July 21, 2009
By Robert Stavins
With the development of climate legislation proceeding in the U.S.
Senate, a key question is whether the United States can cost-effectively reduce
a significant share of its contributions to increased atmospheric CO2 concentrations
through forest-based carbon sequestration. Should biological carbon
sequestration be part of the domestic portfolio of compliance activities?
The potential costs of carbon sequestration policies should be one major
criterion, and so it can be helpful to assess the cost of supplying
forest-based carbon sequestration. This is a topic which I've investigated in a
series of papers with various co-authors over the past ten years ("Land-Use
Change and Carbon Sinks: Econometric Estimation of the Carbon Sequestration
Supply Function." Journal of Environmental Economics and Management
51(2006): 135-152, with Ruben Lubowski and Andrew Plantinga; "Climate
Change and Forest Sinks: Factors Affecting the Costs of Carbon Sequestration."
Journal of Environmental Economics and Management 40(2000):211-235, with Richard
Newell; and "The Costs of Carbon Sequestration: A Revealed-Preference
Approach." American Economic Review, volume 89, number 4, September 1999,
pp. 994-1009.) Most useful for policy purposes is probably the 2005 report Kenneth
Richards and I wrote for the Pew Center on Global Climate Change ("The
Cost of U.S. Forest-Based Carbon Sequestration"). In that report, we
surveyed and synthesized the best cost estimates from all available sources.
Human activities -- particularly the extraction and burning of fossil
fuels and the depletion of forests -- are causing the level of CO2 in the
atmosphere to rise. It may be possible to increase the rate at which ecosystems
remove CO2 from the atmosphere and store the carbon in plant material,
decomposing detritus, and organic soil. In essence, forests and other highly
productive ecosystems can become biological scrubbers by removing (sequestering)
CO2 from the atmosphere. Much of the current interest in carbon sequestration
has been prompted by suggestions that sufficient lands are available to use
sequestration for mitigating significant shares of annual CO2 emissions, and
related claims that this approach provides a relatively inexpensive means of
addressing climate change. In other words, the fact that policy makers are
giving serious attention to carbon sequestration can partly be explained by
(implicit) assertions about its marginal cost, or (in economists' parlance) its
supply function, relative to other mitigation options.
Among the key factors that affect estimates of the cost of forest carbon
sequestration are: (1) the tree species involved, forestry practices utilized,
and related rates of carbon uptake over time; (2) the opportunity cost of the
land-that is, the value of the affected land for alternative uses; (3) the
disposition of biomass through burning, harvesting, and forest product sinks;
(4) anticipated changes in forest and agricultural product prices; (5) the
analytical methods used to account for carbon flows over time; (6) the discount
rate employed in the analysis; and (7) the policy instruments used to achieve a
given carbon sequestration target.
Given the diverse set of factors that affect the cost and quantity of
potential forest carbon sequestration in the United States, it should not be
surprising that cost studies have produced a broad range of estimates. Ken
Richards and I identified eleven previous analyses that were good candidates
for comparison and synthesis, and we made their results mutually consistent by
adjusting them for constant-year dollars, use of equivalent annual costs as
outcome measures, identical discount rates, and identical geographic scope. We
also employed econometric methods to estimate the central tendency (or
"best-fit") of the normalized marginal cost functions from the eleven
studies as a rough guide for policy makers of the projected availability of
carbon sequestration at various costs.
Three major conclusions emerged from our survey and synthesis. First,
there is a broad range of possible forest-based carbon sequestration
opportunities available at various magnitudes and associated costs. The range
depends upon underlying biological and economic assumptions, as well as
analytical cost-estimation methods employed.
Second, a systematic comparison of sequestration supply estimates from
national studies produces a range of $25 to $75 per ton for a program size of
300 million tons of annual carbon sequestration. The range increases somewhat-
to $30-$90 per ton of carbon-for programs sequestering 500 million tons
annually.
Third, when a transparent and accessible econometric technique was
employed to estimate the central tendency (or "best-fit") of costs
estimated in the studies, the resulting supply function for forest-based carbon
sequestration in the United States is approximately linear up to 500 million
tons of carbon per year, at which point marginal costs reach approximately $70
per ton.
A 500 million ton per year sequestration program would be very
significant, offsetting approximately one-third of annual U.S. carbon
emissions. At this level, the estimated costs of carbon sequestration are
comparable to typical estimates of the costs of emissions abatement through
fuel switching and energy efficiency improvements. This result indicates that
sequestration opportunities ought to be included in the economic modeling of
climate policies. And it further suggest that if it is possible to design and
implement a domestic carbon sequestration program, then such a program ought to
be included in a cost-effective portfolio of compliance strategies when the
United States enacts a mandatory domestic greenhouse gas reduction program. Large-scale
forest-based carbon sequestration can be a cost-effective tool that should be
considered seriously by policy makers.
Of course, this raises the question of whether a policy that will bring
about such biological carbon sequestration cost-effectively can be developed, whether
as part of a cap-and-trade system, a related offset scheme, or through some
other policy mechanism. That is a question without easy answers (as I've noted
in a previous post on the Waxman-Markey legislation), but the cost analyses
I've reviewed in this post suggest that it is important to explore possible
ways of incorporating biological carbon sequestration in future U.S. climate
policy.
Source: http://www.huffingtonpost.com/robert-stavins/what-role-for-us-carbon-s_b_242163.html