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View Diary: An Introduction to the Wonderful World of Monopolies (35 comments)

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  •  hmm... (1+ / 0-)
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    I actually own, as part of a collective, 120 acres of woodland in the Cumberland Plateau region of Tennessee. About 75% of it is wooded, though the stand is not very old, maybe just a few decades. We have a community compact not to cut down any trees, which we view as valuable in their own right.

    Each acre probably sequesters about 1 ton of carbon every year, something like that. Which means the whole piece of land sequesters about 75 tons of carbon every year. I have my own carbon offset!

    Anyway, we don't cut down our trees because we like trees more than money. But if we wanted to make money off the land, we might clear-cut the land, which would likely produce about $1000 per acre, or $75,000 total.

    How much money could we make from selling avoided deforestation carbon offset credits?

    It seems like the cost of credit should be more than the $1000 per acre of forest we could make by cutting it all down.

    If we didn't love trees more than money, I imagine we would either demand $1000 per acre of forest that we didn't cut down (for fifty years?) or just cut it all down and sell offsets for reforesting the tract with quick growing pine. Rinse and repeat in 15 years.

    So, which is the most profitable approach?

    It seems like the most profitable approach for this piece of land is to cut it all, replant and collect carbon offsets for doing so, and then cut it all down again.

    It seems like the value of the offset would have to be tremendously high to match the value of timber. The price of carbon is around $20 per ton, right? The timber is worth 50 times more than that.

    Not sure I'm understanding.

    •  If I understand correctly, (0+ / 0-)

      you must actually let the trees stand for a certain period of time.

      Iuris praecepta sunt haec: Honeste vivere, alterum non laedere, suum cuique tribuere. - Ulpian, Digestae 1, 3

      by Dauphin on Sun Jan 17, 2010 at 04:18:13 PM PST

      [ Parent ]

      •  ok (1+ / 0-)
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        Let's say I clear-cut the land and pocket $75,000. It costs me $25,000 to replant, and 16.66 years later I cut again for another $75,000. I do it again. That's 50 years, and I have made $175,000 profit cutting and planting.

        In order for avoided deforestation credits to be competitive, they would have to equal that number, $175,000 over 50 years.

        Keeping it simple, that means the buyer would be paying $175,000 for 50 years X 75 acres X 1 ton of carbon per acre or 3750 tons of carbon, provided I didn't cut anything for 50 years.

        $175,000/3750 is $46.66 per ton of carbon.

        Current prices for forest carbon is around $10 or less.

        I think that price is going to have to come up a lot to have any real effect.

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