Radiative forcing and the optimal rotation age

Forests help mitigate climate change by sequestering atmospheric carbon. However, boreal and high-latitude temperate forests may also contribute to global warming due to the albedo effect. The relative effects of carbon sequestration and albedo can be quantified in terms of radiative forcing. We present a stylized, stand-level analysis to determine the optimal rotation age when considering a tax/subsidy scheme based on radiative forcing and the notion of equivalent carbon emissions. Additional management decision variables considered include species choice and regeneration effort, since these can impact the albedo effect. We demonstrate analytically that the optimal rotation length is likely shortened when albedo-related equivalent emissions are incorporated, relative to a policy based only on carbon. Empirical results indicate that rotation ages do decrease relative to a “carbon only” policy, and approach the traditional (timber only) Faustmann rotation age as equivalent emission rates increase. Our results suggest that forestation does not necessarily provide climatic benefits in all circumstances, and that, at the margin, other opportunities for carbon reduction (e.g. abatement), or pursuing forestation in other locations, become more attractive.     

Energy substitutions, climate change and carbon sinks

We determine the optimal exploitation time-paths of two energy resources, one being depletable and polluting, namely a fossil fuel, the other being renewable and clean. These optimal paths are considered along with the two following features. First, the cumulative atmospheric pollution stock is set not to exceed some critical threshold and second, the polluting emissions produced by the use of fossil fuel can be reduced at the source and stockpiled in several carbon sinks of limited capacity. We show that, if the renewable resource flow is abundant, the optimal path requires that sequestration is implemented only once the ceiling is reached. Moreover, the reservoirs should be completely filled by increasing order of their respective sequestration costs.     

Measuring transnational leakage of forest conservation

Forest conservation in one country can influence the degree of conservation or deforestation in other countries because of international linkages of the forest products industry and markets and a lack of global coordination. Thus leakage and offsetting losses of environmental quality may be present. This paper develops an analytical framework for measuring this leakage and estimates its magnitude via general equilibrium modeling. We find that the magnitude of leakage depends upon the price elasticities of supply of and demand for forestry products across the countries and degree of cooperation in forest conservation. We estimate that a significant portion (42%-95%) of the reduced forestry production implemented in a country/region can be transferred to elsewhere, offsetting environmental gains. Leakage generally diminishes as more countries cooperate, but cooperation among only a few countries does not always dramatically reduce leakage. Thus forest conservation efforts and associated environmental quantity gains in a country or group of countries can be seriously undermined in terms of global net conservation gain in the absence of effective global cooperation. Our results also point to the importance of taking leakage into account in evaluating local or regional forest carbon sequestration projects.     

The economic consequences of substituting carbon payments for crop subsidies in U.S. agriculture

There is a growing body of literature on the costs of sequestering carbon. However, no studies have examined the interplay between farm commodity programs and carbon sequestration programs. This study investigates two dimensions of the interaction between farm commodity programs and afforestation programs, using a price-endogenous sector model of agriculture in the United States. First, this study compares the fiscal and welfare costs of achieving specific carbon targets through afforestation, with and without current farm programs. Second, it examines the welfare, fiscal, and carbon consequences of replacing existing farm subsidies, wholly or in part, with payments for carbon. Two approaches, Hicksian and Marshallian, are investigated. In the first, the sector model is used to quantify the carbon consequences and fiscal costs associated with various combinations of farm commodity and carbon sequestration programs that leave consumers and producers in the U.S. agricultural sector no worse off than under existing farm programs. The second approach focuses on the carbon and welfare consequences of various farm commodity and carbon sequestration programs that hold total program fiscal costs constant at current levels. Althouth the methodology and data are applied to the United States, the issues addressed are common in a number of developed nations, particularly within the European Union (EU). Adapting existing sector models in these nations to perform similar analyses would provide policy makers with more precise information about the nature of the trade-offs involved with second-best policies for replacing farm commodity subsidies with tree planting subsidies.The research reported in this paper was partially funded by the United States Environmental Protection Agency under contract number 68W90077. It does not reflect the official position of that agency. Mention of trade names does not constitute endorsement.     

