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California's regulatory forest carbon market: Viability for northeast landowners

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  • Kerchner, Charles D.
  • Keeton, William S.

Abstract

Carbon markets have the potential to reward landowners for improved forest management and forest conservation. To date, the Over the Counter (OTC) voluntary market represents the greatest opportunity for forest landowners to participate in carbon transactions. However, lack of a consistent carbon price signal and sporadic demand coupled by high transaction costs has prevented widespread participation from family forest landowners. Adoption of a U.S. based cap-and-trade program reduces price risk and may provide incentives for sustainable forest management across large areas. Yet few studies have examined the supply side of carbon offsets and factors affecting project financial viability. To address this gap, we assessed how (1) property characteristics (i.e. stocking level, forest type, size etc.); (2) silvicultural treatments; and (3) protocol and legislative requirements affect the financial viability of compliance forest offset projects, focusing on California's Air Resource Board (ARB) program due to its significance as the world's second largest carbon market. We used forest inventory data from 25 properties in the northeastern United States to examine the viability of the sites as ARB offset projects. We utilized the U.S. Forest Service Forest Vegetation Simulator for our growth and yield simulations. To examine the factors that influence project viability, we used a classification and regression tree analysis performed in S-Plus software. Results indicate C stocking and property size are the most important property characteristics driving return on investment. However, protocol requirements and legislative assumptions impacting long-term monitoring costs are also important factors. While reduced price risk in a compliance carbon market has the potential to improve forest management in North America; high initial project development costs, long-term monitoring obligations, and legislative uncertainty are significant barriers that will limit family forest landowner market participation. The model developed here can be used by U.S. landowners to assess the financial viability of their property as a compliance offset project and can be utilized by policymakers to develop cost-effective climate change policy.

Suggested Citation

  • Kerchner, Charles D. & Keeton, William S., 2015. "California's regulatory forest carbon market: Viability for northeast landowners," Forest Policy and Economics, Elsevier, vol. 50(C), pages 70-81.
    • Handle: RePEc:eee:forpol:v:50:y:2015:i:c:p:70-81
    DOI: 10.1016/j.forpol.2014.09.005
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    Cited by:

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    4. Alisa E White & David A Lutz & Richard B Howarth & José R Soto, 2018. "Small-scale forestry and carbon offset markets: An empirical study of Vermont Current Use forest landowner willingness to accept carbon credit programs," PLOS ONE, Public Library of Science, vol. 13(8), pages 1-24, August.
    5. Alexander Teytelboym, 2019. "Natural capital market design," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 35(1), pages 138-161.
    6. Nahuel Bautista & Bruno D. V. Marino & J. William Munger, 2021. "Science to Commerce: A Commercial-Scale Protocol for Carbon Trading Applied to a 28-Year Record of Forest Carbon Monitoring at the Harvard Forest," Land, MDPI, vol. 10(2), pages 1-22, February.
    7. Khanal, Puskar N. & Grebner, Donald L. & Munn, Ian A. & Grado, Stephen C. & Grala, Robert K. & Henderson, James E., 2017. "Evaluating non-industrial private forest landowner willingness to manage for forest carbon sequestration in the southern United States," Forest Policy and Economics, Elsevier, vol. 75(C), pages 112-119.
    8. Shuai Chen & Jiameng Yang, 2023. "Environmental Pollution Liability Insurance Pricing and the Solvency of Insurance Companies in China: Based on the Black–Scholes Model," IJERPH, MDPI, vol. 20(2), pages 1-21, January.
    9. Bruno D. V. Marino & Nahuel Bautista & Brandt Rousseaux, 2021. "Howland Forest, ME, USA: Multi-Gas Flux (CO 2 , CH 4 , N 2 O) Social Cost Product Underscores Limited Carbon Proxies," Land, MDPI, vol. 10(4), pages 1-17, April.
    10. Graves, Rose A. & Nielsen-Pincus, Max & Haugo, Ryan D. & Holz, Andrés, 2022. "Forest carbon incentive programs for non-industrial private forests in Oregon (USA): Impacts of program design on willingness to enroll and landscape-scale program outcomes," Forest Policy and Economics, Elsevier, vol. 141(C).
    11. Jayasuriya, Maneesha T. & Germain, René H. & Wagner, John E., 2020. "Protecting timberland RMZs through carbon markets: A protocol for riparian carbon offsets," Forest Policy and Economics, Elsevier, vol. 111(C).

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