Temporary carbon storage and discount rates

Several approaches have been proposed for accounting for temporary carbon sequestration in land-use change and forestry projects that are implemented to offset permanent emissions of carbon dioxide from the energy sector. In this paper, the authors investigate further what they call the "ideal" accounting system, where the forest owner would be paid for carbon sequestration as the service is provided and redeem payments when the forest is harvested and carbon is released back into the atmosphere. The authors demonstrate how discounting affects the net present value of the forest when carbon sequestration is taken into account under this ideal system. The analysis is based on simulation of farm-forestry systems in south-eastern Australia.