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A forest owner in a developing country claims that he earns more money with carbon sequestration than with timber production. Determine the revenues of a carbon sink project based on the following information. The project duration is 30 years. Temporary credits are issued after carbon has been sequestered with an expiring time of 5 years. Carbon sequestration is assumed to be 45 tons CO2 until year year 5, additional 75 tons until year 10, 115 tons until year 15, 95 tons until year 20, and 75 tons until year 25, respectively. The price of permanent emission reduction certificates is US$ 25 and the interest rate in ANNEX 1 countries is 2%. Assume that the present value of timber production is US$ 1300 and the interest rate in developing country is 4%. Is the forest owner right?

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M959872

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