Murray, Brian C. (RTI International, Hobbs 131, 3040 Cornwallis Road, Research Triangle Park, NC, 27709-2194; Phone: 919-541-6468; Fax: 919-541-6683; Email: bcm@rti.org)

Estimating Leakage from Forest and Agricultural Carbon Sequestration Projects

Brian C. Murray *, Bruce A. McCarl, Brent L. Sohngen,

Leakage is prominent among the concerns often raised about agriculture, land use change, and forestry carbon sequestration projects as a GHG mitigation strategy. While there is wide recognition that leakage should be deducted from the reporting of estimated carbon benefits from a mitigation project, no consensus yet exists on how to quantify leakage. Leakage occurs when the actions to reduce GHG emissions for a particular project cause responses outside the project boundaries that also have GHG consequences. The cause of leakage is a shifting of economic activity from inside the project boundaries to outside. Therefore approaches to address leakage must employ economic principles, methods and data to estimate its potential magnitude. This presentation builds off of economic analyses the co-authors have collectively conducted to examine leakage effects from forest and agricultural carbon programs both domestically in the U.S. and abroad. The work has primarily employed economic equilibrium models, which re-equilibrate the relevant markets in response to project or program-induced changes in supply and demand. This market leakage can displace economic activity and emissions to locations far away from where the project occurs and is thus difficult to monitor directly. However, because CO₂ emissions are spatially undifferentiated in terms of their contribution to climate change, even distant leakage matters. Preliminary findings from the authors’ works suggest that some forest carbon activities can exhibit large leakage effects depending on the activity itself (forest protection, afforestation, forest management) and the region where it is applied. Agricultural soil carbon sequestration tends to exhibit much less leakage than forest options due to differences in the extent to which soil carbon management practices affect productivity. While current estimates of leakage can be useful in determining rough magnitudes of its probable extent for certain types of forest carbon sequestration activities, there is likely to be a fair amount of heterogeneity in actual leakage effects from projects on the ground. The presentation will identify sources of this heterogeneity and evaluate methods for providing more spatially and sectorally refined estimates for forestry and agricultural projects.