Contracting for Impure Public Goods: Carbon Offsets and Additionality

Governments contracting with private agents for the provision of an impure public good must contend with agents who would potentially supply the good absent any payments. This additionality problem is centrally important in the use of carbon offsets as part of climate change mitigation. Analyzing optimal contracts for forest carbon sequestration, an important offset category, we conduct a national-scale simulation using results from an econometric model of land-use change. The results indicate that for an increase in forest area of 50 million acres, annual government expenditures with optimal contracts are about $4 billion lower compared than under a uniform subsidy.


Issue Date:
2011-02
Publication Type:
Working or Discussion Paper
PURL Identifier:
http://purl.umn.edu/101290
Total Pages:
38
JEL Codes:
Q2; D8; L15
Series Statement:
SD
13.2011




 Record created 2017-04-01, last modified 2017-08-26

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