IDEAS home Printed from https://ideas.repec.org/p/ags/pugtwp/330185.html
   My bibliography  Save this paper

Endogenous carbon price in New Zealand: A forest-CGE analysis

Author

Listed:
  • Wang, Yue
  • Kim, John
  • Poletti, Stephen
  • Sharp, Basil

Abstract

In 2008 New Zealand implemented an emissions trading scheme (NZ ETS) designed to phase-in all sectors and include all greenhouse gases (GHG). Forestry was the first sector to be included. Agriculture, a significant source of GHG, has yet to be included. After the 2015 annual conference of parties in Paris, the New Zealand government agreed to reduce GHG emissions to 30 per cent below 2005 levels by 2030. In contrast to studies introducing a carbon tax this paper uses a forest-computable general equilibrium (forest-CGE) model to derive an equilibrium carbon permit price. Two scenarios set the context for analysing the impact of the NZ ETS on carbon price, land use change between forestry and agricultural sectors, and on the New Zealand's economy. One scenario is based on domestic forestry being the only source of permits. The other scenario involves government with buying permits on the international market. Private agents cannot buy permits on market in both scenarios. Our results estimate an equilibrium carbon permit price of NZ$24 per tonne carbon dioxide equivalent (CO2e), and show that the ETS, with agriculture included, contributes to a 7 per cent reduction in total NZ’s emissions, approximately one fifth of the 2030 target. Key words: carbon price, land use, CGE, NZ ETS, and forestry.

Suggested Citation

  • Wang, Yue & Kim, John & Poletti, Stephen & Sharp, Basil, 2018. "Endogenous carbon price in New Zealand: A forest-CGE analysis," Conference papers 330185, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    • Handle: RePEc:ags:pugtwp:330185
    as

