Minimum Cost Strategies for Sequestering Carbon in Forests.(Statistical Data Included)

I. INTRODUCTION

Sequestering carbon in forests and forest products is a potentially useful mechanism in global efforts to offset expanding greenhouse gas emissions (see, for example, United Nations 1992). In the United States, the Clinton Administration's 1993 Climate Action Plan called for near-term incremental carbon savings of some 10 million metric tonnes (Mmt) per year through various activities in the forest sector (Clinton and Gore 1993).(1) The potential for expanded rates of forest carbon sequestration or net carbon flux beyond 10 Mmt annually appears to be substantial, however, and an array of recent economic studies have examined the costs of attaining higher rates.(2) In most of these studies, the sole vehicle for expanding flux is the afforestation of agricultural land. Consideration of afforestation is certainly critical, since it will likely form the backbone of any program to obtain major expansions in forest carbon flux, but it need not be the only focus for policy action. Rates of forest carbon flux can also be modified through changes in management on existing and future forests, without drawing new land into the forest base. In addition, the time patterns of flux change attainable with afforestation alone are limited. Other management actions may be needed, particularly if large near-term flux increases are required.

This paper examines the costs of meeting incremental forest carbon flux targets in the United States, when both forest management actions and the area of forests can vary. Costs are estimated as the welfare losses in the markets for forest and agricultural products incurred in pursuing various flux policies over the first five decades of the program. We consider a representative range of flux target scenarios and identify the mixes of management actions and land transfers needed to meet these targets at minimum social cost. In the following sections we describe the methods and models used to estimate costs, derivation of the example targets, and projection results. A concluding section discusses the implications of our analysis for forest carbon sequestration policy.

II. METHODS FOR ESTIMATING COSTS AND CARBON FLUX

In reckoning the costs of carbon sequestration programs, many previous studies have limited attention to the direct costs of afforestation, plus the compensation or subsidies required to induce owners of agricultural and to shift its use to forestry. The present analysis measures cost as the net change in producer and consumer surpluses in markets for forest and agricultural commodities.(3) We employ a model of the U.S. forest and agricultural markets in which the sectors are linked through the market for land. Alternative carbon flux targets are examined by constraining the model to find market solutions that allow achievement of the targets. Welfare differences between constrained and unconstrained results provide estimates of impacts on market participants and include the conversion and land use opportunity costs of previous studies.

This is, of course, a partial equilibrium analysis. Our model explicitly treats primary producers in both forest and agriculture sectors, but includes only a portion of the vertical market structures, stopping short of final consumers. Welfare impact estimates derived from the model, under conditions described by Just, Hueth, and Schmitz (1982), may reflect changes in the main markets of the forest and agriculture sectors, but not in tributary factor or product markets where we have assumed (as is customary) fixed prices. Further, we do not consider any impacts on amenity, existence, or other non-commodity values in the two sectors that might arise from changes induced by a carbon sequestration policy. Finally, we consider only adjustments in private forest land and management. While public forest lands will play some role in meeting carbon targets, policy directions are not at present clear and we have assumed that their management and harvests are held constant in their current form and levels in all projections.

Within the conditions noted above, the aim of the present study is to identify what can be termed minimum social cost strategies to achieve forest carbon flux targets and to characterize the associated resource and management changes comprising these strategies. While we offer some comments on the nature of public programs to implement these changes in the concluding section, specific analysis of policy vehicles is left to future research.