Effects of permanence requirements on afforestation choices for carbon sequestration for Ontario, Canada

Abstract

This study examines the economic and spatial impacts of afforestation choices for carbon sequestration in Ontario, Canada when the non-permanence of forestry carbon offsets is taken into consideration. We test six scenarios including three long-term projects with red pine, Norway spruce and hybrid poplar plantations and three shorter term hybrid poplar scenarios that produce temporary carbon emission offsets. We convert the break-even costs of sequestering carbon to a permanent carbon offset equivalent and analyze the possible geographical implications of the choices across eastern, southern and central Ontario, Canada. The most financially viable scenarios show a relatively large part of central Ontario with attractive choices at a 4% discount rate but a much smaller area at an 8% rate. The assumption about the future price evolution of temporary carbon offsets is one of the biggest factors that influence the attractiveness of these choices. At the 4% discount rate and the assumption of rising prices of permanent carbon offsets, the scenarios that store carbon for long periods appear to be the least-costly option. Hybrid poplar appears as the best choice in southern Ontario and a mix of conifer species and hybrid poplar in the central and northern parts. When future prices of temporary carbon offsets are assumed to decline, temporary hybrid poplar projects appear to be more attractive in the southern and eastern parts of the province. The variety of alternative scenario choices also depends on the discount rate and future price expectations for temporary carbon offsets. For a relatively narrow deviation of the carbon offset price (±$0.6 t -1 CO 2), only 4% to 9.2% of the total 5.8 million ha area would have one or more potentially viable alternative scenarios at the 4% discount rate and almost zero alternatives at the 8% rate. Higher discount rates lead to fewer attractive choices, suggesting that landowners would be left with very few options when trying to maximize net returns from plantations.