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Consequences for the global forest sector of carbon offset payments

Consequences for the global forest sector of carbon offset payments. Joseph Buongiorno, Shushuai Zhu. Background. CO 2 emissions => climate change International initiatives Markets Sectoral mechanisms Green climate fund Involve developing countries Better use forests potential

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Consequences for the global forest sector of carbon offset payments

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  1. Consequences for the global forest sector of carbon offset payments Joseph Buongiorno, Shushuai Zhu

  2. Background • CO2 emissions => climate change • International initiatives • Markets • Sectoral mechanisms • Green climate fund • Involve developing countries • Better use forests potential (REduction Deforestation Degration)

  3. Objectives • CO2e sequestration • World • Regions and countries • Effects on markets • Roundwood • Manufactured products With subsidies: ≠ Prices CO2e -Global policy -Partial policy

  4. Theory

  5. GFPM • Dynamic spatial economic model • 180 countries • Forest area & stock • 14 commodities • Production • Consumption • Imports, exports • Prices

  6. Raw material Intermediate product Final product Fuelwood Fuelwood Industrial wood Sawnwood Plywood Particleboard Inventory Fiberboard Mechanical pulp Newsprint Chemical pulp Printing paper Other fibre pulp Other paper Waste paper GFPM Product Flows

  7. Static phase Market surplus: Equilibrium: Dual => Pik

  8. Dynamic phase Supply shift Forest inventory change Offset payment Inventory growth

  9. Inventory growth

  10. DATA Base year = 2009 (FAOSTAT) Resources = FRA 2010 GDP Population 2009-2030 USDA-ERS

  11. CO2e offset payments

  12. Effects on stock CO2e

  13. 300000 250000 200000 Million t 150000 100000 50000 0 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 Year Africa North/Central America South America Asia Oceania Europe Stock CO2e base projection World: 770 billion t 890 billion t

  14. Δstock CO2e with global policy @$30/t

  15. Δstock CO2e @ $30/t, developed countries only

  16. Δstock CO2e in 2030 @ $30/t

  17. CO2e storage supply =>

  18. World 500 400 300 $) Offset payments (billion 200 100 0 0 2000 4000 6000 8000 10000 CO2e (million t) Global policy Developed countries only Cost of carbon sequestration 2015-2030

  19. Effects on wood markets

  20. Wood prices @$30/t CO2e Global (+38%) Partial (+28%) base

  21. Δroundwood production in 2030 @$30/tCO2e

  22. Δ roundwood revenues in 2030 @$30/tCO2

  23. Effects on wood products

  24. ΔSawnwood consumption in 2030 @ $30/t CO2e

  25. 80000 60000 40000 20000 Thousand cubic meters 0 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 -20000 -40000 -60000 Africa North/Central America South America Asia Oceania Europe Year Sawnwood net trade @$30/t CO2e base Global (-19%) Partial (-19% Partial (-41%) global (-41%) Partial (49%) Global 38%)

  26. ΔSawnwood production in 2030 @ $30/t CO2e

  27. Δvalue added in 2030 @$30/t CO2e

  28. Conclusion • Partial policy • Exports environmental damage • Inefficient • Roundwood markets: • production ↓, but price ↑, revenues ↑ + offset payments • Product markets: • price ↑, consumption ↓, consumer welfare ↓ • Large trade effects • Redistribution of production and value added • Max world CO2e stored in forests =8.2 billion t vs world CO2 emissions 2010=33.5 billion t

  29. Acknowledgments • USDA Forest Service Southern Research Station • Jeffrey P. Prestemon

  30. Thank you!

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