Biological Carbon Sinks: Transaction Costs and Governance

Gerrit Cornelis van Kooten

No 2008-12, Working Papers from University of Victoria, Department of Economics, Resource Economics and Policy Analysis Research Group

Abstract: Activities that remove CO2 from the atmosphere and store it in forest and agricultural ecosystems can generate CO2-offset credits that can thus substitute for CO2 emissions reduction. Are biological CO2-uptake activities competitive with CO2 offsets from reduced fossil fuel use? In this paper, it is argued that transaction costs impose a formidable obstacle to direct substitution of carbon uptake offsets for emissions reduction in trading schemes, and that separate caps should be set for emissions reduction and sink-related activities. While a tax/subsidy scheme is preferred to emissions trading for incorporating biologically-generated CO2 offsets, contracts that focus on the activity and not the amount of carbon sequestered are most likely to lead to the lowest transaction costs.

Keywords: carbon sequestration; transaction costs; climate change (search for similar items in EconPapers)
JEL-codes: Q54 Q23 Q42 H23 D23 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-agr, nep-ene and nep-env
Date: 2008-11

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http://web.uvic.ca/~kooten/REPA/WorkingPaper2008-12.pdf Final version, 2008 (application/pdf)

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Persistent link: http://EconPapers.repec.org/RePEc:rep:wpaper:2008-12

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