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Carbon Leakage with Forestation Policies

Harry de Gorter (), Dusan Drabik () and David Just

No 103797, 2011 Annual Meeting, July 24-26, 2011, Pittsburgh, Pennsylvania from Agricultural and Applied Economics Association

Abstract: This paper analyzes carbon leakage due to reduced emissions from deforestation (RED). We find that leakage with RED is good because the policy induces afforestation that contributes to a further carbon sequestration. By ignoring the domestic component of carbon leakage, the literature can either overestimate or underestimate leakage, depending on the magnitudes of the numerator and the denominator of the leakage formulas. Unlike the literature, we include the land and agricultural markets in the analysis of carbon leakage with forestation policies. In this model, carbon leakage depends on: (1) supply and demand elasticities of timber production and consumption, respectively in the country introducing a RED policy (Home country) and in the rest of the world; (2) Home country’s production and consumption share in the world timber production and consumption, respectively; (3) prices of land and crop products in the Home country and the rest of the world; (4) initial allocation of land between forestry and agriculture; (5) share of total forest area set aside under RED; and (6) relative carbon sequestration potential of the forest planted on an afforested land and of the forest withdrawn from timber harvest. These potentials depend heavily on the forest species as well as on timing of the policy, and on the discount rate and time path of increasing carbon prices.

Keywords: Agricultural and Food Policy; Environmental Economics and Policy; Land Economics/Use (search for similar items in EconPapers)
Pages: 22
Date: 2011
New Economics Papers: this item is included in nep-agr and nep-env
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Persistent link: https://EconPapers.repec.org/RePEc:ags:aaea11:103797

DOI: 10.22004/ag.econ.103797

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