Biological Carbon Sinks: Transaction Costs and Governance
Gerrit van Kooten
No 2008-12, Working Papers from University of Victoria, Department of Economics, Resource Economics and Policy Analysis Research Group
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: carbon sequestration; transaction costs; climate change (search for similar items in EconPapers)
JEL-codes: D23 H23 Q23 Q42 Q54 (search for similar items in EconPapers)
Pages: 20 pages
New Economics Papers: this item is included in nep-agr, nep-ene and nep-env
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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:rep:wpaper:2008-12
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