A Method for Estimating the Cost of CO2 Mitigation through Afforestation

Abstract

The Kyoto Protocol allows Annex I countries to use afforestation (theconversion of non-forest landto forest) to meet emissions reduction targets. We present a new method forestimating the cost of CO2mitigation through afforestation based on econometric models of land use. Landuse models are developed from dataon observed land allocation decisions and quantify the relationship betweenthe share of land in forest and the netreturns to forestry, among other land use determinants. The econometricapproach measures the actual responsesby landowners to observed changes in net returns, in contrast to earlierstudies in which landowner responses aredictated by the researcher. Models are estimated for Maine, South Carolina,and Wisconsin. The estimated modelsare used to simulate subsidies for afforestation, which imply increases inforest area and net reductions inatmospheric CO2 concentrations. Average cost measures – totalsubsidies divided by total carbon sequestered –are derived for afforestation programs with and without timber harvesting. Theuse of econometric land use modelsin integrated assessments of climate change is explored. We model the effectson land use patterns and the costsof CO2 mitigation of changes in the net returns to agricultureinduced by climate change.