Spatial and Temporal Variation in the Optimal Provision of Forest-based Carbon Storage

Establishing new or expanding forest areas through afforestation, reforestation, and mitigation of deforestation can be an effective policy tool for offsetting greenhouse gas emissions. Despite the positive perspective, incentive payment approaches intended to encourage forest-based carbon sequestration are deemed to suffer inefficiency primarily due to asymmetric information between landowners and government agencies seeking to purchase environmental benefits. Failing to at least partially resolve this asymmetry may lead to some landowners receiving payments far exceeding their costs, and thus may result in deviation from optimal provision of ecosystem services. The objective of our research is to determine optimal provision of forest-based carbon storage, focusing particularly on how the optimal provision changes over space and time. This analysis occurs through the estimation of site-specific opportunity costs of supplying carbon storage that are used to derive cumulative carbon supply curves and to identify optimal spatial targeting of incentive payments. The empirical results for the 18-county case study show that optimal provision of forest-based carbon storage are 309,000, 435,171, and 356,171 metric tons per year for the periods of 1992-2001, 2001-2006, and 2006-2011, respectively, at the annual costs of about $5.8 million, $8.7 million, and $7.9 million, respectively. We found that the optimal provision of forest-based carbon storage differs across space and time because of the spatial and temporal heterogeneities in the marginal cost of carbon storage and the maximum potential gain of carbon storage. These findings have significant meanings in the literature since few studies, if any, explicitly consider both the temporal and spatial dynamics of the cost efficiency to come up with optimal budget outlays and corresponding carbon storage levels, payment amounts, and would-be participants. Our finding can be used in ways similar to the decision-making guide for Conservation Reserve Program (CRP) enrollment.

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 Record created 2017-04-01, last modified 2018-01-23

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