1. AGEC/FNR 406 LECTURE 22 Carbon Emissions, 1880-2000

2. Recall from last lecture… Global surface temperature has increased.3-.6 degrees Celsius since late 19 th century Climate change predicted to increase global temperatures by.8-4.5 degrees Celsius by the year 2100 Two methods are available for reducing carbon concentration: 1. source reduction 2. sequestration ← topic of this lecture

3. Why sequester carbon? Carbon dioxide is the largest contributor to the global warming problem Carbon dioxide has a long residency time in atmosphere (it is a stock pollutant) Emissions occur worldwide and benefits from sequestration are global, regardless of location Widespread perception that costs of sequestration (especially in the tropics) are lower than costs of source reductions

4. Why tropical forests? 62% of world’s carbon pool is contained in tropical forests Forestry has potential to store 11-15% of global fossil fuel emissions by 2050 Tropical deforestation accounts for nearly 20% of anthropogenic carbon emissions

5. Sequestration under the Kyoto Protocol Kyoto Protocol contains the “clean development mechanism” Purpose is two-fold: 1.reduce greenhouse gasses 2.assist developing countries with sustainable development objectives

6. The Clean Development Mechanism The Clean Development Mechanism enables developed countries to meet GHG reduction goals by recognizing that global warming is a “global” problem enabling reduction in one part of the world to offset emissions in another part of the world

7. How to achieve afforestation Afforestation = tree planting One method is to pay developing countries to re-forest deforested land Carbon is “locked” in trees, reducing atmospheric carbon Tropical forests are attractive due to fast growth rates

8. Example afforestation projects US utility company purchased endangered rain forest in Belize Netherlands Utility company purchased Spruce forest in the Czech Republic, reforesting 15,000 hectares AEP reforestation project in Bolivia sequesters estimated 7 million tons AES reforestation projects in Ecuador, Peru and Bolivia sequester 70 million tons of carbon Halophyte Enterprises sequesters 1650 tons in Mexico

9. The economic perspective Is afforestation cost effective? Smokestack scrubbers cost up to $60 per ton of carbon sequestered in the US; fuel switching can cost up to $500 per ton of carbon avoided Early estimates suggest that under trading, carbon offsets from tropical forests could cost as little as $20 per ton of carbon sequestered in the US

10. How much does afforestation cost? Key issue is estimating a supply curve (i.e. marginal cost function) for afforestation projects Derive costs Compare with benefits Compare with other alternatives Purdue research project

11. Method Estimate the stream of discounted payments necessary to “entice” a developing country farmer to plant and maintain trees on his/her farm Compare these payments with other carbon abatement alternatives

12. Opportunity cost is the key issue The farmer must be indifferent between planting forest and engaging in other activities such as annual crop agriculture

13. How to measure opportunity cost? Minimize the sum of discounted payments subject to an indifference constraint Farmer has to be just as well off with payment + returns from forestry than if he harvested standing trees and engaged in agriculture Aggregate from individual farms to landscape scale to get cost of large-scale carbon storage

14. Empirical data Data from the Philippines P. Falcataria Fast growing Easy to incorporate into existing systems Corn farmers, cabbage farmers and non agricultural land owners are evaluated Varying levels of land quality under each classification are also evaluated

15. Modeling framework Forest biomass and carbon storage estimated through STELLA computer program Opportunity cost of agriculture is estimated via a farm-level model constructed in STELLA and EXCEL

16. Building a supply curve Use models to generate stream of annual payments for afforestation Carbon costs per ton are generated under various land use and quality combinations. Combine results to get a supply curve

17. Supply curve

18. Key points Sequestration through afforestation may be cost effective Important issue is the opportunity cost of land for conversion Fallow land has low opportunity cost Productive agricultural land has higher opportunity cost