Consequences of Co-benefits for the Efficient Design of Carbon Sequestration Programs, The
Hongli Feng, Catherine L. Kling
March 2005 [05-WP 390]
In this paper, we study the social efficiency of private carbon markets that include trading in agricultural soil carbon sequestration when there are significant co-benefits (positive environmental externalities) associated with the practices that sequester carbon. Likewise, we investigate the efficiency of government-run conservation programs that are designed to promote a broad array of environmental attributes (both carbon sequestration and its co-benefits) for the supply of carbon. Finally, policy design and efficiency issues associated with the potential interplay between a private carbon market and a government conservation program are studied. Empirical analyses for an area that represents a significant potential source of carbon sequestration and its associated co-benefits illustrate the magnitude and complexity of these issues in real-world policy design.
Keywords: average ranking of benefits, carbon markets, carbon sequestration, co-benefits, conservation programs, the Upper Mississippi River Basin.
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