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The Economics of Forest Carbon Offsets

Author

Listed:
  • G. Cornelis van Kooten

    (Department of Economics, University of Victoria, Victoria, British Columbia, V8W 2Y2 Canada)

  • Craig M.T. Johnston

    (Department of Forest and Wildlife Ecology, University of Wisconsin, Madison, Wisconsin 53706)

Abstract

Annually, nearly 500 gigatonnes of CO2 are exchanged between terrestrial ecosystems and the atmosphere, and this exchange is clearly affected by human activities related to the Earth's forests. Governments are therefore willing to draft legislation incentivizing forest activities that sequester carbon to combat climate change. In this review, we examine issues related to the creation of carbon offset credits through forest conservation, burning of wood biomass in lieu of fossil fuels, and intensive commercial management that accounts for all carbon fluxes, including postharvest. In doing so, we study the costs of monitoring, measuring, and contracting; the principal-agent problem; and questions related to life cycle analyses of CO2. We can only conclude that greater care is likely needed in the future to identify carbon offsets from forestry activities if these are to be traded in emissions markets.

Suggested Citation

  • G. Cornelis van Kooten & Craig M.T. Johnston, 2016. "The Economics of Forest Carbon Offsets," Annual Review of Resource Economics, Annual Reviews, vol. 8(1), pages 227-246, October.
    • Handle: RePEc:anr:reseco:v:8:y:2016:p:227-246
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    File URL: http://www.annualreviews.org/doi/10.1146/annurev-resource-100815-095548
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    Citations

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    Cited by:

    1. Daigneault, Adam & Johnston, Craig & Korosuo, Anu & Baker, Justin S. & Forsell, Nicklas & Prestemon, Jeffrey P. & Abt, Robert C., 2019. "Developing Detailed Shared Socioeconomic Pathway (SSP) Narratives for the Global Forest Sector," Journal of Forest Economics, now publishers, vol. 34(1-2), pages 7-45, August.
    2. Carmine Guerriero & Giuseppe Pignataro, 2024. "Endogenous property rights and the nature of the firm," Economica, London School of Economics and Political Science, vol. 91(362), pages 383-413, April.
    3. Petri P. Kärenlampi, 2021. "Capital Return Rate and Carbon Storage on Forest Estates of Three Boreal Tree Species," Sustainability, MDPI, vol. 13(12), pages 1-19, June.
    4. Johnston, Craig M.T. & Withey, Patrick, 2017. "Managing Forests for Carbon and Timber: A Markov Decision Model of Uneven-aged Forest Management With Risk," Ecological Economics, Elsevier, vol. 138(C), pages 31-39.
    5. van Kooten, G. Cornelis, 2020. "How effective are forests in mitigating climate change?," Forest Policy and Economics, Elsevier, vol. 120(C).
    6. G. Cornelis van Kooten & Mark E. Eiswerth & Jonathon Izett & Alyssa R. Russell, 2021. "Climate Change and the Social Cost of Carbon: DICE Explained and Expanded," Working Papers 2021-01, University of Victoria, Department of Economics, Resource Economics and Policy Analysis Research Group.
    7. Haratyk, Geoffrey, 2017. "Early nuclear retirements in deregulated U.S. markets: Causes, implications and policy options," Energy Policy, Elsevier, vol. 110(C), pages 150-166.
    8. G. Cornelis van Kooten, 2020. "Climate Change and Agriculture," Working Papers 2020-01, University of Victoria, Department of Economics, Resource Economics and Policy Analysis Research Group.
    9. Bello, Carolina & Culot, Laurence & Ruiz Agudelo, Cesar Augusto & Galetti, Mauro, 2021. "Valuing the economic impacts of seed dispersal loss on voluntary carbon markets," Ecosystem Services, Elsevier, vol. 52(C).
    10. Lyndré Nel & Ana Flávia Boeni & Viola Judit Prohászka & Alfréd Szilágyi & Eszter Tormáné Kovács & László Pásztor & Csaba Centeri, 2022. "InVEST Soil Carbon Stock Modelling of Agricultural Landscapes as an Ecosystem Service Indicator," Sustainability, MDPI, vol. 14(16), pages 1-19, August.
    11. Miguel Riviere & Sylvain Caurla & Philippe Delacote, 2020. "Evolving Integrated Models From Narrower Economic Tools : the Example of Forest Sector Models," Post-Print hal-02512330, HAL.
    12. Petri P. Kärenlampi, 2021. "Diversity of Carbon Storage Economics in Fertile Boreal Spruce ( Picea Abies ) Estates," Sustainability, MDPI, vol. 13(2), pages 1-18, January.

    More about this item

    Keywords

    climate change policy; afforestation; reforestation; deforestation; forest conservation; bioenergy; wood product substitution;
    All these keywords.

    JEL classification:

    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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