The Economics of Forest Carbon Offsets

Posted: 11 Oct 2016

See all articles by G. Cornelis van Kooten

G. Cornelis van Kooten

University of Victoria - Economics

Craig Johnston

University of Wisconsin - Madison - Department of Forest and Wildlife Ecology

Date Written: October 2016

Abstract

Annually, nearly 500 gigatonnes of CO are exchanged between terrestrial ecosystems and the atmosphere, and this exchange is clearly affected by human activities related to the Earth's forests. Governments are therefore willing to draft legislation incentivizing forest activities that sequester carbon to combat climate change. In this review, we examine issues related to the creation of carbon offset credits through forest conservation, burning of wood biomass in lieu of fossil fuels, and intensive commercial management that accounts for all carbon fluxes, including postharvest. In doing so, we study the costs of monitoring, measuring, and contracting; the principal-agent problem; and questions related to life cycle analyses of CO. We can only conclude that greater care is likely needed in the future to identify carbon offsets from forestry activities if these are to be traded in emissions markets.

Suggested Citation

van Kooten, G. Cornelis and Johnston, Craig, The Economics of Forest Carbon Offsets (October 2016). Annual Review of Resource Economics, Vol. 8, Issue 1, pp. 227-246, 2016. Available at SSRN: https://ssrn.com/abstract=2850944 or http://dx.doi.org/10.1146/annurev-resource-100815-095548

G. Cornelis Van Kooten (Contact Author)

University of Victoria - Economics ( email )

Victoria V8W Y2Y, BC
Canada

Craig Johnston

University of Wisconsin - Madison - Department of Forest and Wildlife Ecology ( email )

1630 Linden Drive
Madison, WI 53706
United States

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