Lincoln University. Department of Accounting, Economics and Finance.
Abstract
Presented at the 2012 Lincoln University Postgraduate
Conference, 28-29 August, 2012, Lincoln, New ZealandForest carbon is potentially an important income stream for small landowners in Guatemala
that would help to cease deforestation pressures. However, the temporary nature of
sequestered forest carbon, the risk of environmental disturbances releasing it, and the form of
international carbon markets affect the ability of small forest owners to participate in carbon
trading. To overcome these hurdles an annual carbon rental mechanism may be able to be
established through the carbon banking approach. Thus, this study attempts to explore the
potential of the carbon banking to include small forest owners into the carbon trading system
by providing annual payments for retaining forest. This paper reports the results of an
investigation into the stability of carbon pools formed by small forest owners in Guatemala
and the effect this has on requirements for applying carbon banking approach. The study
uses data on area burned annually in three eco-zones in Guatemala to estimate the risk of
loss of forest carbon due to fire. This information is used in Monte Carlo simulation to model
the risk-adjusted area of forest carbon available for leasing. The results show that only
96.35% of the forest carbon under contract from small owners in the wet zone is available for
leasing to the carbon market when adjusted for fire risk. The same adjustment for the
montane zone is 98.87% and for the dry zone is 97.13%. These percentages are used to
calculate the minimum differential between prices paid to small owners and what is charged
to carbon buyers
