A global analysis of the cost-efficiency of forest carbon sequestration

This paper proposes a ranking of the countries where forest carbon sequestration is the most cost-efficient among 166 countries for which data are available. Taking into account the main cost factors leads to a more nuanced ranking of the countries to be favoured for cost-efficient forest carbon sequestration compared to the assumption that these would always be in tropical areas with high rainfall. The ranking reflects the differences in the opportunity cost of land use and labour cost (production costs), the quality of the business environment (transaction costs), natural conditions (forest productivity), wildfire risk and the avoided GHG emissions from alternative land use. Cost-efficiency also depends on the type of forest project (afforestation, reforestation or forest conservation) and how private (wood harvest) and non-private (environmental and social) co-benefits are counted. A sensitivity analysis is undertaken to examine the robustness of the results with respect to uncertainties in values of the cost and quantity factors of forest carbon sequestration. The results support the view that forests can be a cost-efficient way to offset GHG emissions and that significant cost reductions are possible by targeting the country and sub-national regions in which to locate forest carbon sequestration projects. The report also reviews the literature on the significance and cost of forest carbon sequestration and provides an overview of forest carbon offset schemes.