A Methodological Investigation of the Costs of Carbon Sequestration

Increased attention by policy makers to the threat of global climate change has brought with it considerable attention to the possibility of encouraging the growth of forests as a means of sequestering carbon dioxide. This approach has, in fact, become an explicit element of both U.S. and international climate policies. This paper develops a methodology whereby estimates of the costs of carbon sequestration can be developed on the basis of evidence from observations of landowners' behavior when confronted with the opportunity costs of alternative land uses. The analytical model takes account of silvicultural understanding of the intertemporal linkages between deforestation and carbon emissions, on the one hand and between forestation and carbon sequestration, on the other. The results support the efficacy and potential value of this analytical approach. The paper is intended to be illustrative of how econometric analyses of land use, which already exist for a number of countries, can be used to develop better region-specific estimates of the marginal costs of carbon sequestration.