Temporary sequestration credits : an instrument for carbon bears, Vol. 1 of 1

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Temporary sequestration credits : an instrument for carbon bears

Author:	Kenneth M. Chomitz; Franck Lecocq;	Collection Title:	Policy, Research working paper series ; no. WPS 3181
Country:	World;	Date Stored:	2004/01/16
Document Date:	2003/12/01	Document Type:	Policy Research Working Paper
Language:	English	Region:	The World Region
Report Number:	WPS3181	SubTopics:	Environmental Economics & Policies; Carbon Policy and Trading; Payment Systems & Infrastructure; Montreal Protocol; Banks & Banking Reform; Insurance & Risk Mitigation; Financial Intermediation
Volume No:	1 of 1

Summary: Temporary crediting of carbon storage is a proposed instrument that allows entities with emissions reductions obligations to defer some obligations for a fixed period of time. This instrument provides a means of guaranteeing the environmental integrity of a carbon sequestration project. But because the user of the temporary credit takes on the liability of renewing it, or replacing it with a permanent credit, the temporary credit must sell at a discount compared with a permanent credit. The authors show that this discount depends on the expected change in price of a permanent credit. Temporary credits have value only if restrictions on carbon emissions are not expected to tighten substantially. The intuition is illustrated by assessing the value of a hypothetical temporary sulfur dioxide sequestration credit using historical data on actual sulfur dioxide allowance prices.


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	PDF 14 pages	WPS3181	0.21

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