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Value and risks of expiring carbon credits from afforestation and reforestation projects under the CDM

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  • Michael Dutschke
  • Bernhard Schlamadinger
  • Jenny L.P. Wong
  • Michael Rumberg

Abstract

The Milan conference of the UN Framework Convention on Climate Change has established two types of emission offsets under the Clean Development Mechanism (CDM), valid for afforestation and reforestation activities. In order to account for the non-permanent nature of carbon storage in forests, these credits expire after predefined periods, after which the buyer needs to replace them. The present article assesses their market value in relation to 'permanent' credits, identifies their specific risks, and proposes how to mitigate and manage them. It analyzes strengths and weaknesses of expiring credits for sellers and buyers. Taking the example of the EU emissions trading system, the authors discuss how expiring credits could reach fungibility with permanent emission allowances on domestic markets.

Suggested Citation

  • Michael Dutschke & Bernhard Schlamadinger & Jenny L.P. Wong & Michael Rumberg, 2005. "Value and risks of expiring carbon credits from afforestation and reforestation projects under the CDM," Climate Policy, Taylor & Francis Journals, vol. 5(1), pages 109-125, January.
    • Handle: RePEc:taf:tcpoxx:v:5:y:2005:i:1:p:109-125
    DOI: 10.1080/14693062.2005.9685544
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    References listed on IDEAS

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    1. Dutschke, Michael & Schlamadinger, Bernhard, 2003. "Practical Issues Concerning Temporary Carbon Credits in the CDM," Discussion Paper Series 26241, Hamburg Institute of International Economics.
    2. Dutschke, Michael & Schlamadinger, Bernhard, 2003. "Practical Issues Concerning Temporary Carbon Credits in the CDM," HWWA Discussion Papers 227, Hamburg Institute of International Economics (HWWA).
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    Citations

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    Cited by:

    1. Trotter, Ian Michael & da Cunha, Dênis Antônio & Féres, José Gustavo, 2015. "The relationships between CDM project characteristics and CER market prices," Ecological Economics, Elsevier, vol. 119(C), pages 158-167.
    2. Gilbert Ahamer, 2022. "Why Biomass Fuels Are Principally Not Carbon Neutral," Energies, MDPI, vol. 15(24), pages 1-39, December.
    3. Gregmar Galinato & Shinsuke Uchida, 2010. "Evaluating Temporary Certified Emission Reductions in Reforestation and Afforestation Programs," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 46(1), pages 111-133, May.
    4. Galinato, Gregmar I. & Olanie, Aaron & Uchida, Shinsuke & Yoder, Jonathan K., 2011. "Long-term versus temporary certified emission reductions in forest carbon sequestration programs," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 55(4), pages 1-23.
    5. Benjamin K. Sovacool & Chad M. Baum & Sean Low, 2022. "Determining our climate policy future: expert opinions about negative emissions and solar radiation management pathways," Mitigation and Adaptation Strategies for Global Change, Springer, vol. 27(8), pages 1-50, December.
    6. Michael Dutschke, 2007. "CDM Forestry and the Ultimate Objective of the Climate Convention," Mitigation and Adaptation Strategies for Global Change, Springer, vol. 12(2), pages 275-302, February.

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