Journal of Forest Economics > Vol 33 > Issue 1

Forest-based carbon sequestration, and the role of forward, futures, and carbon-lending markets: A comparative institutions approach

Andrew Coleman, , andrew.coleman@otago.ac.n
 
Suggested Citation
Andrew Coleman (2018), "Forest-based carbon sequestration, and the role of forward, futures, and carbon-lending markets: A comparative institutions approach", Journal of Forest Economics: Vol. 33: No. 1, pp 95-104. http://dx.doi.org/10.1016/j.jfe.2018.12.002

Published: 0/12/2018
© 0 2018 Andrew Coleman
 
Subjects
 
Keywords
JEL Codes:Q23Q55
Carbon bankingCarbon forward marketsForest sequestration
 

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In this article:
1 Introduction
2 Forestry in New Zealand and the carbon market
3 Forwards, futures, and lending markets
4 A carbon lending market
5 Conclusions

Abstract

The sequestration of CO2 in forests is often suggested as a means to offset greenhouse gas emissions. New Zealand’s experience suggests the effects of government programmes to provide carbon credits to forest owners could be enhanced if forward markets, futures markets, or carbon-lending markets were used to manage risks. This paper provides a comparative institutions approach based on the history of commodity markets to argue that carbon lending markets, not forward or futures markets, are likely to be the most convenient form of a forestry carbon market. A carbon lending market will raise the total returns from forestry investments with minimal risks to forest owners, and simultaneously reduce the risks facing other firms contemplating carbon reducing investments. For this reason, governments wishing to include forest sequestration in an Emissions Trading Scheme may wish to encourage the development of a carbon lending market.

DOI:10.1016/j.jfe.2018.12.002