The Economic Analysis of Landowners’ Participation in Carbon Sequestration Programs and Mechanisms
Date Issued
2008
Date
2008
Author(s)
Liu, Wan-Yu
Abstract
In order to reduce the negative impact due to the climate change resulting from increasing greenhouse gases, many countries in the world have actively adopted various kinds of approaches to reduce greenhouse gas emissions. Among those the forest carbon sink/sequestration has been regarded as one of the strategies which can provide the lowest costs for the reduction of emissions. If there is no government intervention, due to the externality problems, the amount of carbon sequestration may not reach the socially optimal level. The introduction of carbon sequestration programs as well as related market mechanisms would help to facilitate the increase of the total amount of carbon sequestration, and to alleviate the climate change problem. The main objective of this study is to theoretically and empirically analyze the following four programs and mechanisms in Kyoto Protocol, namely, clean development mechanism, forest carbon trading, agricultural carbon contract, and carbon subsidy. Built on the previous literatures and the current environment in Taiwan, this study investigates how the landowners in Taiwan make their land use decisions when participating in the above four programs or mechanisms. This study consists of four parts. Firstly, the theoretical model of landowners'' participation in the clean development mechanism has been extended and the empirical study has been conducted to analyze the amount of carbon sequestration, the cost of afforestation, as well as the supply prices of temporary and long-term Certified Emission Reductions (CER) when the landowners in Taiwan participate in this mechanism. Secondly, the theoretical model of landowners'' participation in the forest carbon trading mechanism among different sectors has been formulated and derived. Under various payment measures for carbon sequestration, the simulation has been conducted to analyze landowners'' decision making in Taiwan, including carbon trading prices, landowners'' income, as well as income derived from carbon sequestration,. Thirdly, the decision-making model of landowners'' participation in agricultural carbon contract has been formulated and derived. The comparative static and simulation analyses have been conducted to analyze the optimal length of the agricultural carbon contract, the changes in the profits of land as well as the carbon sequestration in various scenarios, and the effects of related variables on landowners'' land use decision. Lastly, a decision-making model of landowners'' participation in the carbon subsidy policy has been established, and a dynamic programming simulation under different carbon subsidy policies has been conducted to analyze the landowners'' land use decisions in Taiwan, including the changes in the profits of land as well as carbon sequestration, and the effects of related variables on landowners'' land use decisions. Based on the results derived from the above theoretical and empirical analysis in landowners'' land use decisions, some policy recommendations are made as follows: (1) In response to the international trend toward the reduction of greenhouse gases emission and to comply with the Kyoto norms, the government should design separate carbon programs and trading mechanisms for different types of private landowners to strengthen their incentives in participating in the afforestation program. (2) When landowners participate in forest carbon trading mechanisms or carbon subsidy policies, they may not always lengthen their forest rotation period. Therefore, when the government decides to implement these policies or mechanisms, it should take into account the factors affecting the length of forest rotation period. (3) When the government lowers the upper bound of the cultivation intensity in soil carbon contracts, the length of the carbon storage period of the soil of agricultural land may not be always lengthened. In order to make sure the carbon storage period will be increased after the introduction of the program, an appropriate level of the upper bound of the cultivation intensity of soil carbon contracts should be carefully examined and determined. (4) Following the international trend of using fallow land as carbon sinks through soil management, the government should consider providing carbon sink payment to fallow land to increase the efficiency of land uses. (5) All the carbon management and carbon trading policies implemented by the government should be well connected to the international institutions and brought in line with the international practice. (6) The government should strengthen the information systems of carbon management to increase the efficiency of formulating and implementing carbon programs and related mechanisms.
Subjects
Clean Development Mechanism
Forest Carbon Trading
Agricultural Carbon Contract
Carbon Subsidy
Kyoto Protocol
Type
thesis
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