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Abatement and Transaction Costs of Carbon-Sink Projects Involving Smallholders

Author

Listed:
  • Oscar Cacho

    (University of New England)

  • Leslie Lipper

    (Food and Agriculture Organization)

Abstract

Agroforestry projects have the potential to help mitigate global warming by acting as sinks for greenhouse gasses. However, participation in carbon-sink projects may be constrained by high costs. This problem may be particularly severe for projects involving smallholders in developing countries. Of particular concern are the transaction costs incurred in developing projects, measuring, certifying and selling the carbon-sequestration services generated by such projects. This paper addresses these issues by analysing the implications of transaction and abatement costs in carbon-sequestration projects. A model of project participation is developed, which accounts for the conditions under which both buyers and sellers would be willing to engage in a carbon transaction that involves a long-term commitment. The model is used to identify critical project-design variables (minimum project size, farm price of carbon, minimum area of participating farms). A project feasibility frontier (PFF) is derived, which shows the minimum project size that is feasible for any given market price of carbon. The PFF is used to analyse how the transaction costs imposed by the Clean Development Mechanism of the Kyoto Protocol affect project feasibility.

Suggested Citation

  • Oscar Cacho & Leslie Lipper, 2007. "Abatement and Transaction Costs of Carbon-Sink Projects Involving Smallholders," Working Papers 2007.27, Fondazione Eni Enrico Mattei.
    • Handle: RePEc:fem:femwpa:2007.27
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    References listed on IDEAS

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    Cited by:

    1. Donaghy, Peter & Rolfe, John & Gowen, Rebecca & Bray, Steven & Madonna, Hoffman, 2010. "Assessing the economic impact of an emissions trading scheme on agroforestry in Australia’s northern grazing systems," 2010 Conference (54th), February 10-12, 2010, Adelaide, Australia 59069, Australian Agricultural and Resource Economics Society.
    2. Wells, Geoff & Fisher, Janet A. & Porras, Ina & Staddon, Sam & Ryan, Casey, 2017. "Rethinking Monitoring in Smallholder Carbon Payments for Ecosystem Service Schemes: Devolve Monitoring, Understand Accuracy and Identify Co-benefits," Ecological Economics, Elsevier, vol. 139(C), pages 115-127.
    3. Emily Anderson & Hisham Zerriffi, 2012. "Seeing the trees for the carbon: agroforestry for development and carbon mitigation," Climatic Change, Springer, vol. 115(3), pages 741-757, December.
    4. Wiskerke, W.T. & Dornburg, V. & Rubanza, C.D.K. & Malimbwi, R.E. & Faaij, A.P.C., 2010. "Cost/benefit analysis of biomass energy supply options for rural smallholders in the semi-arid eastern part of Shinyanga Region in Tanzania," Renewable and Sustainable Energy Reviews, Elsevier, vol. 14(1), pages 148-165, January.
    5. Larson, Donald F. & Dinar, Ariel & Blankespoor, Brian, 2012. "Aligning climate change mitigation and agricultural policies in Eastern Europe and Central Asia," Policy Research Working Paper Series 6080, The World Bank.
    6. Lee, Jean, 2017. "Farmer participation in a climate-smart future: Evidence from the Kenya Agricultural Carbon Project," Land Use Policy, Elsevier, vol. 68(C), pages 72-79.
    7. Torres, Arturo Balderas & Marchant, Rob & Lovett, Jon C. & Smart, James C.R. & Tipper, Richard, 2010. "Analysis of the carbon sequestration costs of afforestation and reforestation agroforestry practices and the use of cost curves to evaluate their potential for implementation of climate change mitigat," Ecological Economics, Elsevier, vol. 69(3), pages 469-477, January.
    8. Ross Kingwell, 2021. "Agriculture’s carbon‐neutral challenge: The case of Western Australia," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 65(3), pages 566-595, July.
    9. Kingwell, Ross S. & Harris-Adams, Keely, 2009. "An analysis of the spatial and temporal patterns of greenhouse gas emissions by agriculture in Western Australia and the opportunities for agroforestry offsets," 2009 Conference (53rd), February 11-13, 2009, Cairns, Australia 48161, Australian Agricultural and Resource Economics Society.
    10. Larson, Donald F. & Dinar, Ariel & Frisbie, J. Aapris, 2011. "Agriculture and the clean development mechanism," Policy Research Working Paper Series 5621, The World Bank.
    11. Moss, Jonathan & Cacho, Oscar J., 2014. "Farm-scale analysis of the potential uptake of carbon offset activities," 2014 Conference, August 28-29, 2014, Nelson, New Zealand 187402, New Zealand Agricultural and Resource Economics Society.
    12. Cacho, Oscar J., 2008. "Carbon markets, transaction costs and bioenergy," 2008 Conference (52nd), February 5-8, 2008, Canberra, Australia 6007, Australian Agricultural and Resource Economics Society.
    13. Timothy Pearson & Sandra Brown & Brent Sohngen & Jennifer Henman & Sara Ohrel, 2014. "Transaction costs for carbon sequestration projects in the tropical forest sector," Mitigation and Adaptation Strategies for Global Change, Springer, vol. 19(8), pages 1209-1222, December.
    14. Cacho, Oscar J. & Lipper, Leslie & Moss, Jonathan, 2013. "Transaction costs of carbon offset projects: A comparative study," Ecological Economics, Elsevier, vol. 88(C), pages 232-243.

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    More about this item

    Keywords

    Agroforestry; Climate Policy; Carbon Sequestration Costs;
    All these keywords.

    JEL classification:

    • Q23 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Forestry
    • Q57 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Ecological Economics
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products

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