Life’s a breach!
MacKenzie, Ian A.
- Working Paper
Rights / licenseIn Copyright - Non-Commercial Use Permitted
As carbon sinks, forests play a critical role in helping to mitigate the growing threat from anthropogenic climate change. Forest carbon offsets transacted between GHG emitters in industrialised countries and sellers in developing countries have emerged as a useful climate policy tool. A model is developed that investigates the role of incentives in forestry carbon sequestration contracts. It considers the optimal design of contracts to ensure landowner participation and hence, permanence in forest carbon sinks in a context of uncertain opportunity costs and incomplete contract enforcement. The optimal contract is driven by the quality of the institutional framework in which the contract is executed, in particular, as it relates to contract enforcement. Stronger institutional frameworks tend to distort the seller’s effort upwards away from the full enforcement outcome. This also leads to greater amounts of carbon sequestered and higher conditional payments made to the seller. Further, where institutions are strong, there is a case for indexing the payment to the carbon market price if permanence is to be ensured. That is, as the carbon price increases, the payment could be raised and vice versa Show more
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Journal / seriesEconomics Working Paper Series
PublisherETH, Eidgenössische Technische Hochschule Zürich, CER-ETH - Center of Economic Research at ETH Zurich
SubjectFORSTEINRICHTUNG + FORSTÖKONOMIE; contract design; FOREST MANAGEMENT; incomplete enforcement; forest carbon offsets; OPERATIONS RESEARCH; GLOBAL CHANGE + GLOBAL WARMING (CLIMATOLOGY); permanence; GLOBAL CHANGE + KLIMAERWÄRMUNG (KLIMATOLOGIE)
Organisational unit02045 - Departement Geistes-, Sozial- und Staatswissenschaften / Department of Humanities, Social and Political Sciences
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