Abatement and Transaction Costs of Carbon-Sink Projects Involving Smallholders

Oscar Cacho and Leslie Lipper
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Leslie Lipper: Agricultural and Development Economics Division, Food and Agriculture Organization

No 06-13, Working Papers from Agricultural and Development Economics Division of the Food and Agriculture Organization of the United Nations (FAO - ESA)

Abstract: Agroforestry projects have the potential to help mitigate global warming by acting as sinks for greenhouse gasses. However, participation in carbon-sink projects may be constrained by high costs. This problem may be particularly severe for projects involving smallholders in developing countries. Of particular concern are the transaction costs incurred in developing projects, measuring, certifying and selling the carbon-sequestration services generated by such projects. This paper addresses these issues by analysing the implications of transaction and abatement costs in carbon-sequestration projects. A model of project participation is developed, which accounts for the conditions under which both buyers and sellers would be willing to engage in a carbon transaction that involves a long-term commitment. The model is used to identify critical project-design variables (minimum project size, farm price of carbon, minimum area of participating farms). A project feasibility frontier (PFF) is derived, which shows the minimum project size that is feasible for any given market price of carbon. The PFF is used to analyse how the transaction costs imposed by the Clean Development Mechanism of the Kyoto Protocol affect project feasibility.

Keywords: Agroforestry; climate policy; carbon sequestration costs. (search for similar items in EconPapers)
JEL-codes: O1 O13 Q23 Q57 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2006
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Working Paper: Abatement and Transaction Costs of Carbon-Sink Projects Involving Smallholders (2007)
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