Saturday, December 17, 2016

A Global Survey and Review of the Determinants of Transaction Costs of Forestry Carbon Projects

• We measured transaction costs incurred by project developers of forestry carbon in monetary and non-monetary terms.
• We tested if the transaction costs depend on characteristics of the transaction, transactor, and institutional design.
• TCs are found to be significantly influenced by various factors, especially market type.
• CDM-market-related projects face significantly higher TCs than non-CDM-related projects.

Reducing carbon emissions in the forestry sector by means of market-based schemes is considered a cost-effective measure for tackling climate change impacts. However, the transaction costs (TCs) involved are typically unknown or unquantified and therefore often neglected. In this study three types of TCs (search, design and negotiation costs) were measured in person-days and monetary terms based on a global survey of forestry carbon projects implemented across Latin-America, Asia and Africa. Cost estimates vary between zero and 1.201/tCO2 for person-days and from zero to US$ 1.738/tCO2 for monetary costs. Key drivers of TCs are identified based on the characteristics of the project in general, the transaction, the transactors involved and institutional design. The latter type of characteristic is shown to have a particularly large impact on TCs.

by Thu-Ha Dang Phan 1 and 2, Roy Brouwer 2 and Marc David Davidson 1 
1. Institute for Biodiversity and Ecosystem Dynamics, University of Amsterdam, P.O. Box 94248, 1090 GE Amsterdam, The Netherlands
2. Department of Economics, University of Waterloo 200 University Avenue West, Waterloo, ON, N2L 3G1, Canada
Ecological Economics via Elsevier Science Direct
Volume 133; March, 2017; Pages 1–10
Available online 24 November 2016
Keywords: Transaction costs; Institutional design; Forestry carbon; REDD; CDM; Carbon market

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