Delayed carbon sequestration and rising carbon prices

Abstract

We set out a dynamic model to investigate optimal time paths of emissions, carbon stocks and carbon sequestration by land conversion, allowing for non-instantaneous carbon sequestration. Previous research in a dynamic general equilibrium framework, assuming instantaneous carbon sequestration, has shown that land conversion should take place as soon as possible. On the contrary, previous research within a partial equilibrium framework has shown that, with increasing carbon prices, it is optimal to delay carbon sequestration through land conversion. We show that land use change alternatives, e.g. reforestation, have to be used as soon as possible before the singular path is reached, i.e. the unique trajectory that brings the system to the steady-state. We also show that faster increasing carbon prices can induce a reduction in the rate of reforestation, and that this may take place after an initial phase of increased reforestations or even immediately, depending upon the shape of the increase in carbon prices. Finally, we show that the type of species used is relevant and that the land conversion rate gets smaller the longer it takes the trees to grow. We analyze four different carbon accounting methods, describing the conditions that make them efficient and discussing the comparative advantages of each of them.