New Cost Estimates for Forest Carbon Sequestration in the United States

Transcription

1 New Cost Estimates for Forest Carbon Sequestration in the United States Anne Sofie Bang Nielsen Copenhagen University Andrew J. Plantinga Oregon State University

2 Carbon sequestration in forests Trees and other forest plants convert CO 2 to carbon through photosynthesis Carbon is stored in biomass, soils, and floor litter Establishing new forests on agricultural and other nonforest lands (afforestation) can offset emissions of CO 2 from energy generation and other sources Forests typically store more carbon than land in agricultural uses Harvesting trees converts some of the carbon back to CO 2 but some carbon remains fixed in wood products and landfills for long periods of time If trees are used for bio-energy, a net reduction in atmospheric CO 2 is achieved if more carbon is stored compared to the original use

3 Carbon storage in forests Afforestation with and without periodic harvesting Carbon storage Carbon stored with original use without periodic harvesting with periodic harvesting Afforestation with trees used for bio-energy time Carbon storage Carbon stored with original use time

4 Earlier studies indicate that significant amounts of carbon can be sequestered in forests at relatively low costs 300 This study $/ton Carbon (million tons per year) Manne and Richels / Global 2100 Goulder Jorgenson and Wilcoxen / DGEM OECD / GREEN Fitted abatement cost curve This study (partially linear) Source: Lubowski, Plantinga, and Stavins 2006

5 New cost estimates for forest carbon sequestration Cost estimates for each county in the contiguous U.S. Afforestation of rangeland, in addition to cropland and pasture Our estimates account for capitalized development rents in addition to agricultural returns We develop a new set of cost estimates for forest establishment We incorporate data on Holdridge life zones to exclude portions of counties where temperature and moisture availability limit tree growth For the sake of transparency, we do not account for two features of recent studies Endogenous commodity prices Econometric-based estimates of opportunity costs

6 Outline of talk Land prices (opportunity costs) Forest establishment costs Holdridge Life Zones Carbon storage in forests Carbon cost estimates ($/ton C) National marginal cost estimates Comparison to other studies Discussion and Implementation

7 Land prices Average annual net returns per acre for each county and by use from Lubowski (2002): CROPNR, PASTURENR, RANGENR, FORESTNR Estimates from Plantinga, Lubowski, and Stavins (2002) of the portion of the farmland price in each county attributable to future development rents: Average capitalized development rents (DEVVAL) Discounting term reflecting the average time to development for farmland in each county (DISCOUNT) Land price estimates CROPPRICE = CROPNR*DISCOUNT + DEVVAL PASTUREPRICE = PASTURENR*DISCOUNT +DEVVAL RANGEPRICE = RANGENR*DISCOUNT +DEVVAL Land price estimates adjusted for timber revenues

8 Crop prices

9 Range prices

10 Range price net of timber revenues

11 Estimates of forest establishment costs County-level estimates of per-acre tree planting costs from the Conservation Reserve Program CRP is a land-retirement program that allowed farmers to convert cropland to grassland, trees, and other permanent covers Cost share payments for tree establishment Data not available for counties with no acres enrolled in the tree category. These counties are not randomly assigned. Two-stage Heckman procedure used to estimate a tree planting cost equation Equation used to predict costs for counties with no enrollment

12 Original data from CRP on tree planting costs

13 Table 1. Estimation Results for the Cost and Selection Equations Cost equation Cropland share in Holdridge forest Cropland share in LCC IIe-Ve Selection equation Cropland in Holdridge 0.547** (0.156) forest (0.104) Precipitation 0.027** (25.919) (0.003) Longitude * Acres of eligible 0.290** (8.243) cropland (0.000) Longitude squared * Longitude 0.019** (0.046) (0.003) Latitude ** Latitude 0.046** (16.874) (0.006) Latitude squared ** Constant ** East ** (0.219) (0.430) (31.530) East outlier ** (45.584) Constant ** ( ) Inverse Mills ratio ** (34.863)

14 Observed and predicted tree establishment costs

15 Holdridge life zones The Holdridge life zone system is an ecosystem classification scheme for land based on precipitation, temperature, evapotranspiration, and elevation 19 forest zones in the U.S. (example: cool temperature moist forest in the eastern U.S.) In the Holdridge forest zones, forest establishment is not limited by climatic conditions We use maps of the Holdridge zones, land cover (crop, pasture, and range), and private ownership to identify the amount of private land in each county that could potentially be converted to forest

16 The share of each county in crops and a Holdridge forest zone

17 Carbon Stand-level data on carbon storage by forest type (e.g., Ponderosa pine) Annualized carbon flows with and without harvesting Forest-type weighted average of annual carbon uptake per acre

18 Average annual carbon uptake in forests per acre (without harvesting)

19 Carbon cost estimates For each land use and county, Annual cost per acre = (Annualized forest establishment cost per acre + annualized land price per acre)/annualized carbon flows per acre National marginal cost curve constructed by plotting annual costs per acre against total annual carbon sequestered

20 Per-acre carbon cost estimates, all uses and with harvesting

21 Marginal cost estimates, by use $/metric tons per year Million tons carbon per year Cropland Range Pasture

22 Effect of including Holdridge life zone constraints $/metric tons per year Million tons carbon per year With Holdridge constraint Without Holdridge constraint

23 Comparison with other studies Carbon prices (per ton) $25 $50 $75 $100 $125 $150 This study This study (without Holdridge constraints) Moulton and Richards Lubowski et al Note: MR costs adjusted to 1997 values using the Consumer Price Index Much higher estimates than Moulton and Richards They assumed very low opportunity costs of land; in particular, did not account for capitalized development rents Similar estimates to Lubowski et al. up to about $75 per acre, but divergence after that point Accounting for Holdridge life zones Explicit estimates of forest establishment costs

24 Discussion Endogenous prices Accounting for endogenous price feedbacks from the policy would increase marginal cost estimates, as much as doubling them at higher sequestration levels Holdridge life zones have a large effect With this constraint, our marginal cost curve becomes vertical at about 375 million MT per year compared to about 575 MT per year Evidence suggesting the potential for much higher forest carbon yields in regions like the Corn Belt, which would lead to lower cost estimates Other environmental benefits from forest establishment (reduction in agricultural externalities, wildlife habitat)

25 Implementation International climate change agreement Replace project-by-project CDM approach with national inventories of forest carbon Negotiated reference case Carbon credits/debits generated at end of evaluation period Domestic policy Government incentives (e.g., Conservation Reserve Program) Offsets purchased by private entities (e.g., electric utilities) Issues of additionality, permanence, leakage

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27 Pasture price

28 Crop price net of harvesting

29 Pasture price net of harvesting

30 The share of each county in pasture and a Holdridge forest zone

31 The share of each county in range and a Holdridge forest zone

32 Average annual carbon uptake in forests per acre (with harvesting)

33 Per-acre carbon cost estimates, all uses and without harvesting