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Transaction and abatement costs of carbon-sink projects in developing countries

Published online by Cambridge University Press:  04 October 2005

OSCAR J. CACHO ,
GRAHAM R. MARSHALL  and
MARY MILNE
OSCAR J. CACHO
Affiliation:
School of Economics, University of New England, Armidale NSW 2351, Australia
GRAHAM R. MARSHALL
Affiliation:
Institute for Rural Futures, University of New England, Armidale NSW 2351, Australia
MARY MILNE
Affiliation:
Geoscience Australia, Symonston ACT, Australia
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Abstract

Projects in the forestry sector, and land-use change and forestry projects more generally, have the potential to help mitigate global warming by acting as sinks for greenhouse gasses, particularly CO2. However, concerns have been expressed that 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 reviewing the implications of transaction and abatement costs in carbon-sequestration projects. An approach to estimating abatement costs is demonstrated through four case studies of agroforestry systems located in Sumatra, Indonesia. A typology of transaction costs is presented and related to existing pilot projects. The paper concludes with recommendations to reduce the disadvantages that smallholders may face in capturing the opportunities offered by carbon markets.

Type
Research Article
Information
Environment and Development Economics , Volume 10 , Issue 5 , October 2005 , pp. 597 - 614
Copyright
2005 Cambridge University Press

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Footnotes

This research was funded by the Australian Centre for International Agricultural Research (ACIAR) and by the Food and Agriculture Organization (FAO) of the United Nations. Mary Milne was a consultant with the Center for International Forestry Research (CIFOR) when the research was undertaken.