Uncertainty Discounting for Land-Based Carbon Sequestration

Man-Keun Kim and Bruce McCarl

Journal of Agricultural and Applied Economics, 2009, vol. 41, issue 01, 11

Abstract: The effect of stochastic factors on soil carbon makes the quantity of carbon generated under a sequestration project uncertain. Hence, the quantity of sequestered carbon may need to be discounted to avoid liability from shortfalls. We present a potentially applicable uncertainty discount and discuss difficulties that might arise in empirical use. We insist that the variance in historical crop yields across geographical areas is used to derive a proxy variance for forming an uncertainty discount for carbon projects. Application of our approach suggests that project level uncertainty discounts would be 15–20% for the East Texas region.

Keywords: Agribusiness; Land Economics/Use; Research and Development/Tech Change/Emerging Technologies (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (14)

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Journal Article: Uncertainty Discounting for Land-Based Carbon Sequestration (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:joaaec:48754

DOI: 10.22004/ag.econ.48754

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