Last week I wrote about work Brent Sohngen and colleagues are doing on incorporating forest carbon strorage into climate change negotiations. Since really smart reactions often get lost in the shuffle of comments, I thought I would post Brent’s response to the discussion following that post. For context, reader John noted:

What all the (very worthy) eggheads at the IPCC don’t talk about is the difficulty of avoiding deforestation and the whole institutional infrastructure this will involve in countries which often suffer severe capacity constraints.

Problems of enforcement aside, it is unlikely, given the extremely high discount rate of the very poor communities that often live in forested areas, that the future discounted value of carbon storage credits will out weigh future discounted value of the timber. That is to say unless more holistic strategies are put in place to offer forest communities viable alternatives to felling trees, even with payments for carbon storage the incentive structure will not be in place to achieve the desired results.

See below for Brent’s–er, Nobel Laureate* Sohngen’s–reaction.

*This joke never gets old.

(1) The IPCC chapters on forestry as a mitigation option spend quite a bit of time (maybe most of the chapters) discussing the difficulties of implementation. The Special Report on Land Use in 2002 spent a thousand or so pages discussing it. The reports largely agree with John these are difficult issues. They don’t appear to have come to any firm conclusions about how to address them, although in practice, a large business associated with verification of the actual projects out there has arisen (Not that that’s necessarily good).

(2) The results with M. Tavoni above indicate a 3-1 benefit cost ratio for including land use in meeting stringent carbon targets. If no transactions costs, the forest program would cost roughly $1 trillion. Would transactions costs eat up the other $2 trillion? I doubt it. Note that none of the energy options consider transactions costs, although they include heavy doses of carbon storage in geological pits (still a highly uncertain option – with leakage of its own), and nuclear (lots of documented transactions costs there). I’m not arguing that we should get into a battle of who’s got the lowest transactions costs, but I think the scale of potential forest and land use reductions is large enough to include them clearly as an option.

(3) The value of carbon in forests quickly outweighs the value harvesting. For a representative southern pine stand in the US, a carbon price of roughly $20-25/t C ($5-7/t CO2) implies a carbon value roughly equal to typical timber values. Of course the highest value occurs with harvesting timber and being paid for carbon. Landowners in the south would only infinitely hold their forests without harvesting if carbon prices are well above $200/t C.

(4) Standing tropical forests have 80 – 130 (or maybe more) tons C per hectare. If carbon prices are $20/t C, and interest rates are 10%, then rental values are about $2/t C/yr. This amounts to $160-$230/ha/yr in rental values for holidng carbon. Not all, but many, would find this value higher than the value of converting to agriculture. At $100/t C, annual rentals would be $800 – $1300/ha/yr.