Value and Risks of Expiring Carbon Credits from CDM Afforestation and Reforestation

34 Pages Posted: 17 Aug 2004

See all articles by Michael Dutschke

Michael Dutschke

Independent expert

Bernhard Schlamadinger

Joanneum Research

Jenny L. P. Wong

Malaysian Forest Research Institute - Natural Forest Division

Michael Rumberg

TÜV Süddeutschland

Date Written: August 2004

Abstract

The Milan conference of the UN Framework Convention on Climate Change has established two types of emission offsets under the Clean Development Mechanism (CDM), valid for afforestation and reforestation activities. In order to account for the non-permanent nature of carbon storage in forests, these credits expire after a predefined periods, after which the buyer needs to replace them. The present article assesses their market value in relation to permanent credits, identifies their specific risks and proposes how to mitigate and manage them. It analyzes strengths and weaknesses of expiring credits for sellers and buyers. Taking the example of the EU emissions trading system, the authors discuss how expiring credits could reach fungibility with permanent emission allowances on domestic markets.

Keywords: CDM, afforestation, reforestation, permanence, insurance, lCER, tCER

JEL Classification: Q23, Q25, Q13

Suggested Citation

Dutschke, Michael and Schlamadinger, Bernhard and Wong, Jenny L. P. and Rumberg, Michael, Value and Risks of Expiring Carbon Credits from CDM Afforestation and Reforestation (August 2004). Available at SSRN: https://ssrn.com/abstract=576904 or http://dx.doi.org/10.2139/ssrn.576904

Michael Dutschke (Contact Author)

Independent expert ( email )

Badstr. 41
Offenburg, 77652
Germany
+491783355749 (Phone)

HOME PAGE: http://biocarbon.net

Bernhard Schlamadinger

Joanneum Research ( email )

8010 Graz
Austria

Jenny L. P. Wong

Malaysian Forest Research Institute - Natural Forest Division ( email )

Kuala Lumpur
Malaysia

Michael Rumberg

TÜV Süddeutschland ( email )

Munich
Germany

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