Uncertainty Discounting for Land-Based Carbon Sequestration Academic Article uri icon

abstract

  • The effect of stochastic factors on soil carbon makes the quantity of carbon generated under a sequestration project uncertain. Hence, the quantity of sequestered carbon may need to be discounted to avoid liability from shortfalls. We present a potentially applicable uncertainty discount and discuss difficulties that might arise in empirical use. We insist that the variance in historical crop yields across geographical areas is used to derive a proxy variance for forming an uncertainty discount for carbon projects. Application of our approach suggests that project level uncertainty discounts would be 15-20% for the East Texas region.

published proceedings

  • Journal of Agricultural and Applied Economics

author list (cited authors)

  • Kim, M., & McCarl, B. A.

complete list of authors

  • Kim, Man-Keun||McCarl, Bruce A

publication date

  • April 2009