PT02 Environmental Economics
Exhibit Hall
8:00 AM - Tuesday
(PT08) Sequestration Offsets versus Direct Emission Reductions: Consideration of Environmental Externalities.
Elbakidze, L. 1, McCarl, B.2, 1 Texas A&M University, College Station, TX, U.S.A.2 Texas A&M University, College Station, TX, U.S.A.
ABSTRACT- Over the last few years the issue of global climate change has become a major environmental research topic. Fossil fuel oriented power generation sector is a large player when it comes to atmospheric greenhouse gas accumulation and consequent global temperature increase. This problem can be remedied by direct emission reductions from energy sector or by agricultural carbon sequestration, which could be achieved by altering agricultural soil management practices, generally reducing tillage intensity, or by expanding forested area or the size of forested stands. Both, agricultural sequestration and direct emission reductions have corresponding direct and external environmental effects. Externality considerations affect the socially optimal portfolio mix of these strategies. This paper examines the magnitudes of the external benefits/costs and the role that these benefits/costs play in formulating optimal GHG mitigation policy. The role of government is considered in the form of taxation and subsidization for correcting the outcomes of tradable emission permits system when both, agriculture and energy sectors are involved in reducing atmospheric concentration of greenhouse gases (GHG). We question whether government intervention is justified considering relative magnitudes of implementation costs and potential benefits that could be derived from such intervention. We conclude that at this time the existing estimates and the restrictive assumptions employed in calculating the estimates of external benefits/costs from sequestration and emission reduction do not provide enough support for allocating resources to alter the market mix of carbon sequestration and direct emission reduction strategies.
Key words: Co-benefits, Subsidies and Taxes, Greenhous Gases, Emission Offsets