Analysis of the production and transaction costs of forest carbon offset projects in the USA

US Forest Sector Greenhouse Mitigation Potential and Implications for Nationally Determined Contributions

“…In the absence of transaction or market hurdle costs, then, the total GHG payments over the lifetime of the project would need to be at least as high as the costs of establishing the forest stand and the forgone agricultural profits over the same time span. For forest management and afforestation projects, these costs are fairly well known and documented in the literature (Galik, Cooley, & Baker, 2012) and are relatively low. For urban forestry and wood products, these costs are unknown, although they would likely involve some infrastructure investment costs.…”

“…Verification burden is expected to be highest for soil sequestration activities largely because of the variation of soil types and potential sampling methods needed to test soil organic carbon levels. Transaction costs refer to other cost elements that create a wedge between the GHG price incentive determined by the market and the net mitigation incentive received by suppliers (Galik, Cooley, & Baker, 2012). Transaction cost components potentially include offset aggregation fees, certification fees, and other monitoring, verification and reporting costs.…”

Designing efficient markets for carbon offsets with distributional constraints

“…Several studies have documented that transaction costs associated with the production of carbon offsets can be nontrivial (Antinori and Sathaye, 2007;Galik et al, 2012). We evaluate the impact of transaction costs on the efficacy of the instruments considered by adding a 5 dollar per ton of offsets produced.…”

“…First, the higher the SCC, the lower the quantity of allowances allocated to capped firms. 51 Second, the optimal quantity of allowances and the Galik et al (2012) estimate transaction costs for US-based forest carbon offset projects. The authors used a detailed spreadsheet model that includes disaggregated forest types and 10 different regions.…”

Effects of climate change on natural resources and communities: a compendium of briefing papers

“…As a result, smaller NIPF landowners generally will have to enter into contracts with aggregators to remain competitive with larger projects. Galik et al (2009a) analyzed a hypothetical forest management offset project under multiple accounting methodologies or protocols for a period of 100 years and estimated median transaction costs to be $1.63/t CO 2 e sequestered across different regions, forest types, project sizes, and rotation extension lengths. They found that forest offset transaction costs differ by protocol and tend to decrease with project size and length of rotation and that transaction costs can be significant for small forest management offset projects.…”