4.6.3 Risks, Rights, and Practical Economics
Protecting forestlands, grasslands, and other natural ecosystems is often proposed
as the best way to maintain large carbon reservoirs at lowest cost. The cost
of such an approach, however, may in fact be significant, although low in comparison
with many of the options in the energy sector and attempts at forest protection
have failed in many parts of the world. The incentives to convert often far
outweigh the incentives to protect. This problem is often exacerbated by the
absence of well-defined, enforceable property rights, either private or public,
and the absence of other necessary institutions. In an open access situation
the incentives are to use it or lose it, since there are no certain
claims on the future use of the resource. Because there is no long-term claim
on the resource in the future, the result is that resources may be used wastefully
in excess of their economic optimum. Thus, deforestation and land clearing are
a form of the open access problem (Hardin, 1968).
The costs of carbon management may not be distributed in the same way as the
benefits. Carbon management options in developing countries may have low market
costs but high local social costs in land commitments, and the benefits that
arise may not be shared with local peoples. Analysis of a forest protection
project in Madagascar suggests that there are financial benefits for local inhabitants
and social benefits for the global community, but short-term debits at the national
level (Kremen et al., 2000). Formal adoption of markets for forest carbon could
increase incentives for forest protection, especially if mechanisms assure that
local peoples share in the benefits. Similarly, costs and benefits may be realized
at different times; future benefits are often weighted against current costs.
How communities value present and future costs depends on wealth, culture, and
economic and environmental priorities.
International consensus on carbon management begins to have important implications
for national sovereignty and personal property rights, an issue brought to prominence
by recent turmoil regarding international trade agreements (see Chapter
6 for a detailed discussion on policies, measures and instruments).