Transaction and abatement costs of carbon-sink projects: An analysis based on Indonesian agroforestry systems
Oscar Cacho, Graham R. Marshall and Mary Milne
Conference of the Australian New Zealand Society for Ecological Economics
University of Technology Sydney, 2-4 December 2002
The problem of global warming, together with the creation of the United Nations Framework
Convention on Climate Change and associated institutions, has sparked intense interest and
research in the energy and forestry sectors. Projects in the forestry sector, and land-use
change and forestry projects (LUCF) more generally, have the potential to help mitigate
global warming by acting as sinks for greenhouse gasses, particularly CO2. However, concerns
have been expressed that participation of LUCF projects in mitigation markets may be constrained
by high costs. Of particular concern are the transaction costs incurred in measuring, certifying
and selling the carbon-sequestration services generated by LUCF projects. This paper addresses
these issues by reviewing the implications of transaction and abatement costs for integrating
LUCF projects in carbon-sequestration markets. In addition, an approach to estimating the abatement
costs of such projects is demonstrated through four case studies of agroforestry systems located
in Sumatra, Indonesia.