Economics of forest carbon storage and the additionality principle

Olli Ilari Tahvonen, Aapo Taneli Rautiainen

Tutkimustuotos: ArtikkelijulkaisuArtikkeliTieteellinenvertaisarvioitu

Kuvaus

The ability of forests to store carbon is vital in maintaining the preset climate conditions, but is not systematically included in forest management or land-use decisions. Economic reasoning suggests subsidizing carbon storage, but empirical models show that this may easily more than double stand-level bare land values. Subsidization may thus be expensive, as it requires paying for all storage, including what would otherwise be obtained for free. To limit the consumption of public funds, the regulator may apply an additionality principle and solely subsidize storage exceeding a baseline level. We show that the commonly applied stand-level analysis suggests that the additionality principle could be applied to optimal rotation decisions without distortions. However, applying a forest vintage model with endogenous prices and land allocation decisions shows that similar application of the additionality principle causes distortions to both land allocation and optimal forest rotation. Nevertheless, subsidizing carbon storage by forest site productivity tax may still be preferable among the second-best policies. The distortions can be avoided by eliminating excessive subsidies by general land taxation irrespective of whether the land is used for forestry or agriculture.
Alkuperäiskielienglanti
LehtiResource and Energy Economics
Vuosikerta50
Sivut124-134
Sivumäärä11
ISSN0928-7655
DOI - pysyväislinkit
TilaJulkaistu - 2017
OKM-julkaisutyyppiA1 Alkuperäisartikkeli tieteellisessä aikakauslehdessä, vertaisarvioitu

Tieteenalat

  • 1172 Ympäristötiede
  • 511 Kansantaloustiede
  • 512 Liiketaloustiede

Lainaa tätä

Tahvonen, Olli Ilari ; Rautiainen, Aapo Taneli. / Economics of forest carbon storage and the additionality principle. Julkaisussa: Resource and Energy Economics. 2017 ; Vuosikerta 50. Sivut 124-134.
@article{f6429f451374461896a9d34a814cb1dd,
title = "Economics of forest carbon storage and the additionality principle",
abstract = "The ability of forests to store carbon is vital in maintaining the preset climate conditions, but is not systematically included in forest management or land-use decisions. Economic reasoning suggests subsidizing carbon storage, but empirical models show that this may easily more than double stand-level bare land values. Subsidization may thus be expensive, as it requires paying for all storage, including what would otherwise be obtained for free. To limit the consumption of public funds, the regulator may apply an additionality principle and solely subsidize storage exceeding a baseline level. We show that the commonly applied stand-level analysis suggests that the additionality principle could be applied to optimal rotation decisions without distortions. However, applying a forest vintage model with endogenous prices and land allocation decisions shows that similar application of the additionality principle causes distortions to both land allocation and optimal forest rotation. Nevertheless, subsidizing carbon storage by forest site productivity tax may still be preferable among the second-best policies. The distortions can be avoided by eliminating excessive subsidies by general land taxation irrespective of whether the land is used for forestry or agriculture.",
keywords = "1172 Environmental sciences, 511 Economics, 512 Business and Management",
author = "Tahvonen, {Olli Ilari} and Rautiainen, {Aapo Taneli}",
year = "2017",
doi = "10.1016/j.reseneeco.2017.07.001",
language = "English",
volume = "50",
pages = "124--134",
journal = "Resource and Energy Economics",
issn = "0928-7655",
publisher = "Elsevier B. V.",

}

Economics of forest carbon storage and the additionality principle. / Tahvonen, Olli Ilari; Rautiainen, Aapo Taneli.

julkaisussa: Resource and Energy Economics, Vuosikerta 50, 2017, s. 124-134.

Tutkimustuotos: ArtikkelijulkaisuArtikkeliTieteellinenvertaisarvioitu

TY - JOUR

T1 - Economics of forest carbon storage and the additionality principle

AU - Tahvonen, Olli Ilari

AU - Rautiainen, Aapo Taneli

PY - 2017

Y1 - 2017

N2 - The ability of forests to store carbon is vital in maintaining the preset climate conditions, but is not systematically included in forest management or land-use decisions. Economic reasoning suggests subsidizing carbon storage, but empirical models show that this may easily more than double stand-level bare land values. Subsidization may thus be expensive, as it requires paying for all storage, including what would otherwise be obtained for free. To limit the consumption of public funds, the regulator may apply an additionality principle and solely subsidize storage exceeding a baseline level. We show that the commonly applied stand-level analysis suggests that the additionality principle could be applied to optimal rotation decisions without distortions. However, applying a forest vintage model with endogenous prices and land allocation decisions shows that similar application of the additionality principle causes distortions to both land allocation and optimal forest rotation. Nevertheless, subsidizing carbon storage by forest site productivity tax may still be preferable among the second-best policies. The distortions can be avoided by eliminating excessive subsidies by general land taxation irrespective of whether the land is used for forestry or agriculture.

AB - The ability of forests to store carbon is vital in maintaining the preset climate conditions, but is not systematically included in forest management or land-use decisions. Economic reasoning suggests subsidizing carbon storage, but empirical models show that this may easily more than double stand-level bare land values. Subsidization may thus be expensive, as it requires paying for all storage, including what would otherwise be obtained for free. To limit the consumption of public funds, the regulator may apply an additionality principle and solely subsidize storage exceeding a baseline level. We show that the commonly applied stand-level analysis suggests that the additionality principle could be applied to optimal rotation decisions without distortions. However, applying a forest vintage model with endogenous prices and land allocation decisions shows that similar application of the additionality principle causes distortions to both land allocation and optimal forest rotation. Nevertheless, subsidizing carbon storage by forest site productivity tax may still be preferable among the second-best policies. The distortions can be avoided by eliminating excessive subsidies by general land taxation irrespective of whether the land is used for forestry or agriculture.

KW - 1172 Environmental sciences

KW - 511 Economics

KW - 512 Business and Management

U2 - 10.1016/j.reseneeco.2017.07.001

DO - 10.1016/j.reseneeco.2017.07.001

M3 - Article

VL - 50

SP - 124

EP - 134

JO - Resource and Energy Economics

JF - Resource and Energy Economics

SN - 0928-7655

ER -