Carbon Sinks and Reservoirs: The Value of Permanence and Role of Discounting

Scientists are enthusiastic about storing carbon in terrestrial sinks and geological reservoirs in order to obviate the need for lifestyle-changing reductions in fossil-fuel use. Estimating relative costs of various options depends on how permanence is assessed and whether physical carbon is discounted. We demonstrate that, in carbon markets, terrestrial sinks credits cannot be traded one-for-one for emission reduction credits and the conversion factor would depend on how long sinks keep CO2 out of the atmosphere as compared with emission reductions and, discounting physical carbon. As a result, the authority could not determine a conversion factor and the market would be required to do so.

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Working or Discussion Paper
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JEL Codes:
O13; Q54
Series Statement:
REPA Working Paper

 Record created 2017-04-01, last modified 2018-01-22

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