Working Paper: NBER ID: w16963
Authors: Charles Mason; Andrew Plantinga
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 to the use of carbon offsets to mitigate climate change. We analyze optimal contracts for forest carbon, an important offset category. A novel national-scale simulation of the contracts is conducted that uses econometric results derived from micro data. For a 50 million acre increase in forest area, annual government expenditures with optimal contracts are found to be about $4 billion lower compared to costs with a uniform subsidy.
Keywords: carbon offsets; additionality; public goods; contracting; forestation
JEL Codes: D8; L15; Q2
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| optimal contracting scheme for carbon offsets (D86) | reduce government expenditures (H59) |
| optimal contracting scheme (D86) | identification of additional forest area provided by landowners (Q15) |
| contracting scheme (M55) | verification of additionality (C12) |
| contracting scheme (M55) | enhance ability to verify additionality (O22) |
| optimal contracts (D86) | tailored approach to different agents' opportunity costs (F12) |
| contracting scheme (M55) | government costs vs. uniform subsidies (H29) |