂) emissions and of the socially optimal price for emissions.     

Analysing foregone costs of communities and carbon benefits in small scale community based forestry practice in Nepal

Reducing emissions from deforestation and forest degradation, conservation and sustainable management of forests and enhancement of forest carbon (REDD+) are considered to be important cost effective approaches for global climate change mitigation; therefore, such practices are evolving as the REDD+ payment mechanism in developing countries. Using six years (2006–2012) data, this paper analyses trade-offs between carbon stock gains and the costs incurred by communities in generating additional carbon in 105 REDD+ pilot community forests in Nepal. It estimates foregone benefits for communities engaged in increasing carbon stocks in various dominant vegetation types. At recent carbon and commodity prices, communities receive on average US$ 0.47/ha/year of carbon benefits with the additional cost of US$ 67.30/ha/year. One dollar’s worth of community cost resulted 0.23 Mg of carbon sequestration. Therefore, carbon payment alone may not be an attractive incentive within small-scale community forestry and should link with payments for ecosystem services. Moreover, the study found highest community sacrificed benefits in Shorea mixed broadleaf forests and lowest in Schima-Castanopsis forests, while carbon benefits were highest in Pine forests followed by Schima-Castanopsis forests and lowest in Rhododendron-Quercus forests. This indicates that costs and benefits may vary by vegetation type. A policy should consider payment for other environmental services, carbon gains, co-benefits and trade off while designing the REDD+ mechanism in community based forest land use practice with equitable community outcomes. The learning from this study will help in the formulation of an appropriate REDD+ policy for community forestry.     

Designing intergovernmental fiscal transfers for conservation: The case of REDD+ revenue distribution to local governments in Indonesia

A REDD+ scheme would involve the transfer of financial resources to forested developing countries taking part in it. This paper simulates different approaches to the design of intergovernmental fiscal transfers (IFTs), a possible means to channel a REDD+ international payment to local governments which, in several countries, have a certain degree of authority over forest management. Using Indonesia as a case study, the cost-reimbursement and the derivation approaches are tested. It is demonstrated that both approaches could be used. Using the cost-reimbursement approach, localities with more degraded forests would receive a higher compensation per unit of carbon emission reduction than districts with primary forests. Avoiding further conversion of logged-over areas is associated with higher opportunity costs when compared with preventing the conversion of primary forests. In contrast, the derivation approach sets a fixed percentage and rate to distribute REDD+ revenues and ignores the opportunity costs of REDD+ incurred by local governments. The distribution of REDD+ revenues to eligible local governments is based on an assumed market price of carbon credits from REDD+. This paper concludes by discussing the implications of the findings for designing the distribution of REDD+ revenues, both for Indonesia and more generically for other developing countries.     

Barriers and requirements to climate change adaptation of mountainous rural communities in developing countries: The case of the eastern Qinghai-Tibetan Plateau of China

Systematically identifying the barriers and requirements to adaptation is critical to the successful implementation of climate adaptation planning and policies at the local level, especially in the mountainous rural communities of developing countries with limited resources and technology. We conducted an empirical study of the barriers and requirements to adapting to climate change of 539 peasant households in an ecologically vulnerable area of China to enhance their resilience to climate change by improving our understanding of adaptation process and decision-making. Our findings indicated that farmers in the Gannan Plateau face multiple adaptation barriers, of which normative, information and technology barriers were more serious, such as lack of meteorological information service, infrastructure and technology extension in agriculture or animal husbandry. Adaptation requirements are an important way to effectively reduce or eliminate obstacles and improve farmers' adaptive capacity to climate change. The survey found that local households have an urgent requirement for infrastructure, information and production technologies, such as water, electricity, transportation facilities, disaster warning information, employment information and farming or breeding techniques. In addition, due to the influence of economic level, education level, years of farming, gender and other factors, differences exist in the adaptation barriers and requirements faced by farmers in different regions. These findings extend empirical evidence in favor of formulating a reasonable adaptation framework and choosing optimal adaptation strategies, which are essential for enacting well-targeted regional adaptation policies.     

Socio‐economic transitions and everyday life changes in the rural world: Pyrenean households and their contemporary economic history

This article focuses on understanding rural life and how agrarian everyday life changes as a consequence of the radical socio‐economic transformations that, across the world, have accompanied rural communities in their transition from economies of subsistence to industrial production, and, in some areas, from there to providers of service to the tourism‐oriented leisure economy. In the last century in the Alt Urgell District (Spanish Pyrenees), many communities went from a production model based on subsistence farming and livestock breeding first to a specialization in milk production and later to tourism. The industrialization of milk production, the radical transformation of the scale of their operations, and the monetization of life transformed the identity and structure of these communities. The subsequent transformation of many of these farms to accommodate the leisure industry changed the shape of these households again. This paper reflects on how science, governance, commodification, and technology played a role on the transformation of the rural mountain areas, their people, and their everyday life.     

