"Dollarable" Conservation: Valuing Carbon

John Muir, who (among other things) was instrumental in the nascent U.S. National Park movement, has been quoted as saying, "Nothing dollarable is safe."  With due respect, perhaps Mr. Muir had it wrong.  Perhaps the inverse is true: Only the dollarable is safe.  

From an economic perspective, the problem of regulating human-perturbed climate change is clear.  Economic actors do not internalize the negative external costs of their private transactions, i.e., the cost of climate change is not considered when pricing goods and services.  Why?  Without effort, the economic actor can allow the public commons to bear the cost.  In other words, the cost of pollution is subsidized by individuals, corporations, and governments outside of the immediate transaction concerning the economic actor / polluter, and there is no rational need for the polluting actor to consider such costs. 

Recent research shows that the owners and keepers of forested land are bearing these costs.  Werner Kurz, of the Canadian Forest Service, recently gave a talk during which he stated that carbon emissions have increased 40% since pre-industrial levels.  In addition, global forests have been absorbing or offsetting around 27% of annual fossil fuel emissions.  Unfortunately, the increase in atmospheric carbon creates conditions harmful for forests, meaning that we are losing forests to climate change.  This creates a negative feedback cycle: when trees die, they release stored carbon, accelerating climate change, which kills more trees, which release more carbon, etc.

In addition, this Scientific American article claims that U.S. forests offset 11% of the nation's industrial greenhouse gas emissions -- the equivalent of removing half (or 135 million!) of the nation's vehicles from the road each year.  The USDA and the National Association of State Foresters estimate that the nation's forests store 41.1 billion metric tons of carbon.  Being good economic actors themselves, why should forestland owners be expected to provide this service free of cost to the world's greenhouse-gas emitters? 

Recent attempts to address this issue (e.g., the cap-and-trade legislation of 2010) have failed. In the United States, the Chicago Climate Exchange (CCX) operated as a voluntary market, wherein members agreed to lower their emissions and to trade carbon financial instruments.  However, following Congressional failure to make any progress on regulating carbon emissions, the CCX closed its cap-and-trade exchange last year.  

The truth of the matter is that everyone who owns a tree is subsidizing the activities of those whose business emits greenhouse gases.  Whether that subsidy is limited to the tree's inherent ability to "scrub" the air of carbon through the process of photosynthesis or whether the subsidy extends to the loss of forest habitat due to climate change, forestland owners bear the cost of carbon emissions.  

Forestland owners deserve to be compensated for this service, and the only way to ensure that compensation is through federal legislation and regulation.

I know that cap-and-trade legislation, carbon emissions, and climate change are opinion-generating topics ... so, what's yours?  Leave a comment and let me know!

 

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Comments (4) Read through and enter the discussion with the form at the end
treec123 - March 20, 2011 9:10 PM

The possibility of using our forests to store more carbon is great, but there must be "additionality" i.e. no rewards for business-as-usual. Landowners must do something "additional" to store more carbon in forests, such as letting them grow longer between harvests or retaining more live a dead trees when conducting harvest.

And we should not expect to store more carbon in wood products. It takes a relatively large amount of forest destruction (and carbon emissions) in order to create a relatively small amount for lumber (and carbon storage). Long lives forests are a much more secure way to increase forest carbon storage. In other words, for every ton of carbon in the lumber in your house, there are several additional tons of carbon transferred from the forest to the atmosphere.

Here is a slide show clarifying many misconceptions about forests, logging, and carbon:
http://www.slideshare.net/dougoh/forest-carbon-climate-myths-presentation/

Here is a more detailed foot-noted report on forests, carbon and climate change:
http://tinyurl.com/2n96m5

Buckley Bridges - March 21, 2011 7:40 AM

Thank you for the comment and especially for the informational links!

I agree with the "additionality" requirement. Remember, however, that it can be satisfied in at least two ways: either the forest owner forbears harvest for some period of time or suffers increased loss attributable to climate change.

The Werner Kurz presentation I referenced was part of a larger conference on forests at risk from climate change: http://www.fortheforest.org/page_77.

Since forest owners cannot prove whose GHG emissions directly and proximately caused their loss, they cannot hold the responsible parties liable, and are forced to bear the risk of loss alone, thereby subsidizing those creating the risk.

That additional risk, in my opinion, satisfies the "additionality" requirement.

Dave Iverson - March 24, 2011 7:03 PM

This is a classic "joint product" production function problem. It will be a political judgement call as to whether or not forest landowners ought to be rewarded for doing what they do. Right now I don't see why they ought to be so rewarded. Now if they want to lengthen timberland rotation ages, that might be another matter.

As per "cap and trade" my 'take' is that it (and has been) more the stuff of market manipulation than the stuff of prudent policy-making. I was glad to see it die. On the other hand I have argued for a "carbon tax," which to me makes much more sense. see, e.g. http://forestpolicy.typepad.com/ecoecon/2010/01/is-cap-and-trade-dead.html

Buckley Bridges - March 25, 2011 10:46 AM

Dave,

I don't agree that this is a joint production issue, because forestland owners' marginal costs are affected by climate change. There are two separate questions:

1) Whether they should be compensated because their trees do what they have always done; and
2) Whether they should be compensated because their "ox is being gored", i.e., climate change is killing their trees.

A carbon tax could, in theory, remedy the second issue by incentivizing a reduction in GHG emissions, which would, in turn, reduce climate-change loss in the nation's forests. Even though both cap-and-trade and carbon-tax plans are politically controversial, I have sensed a greater resistance to the direct carbon tax.

Given the current political climate, I doubt we will see any action either way any time soon.

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