Opportunities for Carbon
Offsets from US and
Global Forests
Brent Sohngen
AED Economics, The Ohio State University
Sohngen.1@osu.edu
University Fellow, Resources For the Future
US Forest Carbon
Mitigation potential
• Range of recent studies…
– Global Timber Model (Sohngen and Mendelsohn, 2007; Sohngen and Sedjo,
2006); Murray et al. (2005); Lewandrowski et al., (2005); Lubowski et al. (2006)
Min
Max
Median
MMTCO2/yr (AEA, 100 yrs 5%)
$15/t CO2
190
800
265
$50/t CO2
543
3,999
882
US Forest Carbon
Costs
Forest Carbon
Land use change
• Forest mitigation could mean fairly
substantial changes in the way we use
land
Sohngen and
Mendelsohn (2007)
Murray et al. (2005)
Million hectares above baseline in 2055
$15/t CO2
19.0
2.0
$50/t CO2
70.0
23.5
US Forest Carbon
Beyond changing land use, there is a large
potential C service from enhancing management
• What Activities?
– Afforestation
– Forest Mgmt.
$15/t CO2
$30/t CO2
• Changing species
$50/t CO2
• Replanting versus natural
regeneration
• Fertilizing
• Thinning?
– Incr. rotation age.
– Marketed products.
$15/t CO2
Sohngen & Mendelsohn
(2007)
Afforest
Mgmt
47%
53%
54%
46%
62%
38%
Murray et al. (2005)
Afforest
Mgmt
38%
62%
$30/t CO2
58%
42%
$50/t CO2
68%
32%
Forest Carbon
Timber price effects
• Large potential distortions in timber markets.
From Global Timber Model (Sohngen and Mendelsohn, 2007; Sohngen and Sedjo, 2006)
Global Forest Carbon
Mitigation potential
Estimates for 2020
At $15/t CO2
MMtCO2/yr
US
271
REDD
3,312
ROW
2,530
From Global Timber Model (Sohngen and Mendelsohn, 2007; Sohngen and Sedjo, 2006)
Global Forest Carbon
Range of REDD costs
Estimates from Murray et al. (2009)
Global Forest Carbon
Regional distribution of REDD
Avg of Kindermann et al., (2008)
Design Issues
• Measuring/Monitoring/Verification
– Beyond Satellites: There is a big risk of relying too
much on satellites!
• Important for the big stuff
• Ensuring that countries meet obligations
• Ex post assessment of policy effectiveness
– Writing, verifying, and enforcing contracts is just as
important, if not more important
• Is carbon storage a real economic activity?
• Little research to date on contracts for carbon storage.
• Quite a lot of research on agricultural contracts/micro-finance
could be adapted.
Design Issues
• Transactions Costs
– Undoubtedly important, but likely overblown…
• Will change over time as technology changes
– New measurement and monitoring technology
• Can design programs to minimize transaction
costs and adopt new technologies.
– CRP: $5/ha/yr transaction cost.
• Markets have an incentive to reduce TC.
Design Issues
• Additionality/Baselines?
– Primarily a property right or payment issue (how much
carbon can I profit from?)
• E.g., can be avoided by “simply” taxing emissions (and
subsidizing growth)
• If society refuses to tax forest emissions, then treated as offsets,
we simply are deciding today how much someone will get credit
for in the future….
– Ultimately requires a negotiation
• Should be informed by models.
• Be prepared to re-negotiate it in the future.
• High stock, low emission regions: Leave them out or pay them
minimal amounts to enter. Renegotiate in the future if “leakage”
actually occurs.
Design Issues
• Leakage?
– Everything we know now indicates that it is an
important issue (15-90%; Murray et al., 2004;
Sohngen and Brown, 2004).
– Principles:
• Hold countries responsible for leakage inside their
boundaries but do not hold countries responsible for leakage
outside their boundaries.
– Do discount payments to a country if satellite measurements
indicate internal leakage,
– Do not set up ad-hoc international leakage discount factors based
on model results.
• Get as many countries involved as possible.
Design Issues
• Permanence?
– Contracts should only pay for carbon that’s
actually there.
• Make rental payments to landowners to align
incentives with carbon stock.
– If C markets are in place, then lack of
performance (e.g., non-permanence) can be
dealt with on the open market.
• E.g., your carbon disappears, you, or someone
who is legally responsible, has to buy credits at the
current price (or they can have their own reserve).
Is it worth it?
Crediting Forestry Reduces Carbon
Prices Substantially (40 – 50%)
Cumulative Carbon Abatement
900
800
800
Energy + Sequestration
600
500
500
GtC
600
400
300
400
300
200
Other abatement
Forestry: NON-OECD
Forestry: OECD
200
100
100
0
20
02
20
12
20
22
20
32
20
42
20
52
20
62
20
72
20
82
20
92
21
02
21
02
20
92
20
82
20
72
20
62
20
52
20
42
20
32
20
22
20
12
0
20
02
Carbon Price ($/t C)
700
Energy Only
700
Adding Forestry
Consumption gain: $3 trillion
Forest Carbon cost:
$1.1 trillion ($55 billion/yr )
Tavoni, Sohngen, and Bosetti (2007)