Carbon prices and reforestation in tropical forest

Jose A Scheinkman

No 1223, BIS Working Papers from Bank for International Settlements

Abstract: I discuss recent research joint with J Assunção, L P Hansen and T Munson that shows that reforestation in tropical forests has great potential for carbon capture. This research accounts for the dynamics of carbon accumulation in tropical forests and uses a rich data set from the Brazilian Amazon, which encompasses 60% of the largest tropical forest on earth. Specifically, we document that (a) in a business-as-usual scenario, the Brazilian Amazon would emit 17 Gigatons of CO2e in the next 30 years and (b) with transfers to Brazil of $25 per net ton of CO2e captured, optimal land use would imply substantial reforestation in areas currently used for low-productivity cattle ranching, yielding 15 Gigatons of CO2e capture in 30 years. Transfers of $25/ton compare very favorably with other CCS schemes or with prices in carbon trading markets. The total change in trajectory, 32 Gigatons, is large relative to the carbon budget estimated to avoid 50% odds of exceeding 1.5℃ warming. I discuss structures that would give incentives for Brazil not to abandon carbon-capture in the future. I also briefly summarize work in Araujo et al. (2023) that shows that forest degradation in the Amazon generates substantial negative externalities to other portions of the forest.

Keywords: climate change; carbon emissions; carbon capture; reforestation; tropical forests (search for similar items in EconPapers)
JEL-codes: Q01 Q23 Q54 Q57 (search for similar items in EconPapers)
Date: 2024-10
New Economics Papers: this item is included in nep-env
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