Biological Carbon Sinks: Transaction Costs and Governance
Gerrit van Kooten
No 45505, Working Papers from University of Victoria, Resource Economics and Policy
Activities that remove CO2 from the atmosphere and store it in forest and agricultural ecosystems can generate CO2-offset credits that can thus substitute for CO2 emissions reduction. Are biological CO2-uptake activities competitive with CO2 offsets from reduced fossil fuel use? In this paper, it is argued that transaction costs impose a formidable obstacle to direct substitution of carbon uptake offsets for emissions reduction in trading schemes, and that separate caps should be set for emissions reduction and sink-related activities. While a tax/subsidy scheme is preferred to emissions trading for incorporating biologically-generated CO2 offsets, contracts that focus on the activity and not the amount of carbon sequestered are most likely to lead to the lowest transaction costs.
Keywords: Environmental Economics and Policy; Land Economics/Use (search for similar items in EconPapers)
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Working Paper: Biological Carbon Sinks: Transaction Costs and Governance (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:uvicwp:45505
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