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The Economic Value of Selling Carbon Credits from Restored Forests: A Case Study from the Navajo Nation's Tribal Forests

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Abstract:

The goals of this study were to promote restoration of forest ecosystems through fire hazard reduction treatments and to evaluate potential economic benefits of carbon credits to the Navajo Nation. We used the historic Navajo Nation's Continuous Forest Inventory data to calibrate the Forest Vegetation Simulator (FVS) with growth increments and used the FVS to run simulations that encompass the next 50 years. We calculated C revenues using two carbon accounting approaches: (1) reduced buffer pool under the Climate Action Reserve protocol and (2) increased C stocks based on with-and-without analysis. We investigated nine C price scenarios, including constant- and rising-price trajectories; performed discounted cash flow analyses; and calculated net present worth (NPW). When timber was the only marketable output, using a real alternative rate of return (ARR) of 4%, the NPW of target basal area (BA) 40, 70, and 100 ft2/ac were −$144.89, −$267.98, and −$308.57/ac, respectively. When both timber and C were marketable outputs, with a C price of $3/ton, the NPW of target BAs of 40, 70, and 100 ft2/ac were increased to −$119.26, −$256.83, and −$306.31, respectively, under the first accounting approach, and were increased to $168.62, −$57.29, and −$184.09, respectively, under the second accounting approach. Our results indicate that C accounting method, C price, and landowner's ARR affect forest landowner's profitability in participating in the C market.

Keywords: Native American tribal forests; carbon accounting method; ecological restoration treatment; forest project's reversal risk rating; net present worth analysis

Document Type: Research Article

Publication date: January 1, 2011

More about this publication?
  • Each regional journal of applied forestry focuses on research, practice, and techniques targeted to foresters and allied professionals in specific regions of the United States and Canada. The Western Journal of Applied Forestry covers the western United States, including Alaska, and western Canada; WJAF will also consider manuscripts reporting research in northern Mexico that has potential application in the southwestern United States.
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