Abstract

The possibility of encouraging the growth of forests as a means of sequestering carbon dioxide has received considerable attention because of concerns about the threat of global climate change due to the greenhouse effect. In fact, this approach is an explicit element of both U.S. and international climate policies, partly because of evidence that growing trees to sequester carbon can be a relatively inexpensive means of combating climate change. But how sensitive are such estimates to specific conditions? We examine the sensitivity of carbon sequestration costs to changes in critical factors, including the nature of the management and deforestation regimes, silvicultural species, agricultural prices, and discount rates. We find, somewhat counter-intuitively, that the costs of carbon sequestration can be greater if trees are periodically harvested, rather than permanently established. In addition, higher discount rates imply higher marginal costs, and they imply non-monotonic changes in the amount of carbon sequestered. Importantly, retarded deforestation can sequester carbon at substantially lower costs than increased forestation. Key Words: climate change policy, forest sinks, land use, carbon sequestration costs JEL Classification Numbers: Q15, Q23, Q28, D62 * Newell is a Fellow at Resources for the Future; Stavins is the Albert Pratt Professor of Business and Government, and Faculty Chair, Environment and Natural Resources Program, at the John F. Kennedy School of Government, Harvard University, and University Fellow at Resources for the Future. Valuable comments on previous versions of this paper were provided by Lawrence Goulder, William Nordhaus, Andrew Plantinga, Kenneth Richards, two anonymous referees, and participants in seminars at the Univers...