Presented at

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Evaluating Forest Carbon Sequestration Potential
in the U.S. with an Economic Model of the Forest
and Agricultural Sectors

• Presented at Advances in Terrestrial Ecosystem
  Carbon Inventory, Measurements, and Monitoring
  Raleigh, NC
• October 3, 2000
• Presented by Brian Murray

Research Triangle InstituteP.O. Box 12194
3040 Cornwallis RoadResearch Triangle Park, NC
27709
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Acknowledgements

• Modelers
• Bruce McCarl, Texas AM
• Darius Adams, Oregon State University
• Ralph Alig, US Forest Service
• Funding
• US EPA Climate Programs Division
• (through Stratus Consulting)

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Introduction

• U.S. Forests are currently a net carbon sink
  (200-300 MtC/yr)
• Driving factors
• Biophysical
• Economic
• Climate Policy Issues
• Sinks as a GHG mitigation strategy
• Sink potential and other forest functions are
  affected by CO2 and climate

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Economic Research Questions

• How do current/projected economic forces define
  the landscape and its C content?
• How can policy changes modify economic incentives
  to sequester C ?
• What is the cost of forest C sequestration
  relative to other mitigation options ?
• What are the economic welfare implications of
  changes in the
• Policy environment
• Natural environment

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What if carbon had a price?

• Land use
• Land moves from less to to more C-intensive use
  gt net forestation
• Forest Sector
• Increased forest management intensity
• Longer timber rotations (perhaps infinite)
• Favors products with longer shelf lives
• Bio-fuel potential

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What if carbon had a price? (contd)

• Agriculture
• Incentive for soil/grassland management practices
• Afforestation/Deforrestation
• Modification of product mix
• Bio-fuel potential
• Shift in fertilization (N2O), rice(CH4), ruminant
  livestock(CH4), Manure mgt(CH4,N2O), Energy
  Use(CO2)

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What if carbon had a price? (contd)

• Welfare Effects in Commodity Markets
• High sequestration products (Wood?)
• Producers
• Direct C Payments ()
• Indirect Prices fall (-)
• Consumers
• Prices fall ()
• Low Sequestration products (Ag?)
• Opposite effects
• Net market welfare effect (-) gt social cost

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FASOM Model Adams et al 1996

• Economic Model of US Forest and Agricultural
  Sectors
• Optimization MP algorithm allocates land and
  output in a way that maximizes market surplus
• across economic activities
• across time (100-year period)
• Carbon accounting
• Ecosystem pools
• Products

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FASOM model detail
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FASOM Model Structure
Forest sector model (TAMM based)
Agricultural sector model

• Public timberland
• FI timberland
• NIPF timberland
• FORONLY land

• Agricultural land
• Ag-only land

• Convertible
• cropland

CROPFOR

• Convertible land
• Region
• Soft Hard
• Prod. Class
• Mgt. Class

FORCROP
PASTFOR

• Convertible
• pastureland

FORPAST
Urban, developed and special uses
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Applications and Key Findings

• Baseline US private forest base projected to
  sequester 100-120 MM t/year to 2040
• Declines after 2020
• Incremental C from targeted national programs
  (Land Economics 1999)
• Quantity 15-70 MM t/year
• Cost (ave) 20-50 / ton
• Short-term management intensity
• Long-term afforestation
• N-Central hardwoods have more prominent role
  than previously believed

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Applications and Key Findings

• Targeted Afforestation Programs
• Empirical evidence of leakage problem
  offsetting land transfers out of forest
• Restricting land transfers addresses leakage, but
  raises costs
• Fewer acres enroll
• Reduced management intensity on enrolled acres
  and on traditional forest lands

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Work-in-Progress

• Evaluating C incentive programs of different
  scopes
• Broad - Entire land base
• Narrow - Specific lands or specific activities
• Synergistic effects
• Changing C02, climate
• gt Sequestration rates
• C incentives

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Conclusions

• Economic models can inform policymaking by
  showing how policies affect choices and outcomes
• Magnitude and relative cost of sequestration
  options
• Indirect effects of targeted policies
• Unintended consequences
• Perverse incentives
• Sensitivity of outcomes to policy design

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Conclusions (Contd)

• The broader the scope of the economic model, the
  better
• Earlier economic models of C sequestratiion
  ignored market feedback
• Land
• Commodity
• FASOM captures these feedbacks in the forest and
  agriculture sector
• Need for more general equilibrium model that
  captures other sectors ?

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Conclusions (Contd)

• Is Forest Carbon Sequestration a Viable C
  Strategy?
• Yes, but
• Timing is critical
• Leakage Permanence are issues
• Non-carbon synergies and tradeoffs exist
• It cannot entirely offset fossil fuel emissions

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