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Value and Risks of Expiring Carbon Credits from CDM Afforestation and Reforestation

Author

Listed:
  • Dutschke, Michael
  • Schlamadinger, Bernhard
  • Wong, Jenny L.P.
  • Rumberg, Michael

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 a 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

  • Dutschke, Michael & Schlamadinger, Bernhard & Wong, Jenny L.P. & Rumberg, Michael, 2004. "Value and Risks of Expiring Carbon Credits from CDM Afforestation and Reforestation," Discussion Paper Series 26347, Hamburg Institute of International Economics.
    • Handle: RePEc:ags:hwwadp:26347
    DOI: 10.22004/ag.econ.26347
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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," HWWA Discussion Papers 227, Hamburg Institute of International Economics (HWWA).
    2. Dutschke, Michael & Schlamadinger, Bernhard, 2003. "Practical Issues Concerning Temporary Carbon Credits in the CDM," Discussion Paper Series 26241, Hamburg Institute of International Economics.
    3. Susan Subak, 2003. "Replacing carbon lost from forests: an assessment of insurance, reserves, and expiring credits," Climate Policy, Taylor & Francis Journals, vol. 3(2), pages 107-122, June.
    4. Wong, Jenny L.P. & Dutschke, Michael, 2003. "Can Permanence Be Insured? Consideration of Some Technical and Practical Issues of Insuring Carbon Credits from Afforestation and Reforestation," Discussion Paper Series 26270, Hamburg Institute of International Economics.
    5. Wong-Leung, Jenny P. & Dutschke, Michael, 2003. "Can Permanence be Insured? Consideration of some Technical and Practical Issues of Insuring Carbon Credits from Afforestation and Reforestation," HWWA Discussion Papers 235, Hamburg Institute of International Economics (HWWA).
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    Citations

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    Cited by:

    1. Bode, Sven & Jung, Martina, 2004. "On the Integration of Carbon Capture and Storage into the International Climate Regime," Discussion Paper Series 26279, Hamburg Institute of International Economics.
    2. Chisholm, Ryan A., 2010. "Trade-offs between ecosystem services: Water and carbon in a biodiversity hotspot," Ecological Economics, Elsevier, vol. 69(10), pages 1973-1987, August.
    3. Bode, Sven & Jung, Martina, 2004. "On the Integration of Carbon Capture and Storage into the International Climate Regime," HWWA Discussion Papers 303, Hamburg Institute of International Economics (HWWA).
    4. Sven Bode & Martina Jung, 2006. "Carbon dioxide capture and storage—liability for non-permanence under the UNFCCC," International Environmental Agreements: Politics, Law and Economics, Springer, vol. 6(2), pages 173-186, June.
    5. Arcusa, Stephanie & Hagood, Emily, 2023. "Definitions and mechanisms for managing durability and reversals in standards and procurers of carbon dioxide removal," OSF Preprints 6bth5, Center for Open Science.
    6. Emma Paulsson, 2009. "A review of the CDM literature: from fine-tuning to critical scrutiny?," International Environmental Agreements: Politics, Law and Economics, Springer, vol. 9(1), pages 63-80, February.
    7. Delacote, Philippe & Palmer, Charles & Bakkegaard, Riyong Kim & Thorsen, Bo Jellesmark, 2014. "Unveiling information on opportunity costs in REDD: Who obtains the surplus when policy objectives differ?," Resource and Energy Economics, Elsevier, vol. 36(2), pages 508-527.
    8. Pajot, Guillaume, 8. "Carbon credits and the forest sector," Scandinavian Forest Economics: Proceedings of the Biennial Meeting of the Scandinavian Society of Forest Economics, Scandinavian Society of Forest Economics, issue 41, May.

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