Bowdoin Economist Critiques US Carbon Markets (Climate Change Economics)

In a new analysis of US carbon-offset programs that reward farmers for reforesting their farmland, Assistant Professor of Economics Erik Nelson finds that the programs are not enticing enough orchard farmers in Northern California to switch from fruit production to carbon production. These programs are designed to help mitigate climate change.

To make reforestation compete economically with orchard agriculture—to persuade a farmer to stop growing fruits or nuts and instead plant trees—the price of carbon offsets would have to increase nearly a hundredfold, Nelson argues in a new paper he published with Virginia Matzek, a restoration ecologist at Santa Clara University. “Our results partly explain low participation in the reforestation sector of US carbon markets,” they write. Their paper appears in Climate Change Economics.

In many ways orchard farmers appear to be good candidates for “carbon farming” because they are accustomed to working with trees and waiting many years for their investment to produce revenues. But the future for these carbon markets is not promising. Based on current prices for carbon offsets, a grower intent on maximizing revenue in the Central Valley of California, where Nelson and Matzek focused their study, is not likely to convert an orchard farm to forest at any point within the next 100 years.

Read the paper by Nelson and Matzek.