Conference Agenda

We construct an analytical general equilibrium model of an economy with carbon offsets, and show that increasing the carbon offset price has an ambiguous effect on aggregate emissions and welfare. Using two carbon accounting metrics, we demonstrate that offsets are over-credited under many parameterizations; however, offset under-crediting can also occur. Due to general equilibrium effects, neither carbon accounting metric is a sufficient statistic for welfare. Furthermore, we define four margins whereby offsets can respond to payments, including a margin not previously identified. Our results suggest that market spillover effects warrant consideration when evaluating carbon offset policies.

Forest carbon offsetting assumes a credited tonne is equivalent to an emitted one. After on-site verification, three downstream deductions—market leakage, finite storage duration, and reversal risk—reduce a credit's climate value. Prior work addresses upstream additionality or aggregate over-crediting; none prices these three deductions together from empirical data. We calibrate each from published evidence and combine them into one issuance rule, applied to sixteen forest practices across three European biomes with Monte Carlo uncertainty. Net climate value—the surviving share—spans 11–49%, and five European schemes over-credit by 32–63%. Finite storage duration is the largest deduction for most practices, yet schemes credit 30- and 100-year contracts identically. Absolute levels depend on the permanence benchmark, but rankings and the sign of every scheme's gap are invariant. As the EU finalises its Carbon Removals Certification Framework, a credit equals a tonne only when leakage, duration, and reversal are priced alongside verification.

Emissions trading programs have been promoted as efficient means to reduce nonpoint source water pollution and sequester carbon from agricultural land. While trading programs are often evaluated in isolation, they compete with longstanding agricultural conservation subsidy programs. Both programs target agroforestry practices that provide environmental benefits using different payment structures: Trading pays for performance while agricultural conservation programs pay for effort. We evaluate the performance of both programs in isolation and competition using an integrated assessment model that combines a stated preference survey of agricultural landowners for establishing forests with biophysical models of water quality and carbon sequestration benefits of forests. Our numerical policy simulation suggests that the water quality trading program in isolation can provide sufficient financial incentives for landowners to engage in afforestation activities on agricultural land. However, federal agricultural conservation subsidies largely crowd out the trading program when in competition. Stacking payments for carbon offsets with water quality trading payments does not enhance trading participation. Overall, the attractiveness and effectiveness of emissions trading programs for afforestation activities on agricultural land are heavily influenced by the presence and level of federal agricultural conservation subsidies.