FEEM working papers "Note di lavoro" series
2011 .013

Contracting for Impure Public Goods: Carbon Offsets and Additionality


Authors: Charles F. Mason, Andrew J. Plantinga
Series: Climate Change and Sustainable Development
Editor: Carlo Carraro
Type: Journal
Keywords: Carbon Sequestration, Incentive Contracting, Offsets, Additionality
JEL n.: Q2, D8, L15
JEL: Journal of Environmental Economics and Management
Pages: Volume 66, Issue 1, Pages 1-14
Date: 07/2013

Abstract

Governments contracting with private agents for the provision of an impure public good must contend with agents who would potentially supply the good absent any payments. This additionality problem is centrally important in the use of carbon offsets as part of climate change mitigation. Analyzing optimal contracts for forest carbon sequestration, an important offset category, we conduct a national-scale simulation using results from an econometric model of land-use change. The results indicate that for an increase in forest area of 50 million acres, annual government expenditures with optimal contracts are about $4 billion lower compared than under a uniform subsidy.

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Suggested citation: Charles F. Mason, Andrew J. Plantinga, The additionality problem with offsets: Optimal contracts for carbon sequestration in forests, Journal of Environmental Economics and Management, Volume 66, Issue 1, July 2013, Pages 1-14, ISSN 0095-0696, http://dx.doi.org/10.1016/j.jeem.2013.02.003

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