Permanent Discounting for Land-Based Carbon Sequestration

Document Type

Article

Journal/Book Title/Conference

Ecological Economics

Volume

64

Issue

1900-01-04

Publication Date

2008

First Page

763

Last Page

769

Abstract

The effect of stochastic factors on soil carbon makes the quantity of carbon generated under a sequestration project uncertain. Hence, the quantity of sequestered carbon may need to be discounted to avoid liability from shortfalls. We present a potentially applicable uncertainty discount and discuss difficulties that might arise in empirical use. We insist that the variance in historical crop yields across geographical areas is used to derive a proxy variance for forming an uncertainty discount for carbon projects. Application of our approach suggests that project level uncertainty discounts would be 15–20% for the East Texas region.

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