Take a risk: Preferring prevention over control of biological invaders

Scientists have argued that invasive species can be managed most cost effectively with greater investments in prevention. Further, under ideas like the precautionary principle it is reasonable to expect that a cautious manager would use more prevention relative to control because it keeps more invaders out. Yet, this is not typically done. In many cases, private and public resources are invested primarily to control existing invaders rather than to prevent new invasions. Managers frequently wait until after invaders have arrived and then scramble to limit the damages. We believe these paradoxical decisions can be understood by recognizing the link between typical human preferences for risk bearing and the technology of risk reduction. We demonstrate quantitatively how managers perceived to be cautious or averse to risk tend to shy away from prevention relative to control. This counterintuitive result arises because control is a safer choice than prevention because its productivity is relatively less risky: it works to remove existing invaders from the system. In contrast, the productivity of prevention is more uncertain because prevention only reduces the chance of invasion, it does not eliminate it, and invasion may not occur even in the absence of prevention. Managers' averse to risk will inherently avoid as much uncertainty as possible, whether the source of uncertainty regards ecological outcomes or economic productivity. Implications for environmental decision making are clear. In invasive species management, if managers act as though they are risk averse, their caution can backfire when it leads to more control rather than prevention. The social consequences of this choice are a greater probability of future invasions and lower social welfare. Our results suggest that social welfare is highest when managers were willing to “take a risk” with prevention.     

Measurement and communication of greenhouse gas emissions from U.S. food consumption via carbon calculators

Food consumption may account for upwards of 15% of U.S. per capita greenhouse gas emissions. Online carbon calculators can help consumers prioritize among dietary behaviors to minimize personal “carbon footprints,” leveraging against emissions-intensive industry practices. We reviewed the fitness of selected carbon calculators for measuring and communicating indirect GHG emissions from food consumption. Calculators were evaluated based on the scope of user behaviors accounted for, data sources, transparency of methods, consistency with prior data and effectiveness of communication. We found food consumption was under-represented (25%) among general environmental impact calculators (n = 83). We identified eight carbon calculators that accounted for food consumption and included U.S. users among the target audience. Among these, meat and dairy consumption was appropriately highlighted as the primary diet-related contributor to emissions. Opportunities exist to improve upon these tools, including: expanding the scope of behaviors included under calculations; improving communication, in part by emphasizing the ecological and public health co-benefits of less emissions-intensive diets; and adopting more robust, transparent methodologies, particularly where calculators produce questionable emissions estimates. Further, all calculators could benefit from more comprehensive data on the U.S. food system. These advancements may better equip these tools for effectively guiding audiences toward ecologically responsible dietary choices.     

The opportunity cost of land use and the global potential for greenhouse gas mitigation in agriculture and forestry

This paper analyses the role of global land management alternatives in determining potential greenhouse gas mitigation by land-based activities in agriculture and forestry. Land-based activities are responsible for over a third of global greenhouse gas emissions, yet the economics of land-use decisions have not been explicitly modeled in global mitigation studies. In this paper, we develop a new, general equilibrium framework which effectively captures the opportunity costs of land-use decisions in agriculture and forestry, thereby allowing us to analyse competition for heterogeneous land types across and within sectors, as well as input substitution between land and other factors of production. When land-using sectors are confronted with a tax on greenhouse gas emissions, we find significant changes in the global pattern of comparative advantage across sectors, regions, and land types. Globally, we find that forest carbon sequestration is the dominant strategy for GHG emissions mitigation, while agricultural-related mitigation comes predominantly from reduced methane emissions in the ruminant livestock sector, followed by fertilizer and methane emissions from paddy rice. Regionally, agricultural mitigation is a larger share of total land-use emissions abatement in the USA and China, compared to the rest of the world, and, within agriculture, disproportionately from reductions in fertilizer-related emissions. The results also show how analyses that only consider regional mitigation, may bias mitigation potential by ignoring global market interactions. For example, USA-specific analyses likely over-estimate the potential for abatement in agriculture. Finally, we note that this general equilibrium framework provides the research community with a practical methodology for explicit modeling of global land competition and land-based mitigation in comprehensive assessments of greenhouse gas mitigation options.     

