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The land use change time-accounting failure

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Abstract

Land use change (LUC) is the second largest human-induced source of greenhouse gases. While LUC impacts are mostly immediate, policy makers consider it to be evenly spread over time. In the context of public evaluation of projects, I theoretically show that, as long as the discounting process perfectly offsets the rise of carbon prices, cost-benefit analysis outcomes are not affected. When this condition does not hold, which is particular to the global warming issue, the uniform time-accounting of LUC distorts present values by emphasizing both the discounting process and the increase in the carbon price over time. This induced bias is quantified in a case study of bioethanol in France. Depending on the type of impact and discounting and carbon pricing assumptions, a downward/upward bias between ±15% and ±30% of the LUC value is found. Two simple decision tools are pro- vided to improve accounting of LUC impacts.
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Dates and versions

hal-02489625 , version 1 (24-02-2020)

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  • HAL Id : hal-02489625 , version 1

Cite

Marion Dupoux. The land use change time-accounting failure: Cahiers de l'Economie, Série Recherche, n° 107. 2016. ⟨hal-02489625⟩
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