Quantifying additionality thresholds for forest carbon offsets in Mississippi pine pulpwood markets

David Rossi, Justin S. Baker and Robert C. Abt

Forest Policy and Economics, 2023, vol. 156, issue C

Abstract: Concerns over the additionality of carbon sequestration achieved through voluntary carbon market have threatened offset market credibility and stability. There is an urgent need to examine additionality in a dynamic market context. To this end, our analysis focuses on the extent to which deferred harvests of pine roundwood as an offset source can achieve additionality under changing roundwood prices across a large wood-producing region. Specifically, we consider the potential for offset market activity itself and for unexpected demand shocks to adjust carbon baselines as they each have an impact on the relative prices observed for industrial roundwood. We use a bioeconomic model of the roundwood market to simulate harvest activity and estimate the economically feasible levels of carbon storage across four wood-producing basins in Mississippi. We then present estimates of the expected changes in carbon storage under a given change in timber prices and demonstrate how this information can be used to approximate the optimal reaction curve for an offset broker, dealer, or verification program manager seeking to ensure additionality with credits they exchange. The optimal reaction curve consists of a response to a change in the roundwood price state by either approving supplementary harvest deferral contracts or by restricting the supply of new contracts, depending on the direction of the observed price change. Alternatively, the results suggest that contracts could be structured to facilitate payment conditional on realized timber price outcomes, rather than solely on evidence of a delayed harvest.

Keywords: Timber markets; Southern yellow pine; Voluntary carbon offsets; Aboveground carbon storage; Carbon sequestration (search for similar items in EconPapers)
JEL-codes: L73 Q23 Q54 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:forpol:v:156:y:2023:i:c:s1389934123001545

DOI: 10.1016/j.forpol.2023.103059

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