Optimal Use of Carbon Sequestration in a Global Climate Change Strategy Is there a Wooden B.pdfVIP

1 Optimal Use of Carbon Sequestration in a Global Climate Change Strategy: Is there a Wooden Bridge to a Clean Energy Future? Franck Lecocq*, Kenneth Chomitz July 2001 World Bank, Development Economic Research Group, Infrastructure and Environment 1818 H St NW Washington DC 20433 USA Abstract Carbon sequestration is believed to “buy time” for technical change in the energy sector. To assess rigorously this widespread argument, we build an intertemporal optimization model where both abatement of fossil fuel emissions and biomass sequestration can be used to mitigate climate change. We confirm that permanent sequestration, if feasible, can be a cost-effective part of an overall climate change mitigation strategy. Optimal use of temporary sequestration depends mostly on the level of marginal damages and much less on expectations about future technical change in the energy sector. Temporary sequestration is unattractive when marginal damages are low. Keywords: climate change, optimization, carbon sequestration, deforestation, land-use change JEL Classification: Q15, Q20 1. Introduction Does temporary sequestration of CO2 have a place in a comprehensive policy for mitigating climate change? Three arguments have been advanced in favor of sequestration. First, some proportion of “temporary” sequestration may prove permanent (Chomitz, 2000). This applies both for plantations, which may become financially sustainable after initial barriers such as establishment costs have been overcome, and for deforestation prevention projects in areas where pressure on forest turns out to be only temporary1. Second, temporary sequestration may succeed in deferring climatic damages, and this deferral is argued to be a benefit. Third, some argue that temporary sequestration “buys time” for technical change: in other words, it bridges from a period when energy abatement is expensive to a future * Cor