Equating Permanence of Emission Reductions and Carbon Sequestration: Scientific and Economic Foundations for Policy Options

Abstract

Terrestrial (biological) carbon sequestration is the process by which carbon dioxide (CO2) is removed from the atmosphere through photosynthesis and stored in terrestrial stocks of biomass or soil organic carbon. A ton of carbon (or CO2 equivalent) sequestered in terrestrial systems can be used as an offset credit against emissions from sources such as power plants, factories, or automobiles. However, carbon stored in terrestrial carbon pools is particularly susceptible to re-release (reversal), raising the so-called permanence issue. When a reversal occurs, crediting adjustments are necessary to restore the integrity of the offset mechanism. This paper explores the permanence issue from both an atmospheric and an economic perspective, showing that adjustments for reversals can depend on a variety of factors, including the assumed decay rate of the initial emissions pulse, the timing of any stored carbon release, a policy-determined “equivalency period” reflecting the relevant policy time horizon, the time-dependent economic value of carbon mitigation units, and the relevant discount rate for comparing economic flows over time.