    Download full text from publisher

    File URL: https://ageconsearch.umn.edu/record/330185/files/8858_Wang.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Kai Tang & Atakelty Hailu & Marit E. Kragt & Chunbo Ma, 2016. "Marginal abatement costs of greenhouse gas emissions: broadacre farming in the Great Southern Region of Western Australia," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 60(3), pages 459-475, July.
    2. Lubowski, Ruben N. & Plantinga, Andrew J. & Stavins, Robert N., 2006. "Land-use change and carbon sinks: Econometric estimation of the carbon sequestration supply function," Journal of Environmental Economics and Management, Elsevier, vol. 51(2), pages 135-152, March.
    3. Anna Strutt & Allan N. Rae, 2011. "Modelling the Impact of Policies to Reduce Environmental Impacts in the New Zealand Dairy Sector," Working Papers in Economics 11/04, University of Waikato.
    4. G. Cornelis van Kooten & Clark S. Binkley & Gregg Delcourt, 1995. "Effect of Carbon Taxes and Subsidies on Optimal Forest Rotation Age and Supply of Carbon Services," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 77(2), pages 365-374.
    5. Adams, Philip D. & Parmenter, Brian R., 2013. "Computable General Equilibrium Modeling of Environmental Issues in Australia," Handbook of Computable General Equilibrium Modeling, in: Peter B. Dixon & Dale Jorgenson (ed.), Handbook of Computable General Equilibrium Modeling, edition 1, volume 1, chapter 0, pages 553-657, Elsevier.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Caparros, Alejandro & Cerda, Emilio & Ovando, P. & Campos, Pablo, 2007. "Carbon Sequestration with Reforestations and Biodiversity-Scenic Values," Climate Change Modelling and Policy Working Papers 9323, Fondazione Eni Enrico Mattei (FEEM).
    2. Renato Rosa & Clara Costa Duarte & Maria A. Cunha-e-Sá, 2009. "The Role of Forests as Carbon Sinks: Land-Use and Carbon Accounting," Working Papers 2009.61, Fondazione Eni Enrico Mattei.
    3. Favero, Alice & Mendelsohn, Robert & Sohngen, Brent, 2016. "Carbon Storage and Bioenergy: Using Forests for Climate Mitigation," MITP: Mitigation, Innovation and Transformation Pathways 232215, Fondazione Eni Enrico Mattei (FEEM).
    4. Latta, Gregory S. & Adams, Darius M. & Bell, Kathleen P. & Kline, Jeffrey D., 2016. "Evaluating land-use and private forest management responses to a potential forest carbon offset sales program in western Oregon (USA)," Forest Policy and Economics, Elsevier, vol. 65(C), pages 1-8.
    5. Alejandro Caparrós & Emilio Cerdá & Paola Ovando & Pablo Campos, 2010. "Carbon Sequestration with Reforestations and Biodiversity-scenic Values," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 45(1), pages 49-72, January.
    6. Alejandro Caparrós & David Zilberman, 2010. "Optimal carbon sequestration path when different biological or physical sequestration," Working Papers 1018, Instituto de Políticas y Bienes Públicos (IPP), CSIC.
    7. Dwivedi, Puneet & Khanna, Madhu & Sharma, Ajay & Susaeta, Andres, 2016. "Efficacy of carbon and bioenergy markets in mitigating carbon emissions on reforested lands: A case study from Southern United States," Forest Policy and Economics, Elsevier, vol. 67(C), pages 1-9.
    8. Susaeta, Andres & Chang, Sun Joseph & Carter, Douglas R. & Lal, Pankaj, 2014. "Economics of carbon sequestration under fluctuating economic environment, forest management and technological changes: An application to forest stands in the southern United States," Journal of Forest Economics, Elsevier, vol. 20(1), pages 47-64.
    9. Gren, Ing-Marie & Zeleke, Abenezer Aklilu, 2016. "Policy design for forest carbon sequestration: A review of the literature," Forest Policy and Economics, Elsevier, vol. 70(C), pages 128-136.
    10. Renan Ulrich Goetz & Natali Hritonenko & Ruben Mur & Àngels Xabadia & Yuri Yatsenko, 2008. "Climate Change and the Cost of Carbon Sequestration: The Case of Forest Management," Working Papers 329, Barcelona School of Economics.
    11. Lewandrowski, Jan & Kim, C.S. & Aillery, Marcel, 2014. "Carbon sequestration through afforestation under uncertainty," Forest Policy and Economics, Elsevier, vol. 38(C), pages 90-96.
    12. Baker, J.S. & Wade, C.M. & Sohngen, B.L. & Ohrel, S. & Fawcett, A.A., 2019. "Potential complementarity between forest carbon sequestration incentives and biomass energy expansion," Energy Policy, Elsevier, vol. 126(C), pages 391-401.
    13. Robert N. Stavins, 1998. "A Methodological Investigation of the Costs of Carbon Sequestration," Journal of Applied Economics, Taylor & Francis Journals, vol. 1(2), pages 231-277, November.
    14. Wise, Russell M. & Cacho, Oscar J., 2008. "Bioeconomic meta-modelling of Indonesian agroforests as carbon sinks," 2008 Conference (52nd), February 5-8, 2008, Canberra, Australia 6772, Australian Agricultural and Resource Economics Society.
    15. Bielsa, Jorge & Cazcarro, Ignacio & Sancho, Yolanda, 2011. "Integration of hydrological and economic approaches to water and land management in Mediterranean climates: an initial case study in agriculture," MPRA Paper 36445, University Library of Munich, Germany.
    16. Sims, Katharine R.E. & Alix-Garcia, Jennifer M., 2017. "Parks versus PES: Evaluating direct and incentive-based land conservation in Mexico," Journal of Environmental Economics and Management, Elsevier, vol. 86(C), pages 8-28.
    17. Jones, Carol Adaire & Nickerson, Cynthia J. & Heisey, Paul W., 2012. "New Uses of Old Tools: An Assessment of Current and Potential Agricultural Greenhouse Gas Mitigation with Sector-based Policies," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 124735, Agricultural and Applied Economics Association.
    18. Monge, Juan J. & Bryant, Henry L. & Gan, Jianbang & Richardson, James W., 2016. "Land use and general equilibrium implications of a forest-based carbon sequestration policy in the United States," Ecological Economics, Elsevier, vol. 127(C), pages 102-120.
    19. G. Cornelis van Kooten & Sabina Lee Shaikh & Pavel Suchánek, 2002. "Mitigating Climate Change by Planting Trees: The Transaction Costs Trap," Land Economics, University of Wisconsin Press, vol. 78(4), pages 559-572.
    20. Rong Li & Brent Sohngen & Xiaohui Tian, 2022. "Efficiency of forest carbon policies at intensive and extensive margins," American Journal of Agricultural Economics, John Wiley & Sons, vol. 104(4), pages 1243-1267, August.

    More about this item

    Keywords

    Demand and Price Analysis;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ags:pugtwp:330185. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: AgEcon Search (email available below). General contact details of provider: https://edirc.repec.org/data/gtpurus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.