Agriculture Reference
In-Depth Information
the case of zoning or wilderness set asides. With regulations that involve
silvicultural prescriptions to provide more nature (greater uptake of
carbon), there remains uncertainty (
e.g.,
related to measurement) so that it
is not precisely clear when and if the desired outcome has been achieved.
Even when outcomes are defined in terms of specific silvicultural tasks,
such as establishing trees on a site where there had been no trees
previously, there remains a certain amount of ambiguity. For instance,
what is the state of trees at the time they are 'established'? What proportion
are likely to survive? How many stems need to be planted? Are they
appropriate species for the site? Are they native or exotic species, or
genetically engineered to grow quickly for a short period in order to satisfy
“establishment” and/or perceived C uptake requirements? Are trees subject
to disease, and what is the probability that they will survive to maturity and
not release C to the atmosphere before then?
While direct intervention by the state can, in principle, lead to
greater uptake and storage of C, such intervention often leads to policy
failure. Policy failure results from the inability of the authority to provide
appropriate (socially optimal) levels of commercial and/or environmental
amenities because of political interference and/or bureaucratic bungling
(see Hart
et al.
1997; Shleifer and Vishny 1998; La Porta
et al.
1999).
Therefore, it is important to consider the potential of competition, or
markets, to address policy failure related to forestry and global climate
change.
Perhaps the most important market-based initiative with respect to
forestry and land use is the establishment, beginning July 1, 2000, of the
world's first exchange-traded market for carbon uptake credits. This
exchange was created in response to increasing international demand by
large emitters looking to manage risks and purchase C credits, and in
anticipation of public policy to meet targeted GHG emission reductions.
The carbon-trading market was created by the Sydney Futures Exchange,
in conjunction with State Forests of New South Wales and its subsidiary,
the New Zealand Futures and Options Exchange; the Chicago Mercantile
Exchange is likely to follow (McLean 2000).
While this initiative has essentially by-passed government - indeed
precedes political initiatives - public institutions play an important role as
a catalyst. In particular, by separating ownership of carbon from the tree,
legislation in New South Wales enabled establishment of the carbon
exchange. Further, without the courts, it will not be possible to enforce and
adjudicate C sequestration contracts that provide information on the carbon
sequestered (that it even exists) and the silviculture to be performed (that it
has happened). It will likely be left to some mix of initiatives by the private
and public sectors to certify C credits. This will be easier in the case of
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