The land use change time-accounting failure

Marion Dupoux ()
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Marion Dupoux: EconomiX - EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique

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Abstract: Land use change (LUC) is the second largest human-induced source of greenhouse gases. While LUC impacts are mostly immediate, policy makers consider it to be evenly spread over time. In the context of public evaluation of projects, I theoretically show that, as long as the discounting process perfectly offsets the rise of carbon prices, cost-benefit analysis outcomes are not affected. When this condition does not hold, which is particular to the global warming issue, the uniform time-accounting of LUC distorts present values by emphasizing both the discounting process and the increase in the carbon price over time. This induced bias is quantified in a case study of bioethanol in France. Depending on the type of impact and discounting and carbon pricing assumptions, a downward/upward bias between + or - 15% and + or - 30% of the LUC value is found. Two simple decision tools are provided to improve accounting of LUC impacts.

Keywords: cost-benefit analysis; public evaluation of projects; land use change; discounting; relative carbon price; non-constant impacts; bioethanol (search for similar items in EconPapers)
Date: 2016
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