A methodology to estimate impacts of domestic policies on deforestation: Compensated Successful Efforts for “avoided deforestation” (REDD)

Climate change mitigation would benefit from Reduced Emissions from Deforestation and Degradation (REDD) in developing countries. The REDD mechanism, still in discussion, would be in charge of distilling the right incentives and promoting the right policies for fostering forest conservation. The estimation of reduced emissions induced by the mechanism has been raised as an issue, either for issuing the proper amount of carbon credits or for providing appropriate compensations of foregone revenues and other costs to host countries. This estimation would be based on the gap between observed deforestation and a counterfactual value. Although any prediction of deforestation rates (i.e. business-as-usual scenarios) is challenging, and any negotiated target is subject to obvious political influence, these two ways have been prioritirized so far to determine the counterfactual value. In other words proposals focused on a results-based approach, the relevance of which is questionable because estimations of avoided deforestation are hardly reliable. With this approach, issuance of carbon credits and distribution of financial compensations could threaten respectively environmental integrity of the scheme and equity outcomes. Rather than considering overall deforestation (predicted and observed), we argue that a REDD mechanism would gain from linking distribution of carbon finance to real efforts (opposed to “results”) that developing countries implement for slowing deforestation rates. This would provide strong incentives to design and enforce suitable policies and measures. The methodology we present to measure these efforts (labeled Compensated Successful Efforts) is based on the rationale that overall deforestation is partly due to structural factors, and to domestic policies and measures. This typology differs from others presented in the literature such as proximate/underlying causes, or economic/institutional factors. Using an econometric model, our approach estimates efforts that are (i) independent of structural factors (economic development, population, initial forest area, agricultural export prices), (ii) estimated ex post at the end of the crediting period, and (iii) relative to other countries. In order to illustrate the methodology we apply the model to a panel of 48 countries (Asia, Latin America, Africa) and four periods between 1970 and 2005. We conclude on the feasibility to estimate avoided deforestation using the Compensated Successful Efforts approach. In addition to being conservative from an environmental perspective, this approach tends to guarantee fairness by accounting for dramatic changes during the commitment period. Last, such estimations of avoided deforestation could provide guidance for decisions on further financing of national programs to curb deforestation, as it would help to distinguish between successful and unsuccessful policies.     

The economics of managing carbon via forestry: Assessment of existing studies

The purpose of this paper is to assess the existing studies on the economics of using forests as a means of mitigating atmospheric carbon build-up. This assessment addresses conceptual and empirical issues and provides a basis for a comprehensive and cost efficient forest management strategy. Critical needs and opportunities for future research are identified.     

Economists, value judgments, and climate change: A view from feminist economics

A number of recent discussions about ethical issues in climate change, as engaged in by economists, have focused on the value of the parameter representing the rate of time preference within models of optimal growth. This essay examines many economists' antipathy to serious discussion of ethical matters, and suggests that the avoidance of questions of intergenerational equity is related to another set of value judgments concerning the quality and objectivity of economic practice. Using insights from feminist philosophy of science and research on high reliability organizations, this essay argues that a more ethically transparent, real-world-oriented, and flexible economic practice would lead to more reliable and useful knowledge.     

