Carbon sequestration and the optimal forest harvest decision under alternative baseline policies

Abstract

The choice of a baseline against which to evaluate changes in carbon stocks is a critical component of any forest carbon offset market. In this paper, we use a discrete dynamic programming model and data from a lodgepole pine (Pinus contorta Douglas ex Loudon) stand in northeastern British Columbia, Canada, to demonstrate that different baselines have little or no effect on optimal harvest decision but can have a large impact on economic returns to a landowner. The results reveal that the magnitude of the financial return to the landowner is dependent on the starting conditions of both the predetermined baseline and the proposed carbon offset project. The study also shows that when given the choice between alternative baselines, a landowner will always choose a fixed baseline over a business-as-usual baseline.