Biological Carbon Sequestration and Carbon Trading Re-Visited

Biological activities that sequester carbon create CO2 offset credits that could obviate the need for reductions in fossil fuel use. Credits are earned by storing carbon in terrestrial ecosystems and wood products, although CO2 emissions are also mitigated by delaying deforestation, which accounts for one-quarter of anthropogenic CO2 emissions. However, non-permanent carbon offsets from biological activities are difficult to compare with each other and with emissions reduction because they differ in how long they prevent CO2 from entering the atmosphere. This is the duration problem. It results in uncertainty and makes it hard to determine the legitimacy of biological activities in mitigating climate change. Measuring, verifying and monitoring the carbon sequestered in sinks greatly increases transaction costs and leads to rent seeking by sellers of dubious sink credits. While biological sink activities undoubtedly help mitigate climate change and should not be neglected, it is shown that there are limits to the substitutability between temporary offset credits from these activities and emissions reduction, and that this has implications for carbon trading. A possible solution to inherent incommensurability between temporary and permanent credits is also suggested

Wind Power: The Economic Impact of Intermittency

Wind is the fastest growing renewable energy source for generating electricity, but economic research lags behind. In this study, therefore, we examine the economics of integrating large-scale wind energy into an existing electrical grid. Using a simple grid management model to investigate the impact of various levels of wind penetration on grid management costs, we show that costs of reducing CO2 emissions by relying more on wind power depend on the generation mix of the existing electrical grid and the degree of wind penetration, with costs ranging from $44 to well over$1000 per tonne of CO2 reduced. Costs are lowest if wind displaces large amounts of fossil fuel production and there is some hydroelectric power to act as a buffer. Hydro capacity has the ability to store wind generated power for use at more opportune times. If wind does nothing more than replace hydro or nuclear power, however, the environmental benefits (reduced CO2 emissions) of investing in wind power are smal

What Makes Mountain Pine Beetle a Tricky Pest? Difficult Decisions when Facing Beetle Attack in a Mixed Species Forest

The pine forest of British Columbia is undergoing its largest recorded pest epidemic. The damage caused by native mountain pine beetle creates difficulties for the public owner of the resource, which is interested in protecting future timber supply while salvaging dead and dying pine. This paper addresses two problems that have often been over-looked: the variability and timing of beetle attack, and the variability of pine inventory in each stand. Management controls are limited to the annual rate of harvest and timber product outputs are based on shelf life – the length of time infested timber can still be used to produce lumber. Using mathematical programming to schedule harvest, we introduce a novel objective function based on the maximization of the net returns of the timber portfolio at the end of the 20 year time horizon under harvest and product flow constraints implemented by the public landowner to insure stability in the forest sector, and especially a stable supply of feedstock (bushchips) for bio-energy production, while recovering value from stands that would otherwise become uneconomical to harvest. The optimal short-run response is to increase harvests over the baseline harvest without beetle. The use of future net returns as the optimization objective ensures that harvest during the 20 year time horizon occurs in stands that would otherwise be economically unharvestable and also the harvest is generally above 70% pine in aggregate. Net returns do not exceed those of the baseline harvest without beetle, regardless of the scenario, as the harvest of low value bushchips must be subsidized by the harvest of timber that can be converted into lumber. Shelflife provides significant changes in NPV as more timber can be converted to lumber if shelflife is longer. The government has a difficult fiscal management problem. Employing an evenflow of total harvest can yield higher net gains but at the risk of relying more heavily on the harvest of damaged timber and reduced future harvests of quality timber for dimensional lumber. This strategy would produce a “feast” of short term revenue followed by a “famine” when bushchip harvest is subsidized by the harvest of better quality timber. Alternatively, managing the individual forest products could yield some minimum government revenues but this strategy could also lead to the need to deplete reserves that could be reserved for future timber supply. Regardless of the strategy, to optimize for future timber supply potential means that a large percentage (25% in this study) of the damaged pine should only be harvested in the future and will not be of a quality to produce lumber

Processes of soil degradation and deterioration: an economics point of view

Non-Peer Reviewe

Expert opinion versus transaction evidence: using the Reilly index to measure open space premiums in the urban-rural fringe

Due to economic and population growth farmland and to a lesser extend other undeveloped areas are under pressure in the urban-rural fringe in British Columbia, Canada. The objectives of this paper are to determine if residential property values near Victoria, BC include open-space premiums for farmland or parks or both, and to determine if using assessed values instead of market prices of the property result in the same findings. We estimate a SUR (Seemingly Unrelated Regression) model with two hedonic pricing equations, one with actual market values as the dependent variable and one with assessed property values, and compare the resulting estimates of shadow prices for open space amenities. Furthermore, we take account of spatial autocorrelation and combine Method of Moment estimates of the spatial parameters in both equation

An economic analysis of farmer decisions with respect to soil erosion in Saskatchewan

Non-Peer ReviewedA dynamic economic model is used to evaluate the far.m decision process with respect to the intensity of cropping in the Brown Soil Zone of Saskatchewan. Based on this model, and several agronomic relationships estimated from data collected as part of the Innovative Acres project, we each the following conclusions: (1) Flexible cropping increases net discounted returns and substantially reduces soil erosion, when compared to the predominant crop rotation in the region, ( 2) Unless soils are already substantially eroded, conventional summerfallow is preferred to chem-fallow by profit maximizing decision makers, and (3) The overall risk of flex-cropping may be less then the traditional rotations used in the study region

Natural Gas, Wind and Nuclear Options for Generating Electricity in a Carbon Constrained World

A linear programming model is used to examine the impact of carbon taxes on the optimal generation mix in the Alberta electrical system. The model permits decommissioning of generating assets with high carbon dioxide emissions and investment in new gas-fired, wind and, in some scenarios, nuclear capacity. Although there is an intertie from Alberta to the U.S., the focus is on the connection to British Columbia as wind energy can potentially be stored in reservoirs behind hydroelectric dams. However, storage can also be used to smooth out the net load facing nuclear facilities. A carbon tax facilitates early removal of coal-fired capacity, which is replaced by low-emissions gas plants. It is only when the carbon tax exceeds $125/tCO2 that wind enters the system, although wind is displaced by nuclear power if that option is permitted. Although upfront costs of adding nuclear capacity are prohibitive, nuclear outcompetes wind because wind farms have low capacity factors and, importantly, because a great deal of gas-plant capacity is required to support wind, something avoided when nuclear energy is added. Finally, an intertie with British Columbia is beneficial because of the support it provides for wind and nuclear energy, but the role of natural gas is more important in facilitating a transition to lower system-wide carbon dioxide emissions

Is Free Trade the End All Be All? The Case of Log Exports

The government of British Columbia imposes restrictions on the export of logs from public and private forestlands, primarily to promote local processing and associated employment benefits. Economists wholeheartedly oppose BC’s export restrictions, arguing that BC’s citizens are worse off as a result of the government’s measures. In this paper, it is shown that, while free trade in logs might well maximize global wellbeing, it might not necessarily result in the greatest benefit to British Columbia. Indeed, both economic theory and a follow-up numerical analysis indicate that some restrictions on the export of logs can lead to higher welfare for BC than free trade