Expanding Carbon Stocks in Existing Forests – A Methodological Approach for Cost Appraisal at the Enterprise Level

The study presents a comprehensive methodology for the appraisal of C-stock expansion in existing forests as a forest management activity according to Art. 3.4 of the Kyoto Protocol. It allows for producer costs of carbon sequestration in forest enterprises to be derived. The methodology is based on a non-linear programming approach considering economic optimisation as well as ecological, social and sustainability needs through constraints and risk integration. While introducing further constraints on carbon stocks, the carbon stored in forest biomass was increased in periodic increments. However, while extending the carbon stocks, the ecological and social constraints as well as sustainability requirements are not to be violated. Costs were derived for every additional Mg (Megagrams) of C per ha sequestered in comparison to a baseline management. Two basic cases were considered: First, a permanent carbon sequestration was assumed. Secondly, a temporary storage of additional carbon over 10 years was supposed. The potential willingness of buyers of carbon certificates to pay for temporary carbon sequestration was derived by a financial consideration. We assumed that, for a buyer, the value of a temporary carbon sequestration certificate would be equivalent to the return on the savings because an investment in technical measures on reduction of carbon emissions can be postponed. Temporary carbon storage proved to be an interesting alternative when compared with permanent sequestration of carbon. Basically the costs of additional Mg C sequestered increased when carbon sequestration in periodic increments was enlarged. Given a market price of 11.42 Euro per Mg C for 10-year temporary carbon storage, the management of the forest could expand additional sequestration up to 6 Mg C per ha. Doing so, additional carbon sequestration generates an economic surplus as the costs of the last Mg C per ha would equal the market price.     «

The study presents a comprehensive methodology for the appraisal of C-stock expansion in existing forests as a forest management activity according to Art. 3.4 of the Kyoto Protocol. It allows for producer costs of carbon sequestration in forest enterprises to be derived. The methodology is based on a non-linear programming approach considering economic optimisation as well as ecological, social and sustainability needs through constraints and risk integration. While introducing further constrai...     »