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Accession Number PB2012-114846
Title Baselines in Environmental Markets: Tradeoffs Between Cost and Additionality.
Publication Date Feb 2012
Media Count 8p
Personal Author E. Marshall M. Weinberg
Abstract Over the past few decades, conservation programs have provided incentives to farmers to make production decisions that place a priority on environmental improvements in addition to production of commodities (Claassen et al., 2007). More recently, markets have been developed or proposed that allow farmers to sell credits for environmental improvements in water quality, carbon sequestration, wetlands restoration, and other areas. These markets use an environmental baseline to help determine whether the proposed improvements qualify for market credits, and, if so, the number that should be awarded. Selection of a baseline emissions level is often a critical and contentious element of program design for carbon or water-quality credit markets. Baselines help ensure that credits generated for sale through markets are additional (i.e., the environmental improvements qualifying for offset credits would not have taken place in the absence of the market or program incentive). Additionality is frequently cited as a requirement in defining the integrity of environmental improvement credits (Three-Regions Offsets Working Group, 2010). Giving credits or payments for changes that have already been implemented, or are likely to be implemented soon even in the absence of the program, can undermine the environmental gains expected from the program. Due to the complexity and costs associated with defining, measuring, and verifying environmental baseline levels across heterogeneous landscapes, program managers may face a tradeoff between the precision with which changes in environmental performance can be estimated and the cost of refining those estimates. Balancing these two considerations is often the motivation behind selection of a particular baseline in environmental market design. Other market design considerations include those related to program eligibility restrictions, scope of measurement (i.e., accounting for leakage), offset permanence, and measurement uncertainty. This brief focuses exclusively on baselines to clarify their role in the larger context of offset market design.
Keywords Carbon sequestration
Commodities
Conservation
Costs
Credit
Environmental goods
Farmer participation
Market
Production
Trading opportunities
Water quality
Wetlands


 
Source Agency Economic Research Service
NTIS Subject Category 98 - Agriculture & Food
96A - Domestic Commerce, Marketing, & Economics
68 - Environmental Pollution & Control
Corporate Author Economic Research Service, Washington, DC.
Document Type Technical report
Title Note N/A
NTIS Issue Number 1226
Contract Number N/A

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