Economics of Forest Ecosystem Carbon Sinks: A Review

Carbon terrestrial sinks are seen as a low-cost alternative to fuel switching and reduced fossil fuel use for lowering atmospheric CO₂. In this study, we review issues related to the use of terrestrial forestry activities to create CO₂ offset credits. To gain a deeper understanding of the confusing empirical studies of forest projects to create carbon credits under Kyoto, we employ meta-regression analysis to analyze conditions under which forest activities generate CO₂-emission reduction offsets at competitive "prices." In particular, we examine 68 studies of the costs of creating carbon offsets using forestry. Baseline estimates of costs of sequestering carbon are some US$3–$280 per tCO₂, indicating that the costs of creating CO₂-emission offset credits through forestry activities vary wildly. Intensive plantations in the tropics could potentially yield positive benefits to society, but in Europe similar projects could cost as much as $195/tCO₂. Indeed, Europe is the highest cost region, with costs in the range of $50–$280 per tCO₂. This might explain why Europe has generally opposed biological sinks as a substitute for emissions reductions, while countries rush to finance forestry sector clean development mechanism projects. In Canada and the U.S., carbon sequestration costs range from a low of about $2 to nearly $80 per tCO₂. One conclusion is obvious: some forestry projects to sequester carbon are worthwhile undertaking, but certainly not all.