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Carbon Sinks and Reservoirs: The Value of Permanence and Role of Discounting

Pablo Benítez and Gerrit van Kooten

No 2005-10, Working Papers from University of Victoria, Department of Economics, Resource Economics and Policy Analysis Research Group

Abstract: Scientists are enthusiastic about storing carbon in terrestrial sinks and geological reservoirs in order to obviate the need for lifestyle-changing reductions in fossil-fuel use. Estimating relative costs of various options depends on how permanence is assessed and whether physical carbon is discounted. We demonstrate that, in carbon markets, terrestrial sinks credits cannot be traded one-for-one for emission reduction credits and the conversion factor would depend on how long sinks keep CO2 out of the atmosphere as compared with emission reductions and, discounting physical carbon. As a result, the authority could not determine a conversion factor and the market would be required to do so.

Keywords: climate change; carbon offset; carbon sinks; discounting physical carbon (search for similar items in EconPapers)
JEL-codes: O13 Q54 (search for similar items in EconPapers)
Pages: 22 pages
Date: 2005-10
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