Value and Risks of Expiring Carbon Credits from CDM Afforestation and Reforestation

Michael Dutschke, Bernhard Schlamadinger, Jenny P. Wong-Leung and Michael Rumberg

No 290, HWWA Discussion Papers from Hamburg Institute of International Economics (HWWA)

Abstract: The Milan conference of the UN Framework Convention on Climate Change has established two types of emission offsets under the Clean Development Mechanism (CDM), valid for afforestation and reforestation activities. In order to account for the non-permanent nature of carbon storage in forests, these credits expire after a predefined periods, after which the buyer needs to replace them. The present article assesses their market value in relation to ?permanent? credits, identifies their specific risks and proposes how to mitigate and manage them. It analyzes strengths and weaknesses of expiring credits for sellers and buyers. Taking the example of the EU emissions trading system, the authors discuss how expiring credits could reach fungibility with permanent emission allowances on domestic markets.

Keywords: CDM; afforestation; reforestation; permanence; insurance; lCER; tCER (search for similar items in EconPapers)
JEL-codes: Q13 Q23 Q25 (search for similar items in EconPapers)
Date: 2004
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:hwwadp:26347

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