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Economic incentives for carbon sequestration

a review of the literature

Zeleke, Abenezer and Gren, Ing-Marie (2014). Economic incentives for carbon sequestration. Uppsala: (NL, NJ) > Dept. of Economics, Sveriges lantbruksuniversitet. Working paper series / Swedish University of Agricultural Sciences, Department of Economics ; 2014:08
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Abstract

The main purpose of this study is to review studies in economics on policies for carbon sequestration. Specific design problems are associated with heterogeneous land holders, additionality and permanence in carbon projects, and the risk of leakage. It was found that a large part of the literature, which started in the late 1980s, has been focused on the calculation of costs for carbon sequestration, mainly in forests, and on calculations of cost savings from its introduction in climate programs. Results from the literature point to cost savings of up to 40%. The small body of literature on transaction costs, mainly attributed to monitoring and verification, indicates that these costs are modest. The literature on policy design is much more scant, and the main part suggests discounting of the carbon sink value to account for the uncertainty. Assessment of equilibrium prices in the many existing voluntary and regulatory carbon sink markets shows a lower price of carbon sink compared with certain abatement of fossil fuels. This can be explained by risk discounting. A few studies suggest contract design for self-enforcement of efficient carbon projects. This has not yet been implemented in carbon sink offsets in practice, the carbon trade of which corresponds to approximately 0.3% of all carbon trade.

Authors/Creators:Zeleke, Abenezer and Gren, Ing-Marie
Title:Economic incentives for carbon sequestration
Subtitle:a review of the literature
Series/Journal:Working paper series / Swedish University of Agricultural Sciences, Department of Economics (1401-4068)
Year of publishing :2014
Number:2014:08
Number of Pages:43
Place of Publication:Uppsala
Publisher:Department of Economics, Swedish University of Agricultural Sciences
ISSN:1401-4068
Language:English
Publication Type:Report
Article category:Other scientific
Full Text Status:Public
Agris subject categories.:X Agricola extesions > X70 Economics and management
Subjects:(A) Swedish standard research categories 2011 > 5 Social Sciences > 502 Economics and Business > Economics
Agrovoc terms:carbon sequestration, economics
Keywords:economic incentives, carbon sequestration, policy design, survey
URN:NBN:urn:nbn:se:slu:epsilon-e-2194
Permanent URL:
http://urn.kb.se/resolve?urn=urn:nbn:se:slu:epsilon-e-2194
ID Code:11622
Faculty:NJ - Fakulteten för naturresurser och jordbruksvetenskap
Department:(NL, NJ) > Dept. of Economics
Deposited By: SLUpub Connector
Deposited On:03 Nov 2014 11:14
Metadata Last Modified:02 Dec 2014 11:09

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