EFFICIENT CONTRACTS FOR CARBON CREDITS FROM REFORESTATION PROJECTS

Suzi Kerr

Others from University Library of Munich, Germany

Abstract: This paper tackles the complex issue of how buyers and sellers within a domestic carbon credit system designed to include regenerating indigenous forest would optimally design contracts for trades of the new good, “carbon sink credits”. The paper begins by briefly defining the constraints that sink projects must meet. This implicitly shows the freedom we have in designing contracts. In the context of a simple numerical example I discuss the constraints that the market puts on contracts. In particular I consider the interests of the buyers and sellers, and how they can maximise and share gains through contract design. I outline the sources of risk and discuss who has advantages in dealing with these risks. The best contract designs impose the risk on those most able to address or absorb it. I illustrate the potential gains from sink contracts with a range of conditions and contracts.

Keywords: climate; contracts; carbon credits; reforestation; projects (search for similar items in EconPapers)
JEL-codes: Q25 Q28 (search for similar items in EconPapers)
Date: 2004-01-08
New Economics Papers: this item is included in nep-env
Note: Type of Document - pdf; prepared on Word 2000; to print on PC;
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https://econwpa.ub.uni-muenchen.de/econ-wp/othr/papers/0401/0401003.pdf (application/pdf)

Related works:
Working Paper: Efficient Contracts for Carbon Credits from Reforestation Projects (2003)
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Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwpot:0401003

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