The Economics of Including Carbon Sinks in Climate Change Policy- Evaluating the carbon supply curve through afforestation in Latin America

Benitez, P.C. & Obersteiner, M. ORCID: https://orcid.org/0000-0001-6981-2769 (2003). The Economics of Including Carbon Sinks in Climate Change Policy- Evaluating the carbon supply curve through afforestation in Latin America. IIASA Interim Report. IIASA, Laxenburg, Austria: IR-03-019

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Abstract

After the inclusion of carbon sinks in the Kyoto Protocol, greenhouse gas mitigation policies account for abatement measurements in both the energy and forestry sectors. This report deals with the development of a methodology for estimating cost-curves of carbon sequestration from afforestation activities and its combination with existing cost-curves of carbon abatement in the energy sector, with an application to the Latin American region. For deriving the carbon supply curves, a bottom-up approach is used where the costs of carbon sequestration are first estimated on individual grids (geo-referenced area of 50 W 50 km), which are aggregated in a single cost curve. In evaluating the carbon sequestration benefits of forests, we intend to capture the life-cycle of the sequestered carbon by accounting the carbon uptake during forest growth, the carbon emissions during the harvest periods, and the residual carbon storage in short-and long-lived products.

From a number of model runs we show that (i) the cumulative carbon sequestration by 2010 could amount to about one fourth of the yearly emissions in the regions energy sector, given a carbon price of US$20/tC, (ii) the Latin American region on its own could fulfill the Kyoto Protocol demand on Clean Development Mechanism (CDM) sinks for 2008-2012 at a carbon price of US$26-32/tC, and (iii) when the supply curves of afforestation and energy are combined, the total emission reductions in 2010 are at least 15% larger than in the case of the energy sector alone. Sensitivity analysis shows that long-run projections are very sensitive to forest growth assumptions.

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