How Feasible is Carbon Sequestration in Korea? A Study on the Costs of Sequestering Carbon in Forest

In recent years, carbon sequestration has become a more attractive policy in Korea due to the increasing trend of marginal cropland and enhanced public awareness on adverse climate change phenomena. This study aims to calculate the unit costs of carbon sequestration programs through afforestation in Korea and examine the cost-effectiveness of programs. The basis of our simulation is an econometric land use share model, and province level of aggregated panel data are used for model estimation. Four scenarios are considered depending on whether the program includes the harvest and which tree species are planted. The approach of sequestration program is to pay the landowners to convert their lands to forest for a period of time in exchange of fixed annual payment in addition to tree establishment cost. Our results show that the unit cost varies from $122 to $486 per ton of carbon stored depending on the scenarios and payment levels. We found that the carbon sequestration can be a cost-effective mitigation policy in Korea although it is not the least cost option.     

Multiple solutions under quasi-exponential discounting

Infinite horizon dynamic optimization problems with non-exponential time preferences may not only exhibit time inconsistency but may also have multiple solutions with distinct payoffs. We here show that such multiplicity is generic in the sense that it occurs in an open set of such decision problems, even with small state- and action-spaces. Non-exponential discounting allows for an “addictive” equilibrium alongside a “virtuous” equilibrium. We also provide a sufficient condition for uniqueness in infinitely repeated decision problems with general action spaces. Authors thank Philippe Jehiel, Maria Saez-Marti and Bill Sandholm for comments to an earlier version, and the Knut and Alice Wallenberg Research Foundation for financial support.     

Permanence discounting for land-based carbon sequestration

One major concern regarding land-based carbon sequestration involves the issue of permanence. Sequestration may not last forever and may either be released in the future or require expenditures to maintain the practices that keep it sequestered. In this paper, we investigate the differential value of offsets in the face of impermanent characteristics by forming a price discount that equalizes the effective price per ton between a “perfect offset” and one possessing some with impermanent characteristics. We find this discount to be a function of the future needs to replace offsets (in the face of lease expiration quantity or volatilization upon activities such as timber harvest) and the magnitude of any needed maintenance costs. We investigate the magnitude of the discounts under alternative agricultural tillage and forest management cases. In those studies, we find that permanence discounts in the range of 50% are not uncommon. This means that in the market place an impermanent sequestration offset may only receive payments amounting to 50% of the market carbon price. Furthermore, we find that in the face of escalating carbon prices that offsets may prove to be worthless.     

A study of legal attributes of carbon emission rights in carbon trading

Clean Development Mechanism （CDM） has given birth to an international carbon trading market prosperity, which provides developing countries with valuable opportunity to address climate change issues right along with economic development and environmental improvement to achieve sustainable development. However, most studies of CDM focus on economics, and few on its legal problems. CDM involves too many aspects. And the clear legal attribute of trading object is the basis of progress of the transaction and also the start point of legal protection. Therefore, this paper in accordance with the inherent principle of property rights economics, and environmental economics in CDM, only discusses CDM carbon emission right legal interpretation and its attribution. The paper recommends that in order to ensure and promote the carbon emission right trading, carbon emission right should be attributed into the system of real rights to be regulated by Real Right Law. In this way, carbon emission right can gain exclusive power of possession and use, which can achieve a clear right definition of environmental goods in line with Coase＇s theory to protect Chinese profit in carbon trading market and promote the development of the carbon trading market further.     

Respondent uncertainty in a contingent market for carbon offsets

The main objective of this paper is to provide additional empirical evidence of what explains respondent uncertainty in contingent valuation (CV) and how this in turn affects stated willingness to pay (WTP). Air travelers asked to pay a carbon travel tax to offset carbon emissions from flying were asked how likely it is that they will actually pay if the tax is voluntary. When changing the market compliance imperative from a mandatory carbon tax to a voluntary contribution, a third of all air travelers consider it unlikely they will actually pay their stated WTP amount. An ordered probit estimation approach is applied to identify the sources of respondent uncertainty. Besides the bid price, respondent sense of responsibility and belief in the effectiveness of the voluntary carbon market are among the main reasons for the experienced uncertainty.