The land use change time-accounting failure

Marion Dupoux (1)

1 IFPEN - IFP Energies nouvelles

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.

Domains: Economics and Finance

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