Uncertainty Discounting for Land-Based Carbon Sequestration

The effect of stochastic factors on soil carbon makes the quantity of carbon generated under a sequestration project uncertain. Hence, the quantity of sequestered carbon may need to be discounted to avoid liability from shortfalls. We present a potentially applicable uncertainty discount and discuss difficulties that might arise in empirical use. We insist that the variance in historical crop yields across geographical areas is used to derive a proxy variance for forming an uncertainty discount for carbon projects. Application of our approach suggests that project level uncertainty discounts would be 15–20% for the East Texas region.


Issue Date:
2009-04
Publication Type:
Journal Article
PURL Identifier:
http://purl.umn.edu/48754
Published in:
Journal of Agricultural and Applied Economics, Volume 41, Number 1
Page range:
1-11
Total Pages:
11
JEL Codes:
H43; Q54




 Record created 2017-04-01, last modified 2017-04-28

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