Influences of Permanence on the Comparative Value of Biological Sequestration versus Emissions Offsets

Bruce A. McCarl, Brian C. Murray, Uwe A. Schneider
August 2001  [01-WP 282]

Emerging policies directed toward greenhouse gas emission (GHGE) reductions are causing governments and industries to consider the merits of GHGE mitigation possibilities. Land-based biological sequestration (LBS) is being evaluated as one potential way to achieve net GHGE reductions. Some have argued that LBS strategies are relatively inexpensive ways of lessening GHGE mitigation costs as well as increasing economic opportunities for farmers and foresters. However, there seem to be doubts in the international community regarding issues of permanence, leakage, monitoring, measurement, and transaction costs. Here, the authors investigate the effects of permanence, examining the influence of permanence on the relative value of an LBS offset versus a direct emission offset. Specifically, they estimate the relative value to a carbon purchaser of LBS and emission offsets as they arise over time. The authors also treat the concept of rental of carbon sequestered through LBS, and examine bridge-to-the-future scenarios, which introduce nonconstant future GHGE offset prices. Finally, they investigate the implications that permanence-related price discounts may have on the potential contribution of LBS activities to GHGE offset efforts.

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