Replaced with revised version of paper 06/26/09.

There is widespread recognition that forestry carbon credits can reduce the net emissions of carbon into the atmosphere. Designing systems to sequester carbon, however, has proven difficult due to a number of efficiency issues, including leakage. Leakage occurs when policy makers develop carbon...

This paper analyzes the effect of uncertainty in several key parameters on the marginal costs of carbon sequestration in forests. These parameters include the land supply elasticity, which governs the conversion of land from agriculture to forests and vice versa; parameters of the forest biomass...