Accounting for forest fire risks: global insights for climate change mitigation

Fire is an important risk in global forest loss and contributed 20% to 25% of the global anthropogenic greenhouse gas emissions between 1997 and 2016. Forest fire risks will increase with climate change in some locations, but existing estimates of the costs of using forests for climate mitigation do not yet fully account for these risks or how these risks change inter-temporally. To quantify the importance of forest fire risks, we undertook a global study of individual country fire risks, combining economic datasets and global remote sensing data from 2001 to 2020. Our estimates of forest fire risk premia better account for the risk of forest burning that would be additional to the risk-free and break-even price of credits or offsets to promote carbon sequestration and storage in forests. Our results show the following: (1) forest fire risk premia can be much larger than the historical forest area burned; (2) for some countries, forest fire risk premia have a large impact on the relative country-level break-even price of carbon credits or offsets; (3) a large spatial and inter-temporal heterogeneity of forest fires across countries between 2001 and 2020; and (4) the importance of properly incorporating forest fire risk premia into carbon credits/offset programs. As part of our analysis, and to emphasise the possible sub-national scale differences, our results highlight the heterogeneity in fire risk premia across 10 Canadian provinces.