Dynamics and the economics of carbon sequestration: common oversights and their implications

Abstract

Accurate assessment of the cost of carbon sequestration is important for the development of mitigation policies globally. Given that sequestration in soils or vegetation is a lengthy process, such assessment requires financial discounting and making realistic assumptions about changes over time in the rate of sequestration, the price of carbon, and the opportunity cost incurred by adopting sequestration practices. Our objective is to demonstrate how these assumptions affect estimates of the cost of sequestration-based mitigation strategies. Using an Australian case study of soil carbon sequestration, our estimates of the carbon price required for financial viability are highly sensitive to dynamic assumptions, varying by a factor of four with different assumptions. Yet the influence of these time-related assumptions is poorly acknowledged in the literature, with many studies either failing to disclose their assumptions, or employing questionable assumptions and methods. Recommended global strategies are for researchers to report their assumptions related to dynamics much more transparently and to improve their research methods and the realism of their assumptions when analysing the economics of carbon sequestration. We recommend that policymakers become better aware of the issues created by dynamics, so that they are able to validly interpret assessments of the cost of sequestration and to ensure that they design policies in a way that facilitates fair comparison of the costs of mitigation strategies that operate over different timescales.