The future of food demand: understanding differences in global economic models

Understanding the capacity of agricultural systems to feed the world population under climate change requires projecting future food demand. This article reviews demand modeling approaches from 10 global economic models participating in the Agricultural Model Intercomparison and Improvement Project (AgMIP). We compare food demand projections in 2050 for various regions and agricultural products under harmonized scenarios of socioeconomic development, climate change, and bioenergy expansion. In the reference scenario (SSP2), food demand increases by 59–98% between 2005 and 2050, slightly higher than the most recent FAO projection of 54% from 2005/2007. The range of results is large, in particular for animal calories (between 61% and 144%), caused by differences in demand systems specifications, and in income and price elasticities. The results are more sensitive to socioeconomic assumptions than to climate change or bioenergy scenarios. When considering a world with higher population and lower economic growth (SSP3), consumption per capita drops on average by 9% for crops and 18% for livestock. The maximum effect of climate change on calorie availability is ?6% at the global level, and the effect of biofuel production on calorie availability is even smaller.     

Measuring the social costs of suboptimal combinations of policy instruments: A general framework and an example

Since most agricultural programs employ two or more policy instruments simultaneously, it is notable thai little research has attempted to find optimal instrument combinations and no research exists which evaluates the social costs (unrealized benefits) of combining instruments suboptimally. In our paper we report a simple and feasible method to find optimal policy instrument combinations, and we provide the first general, formal approach to measuring the social costs of suboptimal policy instrument combinations. Our approach is illustrated in an analysis for live major U.S. crops (corn, feed grains, wheat, rice, cotton). The simple model we employ for the illustration suggests that except lor the feed grains program, the observed programs combined policy instruments quite suboptimally. We conclude that agricultural economics research now can and should begin placing increased emphasis on studying optimal policy instrument combinations.     

Climate change adaptation in agriculture: A computable general equilibrium analysis of land-use change in Nepal

This paper investigates the feasibility of changes in cropland-use as an adaptation strategy to minimise the economy-wide costs of climate change on agriculture. Nepal makes an interesting case study as it is one of the most vulnerable agricultural economies within South Asia. We develop a comparative static multi-household computable general equilibrium (CGE) model for Nepal, with a nested set of constant elasticity of transformation (CET) functional forms, to model the allocation of land within different agricultural sectors. Land transformation elasticities in these CET functions are allowed to reflect the ease of switching from one crop to another based on their agronomic characteristics. The results suggest that, in the long run, farmers in Nepal tend to allocate land to crops that are comparatively less impacted by climate change, such as paddy, thereby minimising the economy-wide impacts of climate change. Furthermore, the results reveal that land-use change tends to reduce the income disparity between different household groups by significantly moderating the income losses of marginal farmers. Therefore, it is suggested that policy makers in Nepal should prioritise schemes such as providing climate-smart paddy varieties (i.e., those that are resistant to heat, drought and floods) to farmers, subsidising fertilizers, improving agronomic practices, and educating farmers to switch from crops that are highly impacted by climate change to those that are not, such as paddy.     

The role of behavioural factors and opportunity costs in farmers' participation in voluntary agri-environmental schemes: A systematic review

Agri-environmental schemes (AESs) are increasingly implemented to promote the adoption of environmentally friendly practices by farmers. We use a systematic review to explore the role of behavioural factors and opportunity costs in farmers' decisions to participate in AESs in Australia, Europe and North America. Behavioural factors influence how farmers value and perceive options, while opportunity costs relate to farmers' forgone utility when choosing to participate in schemes. We synthesise insights from 79 articles and over 700 factors explaining the participation in AESs. We find that a set of behavioural factors seem consistently connected to participation, including agricultural training, advice and having positive attitudes towards AESs. Moreover, several factors related to opportunity costs also have a rather consistent relationship with AES participation, including market conditions, implementation efforts, profitability, and management and contract flexibility. However, many relationships of behavioural factors and opportunity costs with AES participation are not as consistent and generalizable as sometimes portrayed and require context-specific interpretation. Those factors with mixed results can still provide insights into farmers' participation decisions as several of them are either ‘positively and insignificantly’ or ‘negatively and insignificantly’ related to participation, such as environmental attitude, trust and farm size. These results suggest that their relationship with AES participation depends on other factors or the setting, highlighting interactions and raising important new research questions. Overall, our results provide several entry points for both researchers and policy-makers, highlighting uncertainties in relationships between factors and participation that should be considered when designing policies.