CARBON CREDITS COMPETE POORLY WITH AGRICULTURAL COMMODITIES IN AN OPTIMIZED MODEL OF LAND USE IN NORTHERN CALIFORNIA

Erik Nelson and Virginia Matzek
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Virginia Matzek: #x2021;Department of Environmental Studies and Sciences, Santa Clara University, California, USA

Climate Change Economics (CCE), 2016, vol. 07, issue 04, 1-24

Abstract: Nascent US carbon markets reward farmers for reforesting agricultural land, with consequent ecological co-benefits. We use a dynamic optimization model to determine the likelihood of an orchard farmer in northern California converting to forest under 90 plausible future scenarios. We find reforestation to be a highly unlikely outcome, occurring only 4.0% of the time under current economic, biophysical, and policy conditions, and only 18.5% of the time under a set of assumptions that make carbon offset production more economically viable. Conversion to “carbon farming” was more sensitive to changes in orchard production costs and yields than to carbon offset policy changes. In the absence of other changes, the price of a carbon offset would have to increase nearly a hundredfold to make reforestation compete economically with orchard agriculture. Our results partly explain low participation in the reforestation sector of US carbon markets. We conclude that farmers will not be interested in forest conversion unless their land has limited agricultural potential or they are motivated by social, rather than economic, rewards.

Keywords: Carbon credits; reforestation; orchards; dynamic optimization; AB32; CARB (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (1)

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DOI: 10.1142/S2010007816500093

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