Global cost estimates of forest climate mitigation with albedo: a new integrative policy approach

Abstract

Climate change mitigation policies have usually considered forest-based actions as cheap and fast options to reduce CO2 concentration in the atmosphere and slow down global warming. Most economic analyses, however, have ignored the effects of these actions on land surface albedo and the resulting effect on energy balance and temperature. This study estimates the marginal cost of forest mitigation associated with both carbon sequestration and albedo change, by introducing regional and forest-specific albedo information in a global dynamic forestry model. Our analysis indicates that traditional forest sequestration policies have underestimated the costs of climate mitigation, driving forest-based actions in regions where subsequent changes in albedo are significant. To reduce this inefficiency, this paper proposes a novel approach where both carbon sequestration and albedo effect are incorporated into pricing. Our results suggest that, under the same carbon price path, the integrative policy provides greater net global mitigation in absolute terms and per hectare of forest, and thus it is more efficient and less intrusive than the traditional policy.