The cost of sequestering carbon on private forest lands

Abstract

The increase of carbon dioxide in the atmosphere and its possible greenhouse effect on global climate has become one of today's major environmental issues. Utility/coal companies which produce high levels of carbon dioxide are interested in mitigating their emissions by sequestering carbon in trees. This study proposed to investigate the amount of money that utility companies would have to pay private forest landowners to sequester additional tonnes of carbon in their forests. Analyses were conducted to calculate the annual financial compensation/incentives necessary to (1) compensate forest landowners who apply economically sub-optimal rotations to sequester maximum carbon; or (2) motivate private landowners to convert unstocked lands into productive forest lands to sequester carbon. Biological and financial analyses were conducted using Loblolly pine ( Pinus taeda) on a range of site indices. Applying the Faustmann formula, the amount of necessary compensation/incentive was calculated as the difference between the soil expectation value (SEV) of the economically optimal rotation and the SEV of the biologically optimal rotation which maximizes mean annual increment (MAI) of sawtimber and, therefore, maximizes carbon stored in the forest and in the long-lived wood products. Results indicate that the carbon sequestration difference between the MAI of the optimal economic rotation and that of the optimal carbon rotation may be up to 0.79 t of carbon per hectare. Planting unstocked land may store an additional 1.03–3.77 t of carbon per hectare per year. The annual compensation values tend to increase as real interest rates increase. The minimum annual compensation is $0.84 per hectare using an interest rate of 2.5% on site index 50 land. The maximum annual compensation is $72.79 per hectare using an interest rate of 12.5% on site index 90 land. The average costs of sequestering an additional tonne of carbon on lands already intensively managed vary from $4.18 to $181.27. The average costs of sequestering an additional tonne of carbon on unstocked land range from $0.74 to $27.32.