Exploring policy solutions and tools to scale carbon market participation

• In Event: Environmental Policies at Different Scales, With Overlaps and Confounds: Analytic Solutions?

Abstract

The forest carbon market is currently experiencing significant growth within the voluntary market, with increasing demand for high-quality credits from businesses looking to offset emissions, but challenges still persist regarding market integrity, credibility, and scale. Demonstrating additionality, due to the subjectivity of baseline projections, can be a significant barrier particularly among small-scale forest owners (Asante and Armstrong 2016).  The term additional, according to the American Clean Energy and Security Act of 2009 (Waxman and Markey 2009), means reductions, avoidance, or sequestration of greenhouse gases that result in a lower level of net greenhouse gas emissions than would otherwise occur in the absence of an offset project. Besides additionality, other obstacles to why carbon programs are not yielding the promised emissions reductions, include flawed methods for calculating baselines, institutional coordination, and asymmetric information between landowners and and sellers. In this paper we address two questions: How does the requirement of carbon additionality create barriers to participation? What are some ways that landowners can meet this requirement to accelerate participation and optimize carbon sequestration to reduce emissions? To address these questions, the paper draws on existing literature discussing solutions to the additionality problem, interviews with carbon developers and other carbon market participants (n=20), and scenarios of landowner compliance and non-compliance with additionality requirements. The scenarios are derived from a planning tool for landowners and forestry professionals that assists in determining eligibility and choosing among alternatives for forest carbon management. Based on a pilot test of the planning tool with landowners in North Carolina, we identify most common scenarios where additionality presents barriers, as well as programs that may be optimal for landowners given characteristics of property size, economic benefit, location, and other attributes. The pilot data from the decision-support tool will also be used to  create capital budgets using discounted cash flow analysis techniques for the various scenarios to estimate the net present value, land expectation value, annual equivalent income, and benefit-cost ratio for each alternative. Finally, sensitivity analyses will be employed to estimate the profitability of scenarios using a range of project costs, discount rates, time horizons, and prices for carbon credits. The results from this work can address current knowledge gaps on how to design programs that increase participation for landowners and overcome additionality barriers. Information derived from the scenarios and sensitivity analyses can aid carbon developers and other decision-makers in transforming existing carbon programs in ways that enable greater participation among underrepresented landowner groups, such as small-scale forest owners.

Author

• Tatyana B Ruseva, Appalachian State University
  Presenting Author