Cost to produce Carbon credits by reducing the harvest level in British Columbia, Canada

Cosmin D. Man, Kevin C. Lyons, John D. Nelson and Gary Q. Bull

Forest Policy and Economics, 2015, vol. 52, issue C, 9-17

Abstract: This paper uses the inventory of three actively managed forest estates located in the Coastal, Central Interior, and Northern Interior forest regions in British Columbia to estimate the cost to produce Carbon credits ($ per Carbon credit) when the harvest is reduced below the baseline level. The financial analysis was conducted over a range of discount rates (0–16%) and the total cost included the opportunity cost due to harvest reduction and the Carbon project cost (the Carbon project initial establishment and validation cost and the ongoing verification cost for two frequencies (1-year and 5-year)). When the opportunity cost was not included, the cost per Carbon credit was similar to previous findings (lower cost per Carbon credit for higher site index (i.e. top height in meters at age 50)). However, when the opportunity cost was included the cost per Carbon credit was higher for higher site indices which corresponded to higher average value per hectare harvested (AVHH) (i.e. timber revenue multiplied by average harvested volume per hectare per year). The reversal of trends is the result of the average timber revenue being higher for higher site indices which resulted in a higher opportunity cost and higher AVHH. The opportunity cost represented 58% to 97% of the cost per Carbon credit. Compared to the 5-year verification, the 1-year verification frequency increased the total cost per Carbon credit by 1% to 22%, with the smallest increase being when the Carbon project cost represented a small percent of the total cost. The estimates for the three forest estates analyzed here represent three points from a larger spectrum, and they identify the cost per Carbon credit over a range of site indices (14.7 to 25.6meters top height at age 50), AVHH (12.2 to 63.7thousand$ha−1year−1), and timber net revenues ($4 to $35m−3). Further research is required to determine if the trends found in this study hold over a more densely populated spectrum.

Keywords: Carbon price; Carbon offsets; Forest management; Discount rate; Verification period; Harvest level (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:forpol:v:52:y:2015:i:c:p:9-17

DOI: 10.1016/j.forpol.2014.12.002

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