Abatement and Transaction Costs of Carbon-Sink Projects Involving Smallholders

29 Pages Posted: 28 Mar 2007

See all articles by Oscar Cacho

Oscar Cacho

University of New England (Australia) - Graduate School of Agricultural and Resource Economics

Leslie Lipper

Food and Agriculture Organization of the UN

Date Written: March 2007

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.

Keywords: Agroforestry, Climate Policy, Carbon Sequestration Costs

JEL Classification: Q23, Q57, O1, O13

Suggested Citation

Cacho, Oscar and Lipper, Leslie, Abatement and Transaction Costs of Carbon-Sink Projects Involving Smallholders (March 2007). FEEM Working Paper No. 27.2007, Available at SSRN: https://ssrn.com/abstract=976400 or http://dx.doi.org/10.2139/ssrn.976400

Oscar Cacho (Contact Author)

University of New England (Australia) - Graduate School of Agricultural and Resource Economics ( email )

Australia

Leslie Lipper

Food and Agriculture Organization of the UN ( email )

Viale delle Terme di Caracalla
Rome, Lazio 00100
Italy

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
193
Abstract Views
1,765
Rank
295,972
PlumX Metrics