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Environment & Sustainable Development
Land Use
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Econometric Analysis of the Cost of Carbon Sequestration
Sponsor: AVINA Foundation
Country: Peru
Objective
The possibility of expanding forested area or retarding deforestation as a
means of sequestering carbon dioxide is receiving increasing attention
because of concerns about the threat of global climate change due to the
greenhouse effect (National Academy of Sciences (NAS) 1992; Bruce, Lee, and
Haites 1996). Such a possibility may be of particular importance for Latin
America, where over 50 percent of the land is classified as forest,
including the biologically diverse Amazon rain forest (Food and Agriculture
Organization 1997).
The high level of interest in carbon sequestration has been due, in part, to
suggestions that sufficient lands are available to use the approach to
mitigate a substantial share of annual carbon dioxide emissions (Marland
1988; Lashof and Tirpak 1989; and Trexler 1991) and claims that growing
trees to sequester carbon is a relatively inexpensive means of combating
climate change (Dudek and LeBlanc 1990; National Academy of Sciences 1992;
Sedjo and Solomon 1989). In other words, the serious attention given by
policy makers to carbon sequestration can partly be explained by (implicit)
assertions about respective marginal cost functions. Thus, analyzing the
real costs of biological carbon sequestration requires an empirical analysis
of the factors affecting land use changes (Stavins 1999). In the Latin
American context, such an analysis must include recognition of the roles
played by land tenure regime, public policies, and broader economic
development goals.
Methodology
CID’s research builds upon the existing body of econometric analyses of land use change, developing a dynamic model of land-use decision making, from which necessary conditions can be derived, which lead to a set of structural equations, with which hypotheses can be tested. In this way, we used data on land-use decisions to estimate the probabilities that landowners allocate their land to alternative uses, based on anticipated economic returns. Such dynamic models have been estimated in the United States previously, as explained above, but only Boscolo et al. have performed such analysis in Latin America. Econometrically estimated parameters provide the basis for constructing a dynamic simulation model of how land use may be anticipated to change in response to changes in the economic climate, including such relevant factors as expected timber and agricultural product prices, relevant production costs, and changing public policies, such as taxes on deforestation or subsidies on afforestation.
The estimated land-use equations that are produced are the first, necessary step toward constructing empirically reliable estimates of the true marginal costs of carbon sequestration. By linking the results from this estimation to a set of models of the various relationships that exist between the time path of deforestation and carbon emissions, and the time path of afforestation and carbon sequestration, we may be able to predict net carbon emissions and the level of sequestration associated with a given policy and a given set of economic variables, contingent upon data availability. The simulation model can be modified so that its results are expressed in terms of marginal costs of carbon sequestration and total annual sequestration. These cost estimates can be compared with the costs associated with more conventional approaches to carbon abatement, such as fuel switching and increased energy efficiency, and as such may be useful in selecting emissions targets under international climate change agreements, and/or in estimating the cost of achieving such targets.
Detailed quantitative data is required on actual land-use changes over time and across space, and many national remote sensing agencies have province level data on land-use over time. In addition, state or provincial agricultural statistical services report annual county-level or other geographically-defined data on relevant product and input prices, yields, and land conversion costs. Most countries also conduct national agricultural surveys on a periodic basis. Data on timber prices are available from national forest service agencies. We will select a country for analysis partly on the basis of the quality and quantity of available land-use and other types of data. We limited our country choice to the Andean region and Brazil because these countries are relatively poor and are experiencing relatively high levels of deforestation. Having selected a country for analysis, we then chose a local institution with which to collaborate.
Outputs
This work represented a contribution to the academic literature in this
area because applied a rigorous yet tractable dynamic model of
land-use in a developing-country context in which insecure tenure,
agricultural market fragmentation, and credit constraints may be the norm.
Moreover, econometrically estimated parameters provided the basis for
constructing a dynamic simulation model of how land use may be anticipated
to change in response to changes in the economic and policy climate. This
potential policy application, as well as the estimation of a marginal cost
curve for carbon sequestration, was timely and relevant for the Latin
American country in which this analysis was performed, potentially allowing
both agricultural and climate change policy to be developed more carefully.
Economic Drivers and Ecological Consequences
Country: Brazil
Sustainable growth and land use management policies need to be discussed in a context that includes macroeconomic and development policy as well as ecology and conservation science. Our objective was to estimate the impact of different macroeconomic policies and growth trajectories on land use change in the Brazilian Cerrado and Amazon, and to project the associated long-term ecological and economic implications of these changes. We accomplished this by combining a computable general equilibrium model of Brazil with a spatial-econometric model of the Cerrado and Amazon. These economic and geographic components were complemented by the work of natural scientists that focused on synthesizing prior work on the environmental consequences of land use change, particularly on carbon and ecosystem integrity.
The major contributions of this project took place at two levels:
The research agenda described here will act to synthesize and complement current and previous study efforts, and should not be viewed as a competing or alternative approach to other research efforts, whether in the social and natural sciences. The central focus of this work is the creation of a policy analysis tool that can be used to assess multiple alternatives at different scales, capable of assessing the trade-offs and complementarities of economic and environmental objectives. However, we do not intend to produce policy recommendations.
Our research team is comprised of scientists from several disciplines (economists, agronomists, ecologists, geographers) drawing on individuals and institutions from South and North America. Consistent with the philosophy of CID, this project will support and contribute to the work of Brazilian scientists involved in this research. We are currently working with researchers from the University of Brasilia and EMBRAPA Cerrado who will carry out significant portions of this work.
Projects |
People | Publications
| Faculty | Researchers |
| Theodore Panayotou | Marcellus Caldas |
| Robert Faris | |
| Collaborating Faculty | Andrew Mellinger |
| Robert Stavins | Juan Silva |
| Otto Solbrig | Alix Peterson Zwane |
| Staff | |
| Mara Vorhees |
Projects |
People | Publications
Caldas, Marcellus, Robert Walker and Stephen Perz. "Small Producer Deforestation in the Brazilian Amazon: Integrating Household Structure and Economic Circumstance in Behavioral Explanation." CID Working Paper No. 96. (October 2002)
Stavins, Robert N. "The Costs of Carbon Sequestration: A Revealed-Preference Approach." American Economic Review, volume 89, number 4, pp. 994-1009. (September 1999)
Newell, Richard G. and Robert N. Stavins. "Climate Change and Forest Sinks: Factors Affecting the Costs of Carbon Sequestration." Journal of Environmental Economics and Management, forthcoming (2002)
Zwane, Alix Peterson. "Does Poverty Constrain Deforestation? Econometric Evidence from Peru." (May 2002)
Projects |
People | Publications
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© 2007 by the President and Fellows of Harvard College.
Last revised
10/31/2007