Value and Risks of Expiring Carbon Credits from CDM Afforestation and Reforestation Report as inadecuate




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The Milan conference of the UN Framework Convention on Climate Change has established two types of emission offsets under the Clean Development Mechanism (CDM), valid for afforestation and reforestation activities. In order to account for the non-permanent nature of carbon storage in forests, these credits expire after a predefined periods, after which the buyer needs to replace them. The present article assesses their market value in relation to permanent credits, identifies their specific risks and proposes how to mitigate and manage them. It analyzes strengths and weaknesses of expiring credits for sellers and buyers. Taking the example of the EU emissions trading system, the authors discuss how expiring credits could reach fungibility with permanent emission allowances on domestic markets.

Keywords: CDM ; afforestation ; reforestation ; permanence ; insurance ; lCER ; tCER

Subject(s): Environmental Economics and Policy

Issue Date: 2004

Publication Type: Working or Discussion Paper

PURL Identifier: http://purl.umn.edu/26347

Total Pages: 34

JEL Codes: Q23; Q25; Q13

Series Statement: HWWA Discussion Paper 290

Record appears in: Hamburg Institute of International Economics > Discussion Paper Series





Author: Dutschke, Michael ; Schlamadinger, Bernhard ; Wong, Jenny L.P. ; Rumberg, Michael

Source: http://ageconsearch.umn.edu/record/26347?ln=en







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