The Canadian greenhouse gas offset system was proposed and developed with the objective of assisting Canada in achieving its Kyoto target by means of low cost emission reduction. This study estimates the potential of agricultural soils in Canada to provide carbon credits. Carbon sequestration practices such as moderate till, no-till and perennial crop activities were considered in the analysis. Crops under different tillage regimes, hay and alfalfa were also included in the study. Simulation analysis was undertaken using the Canadian Regional Agricultural Model (CRAM) for carbon prices ranging from $5 to $100/t of CO2e. Carbon credits generated as a result of the sequestration activities were estimated by endogenizing a carbon price for the sequestration activity into the CRAM model. The analysis was done regionally, provincially, and nationally. Two scenarios were investigated; one that included tillage practices and perennial crops (Policy All) and the other that only included tillage practices (Policy Till). Cropping pattern changes, carbon sequestration levels, carbon revenues, and adoption rates were estimated in the simulation. In addition, the role of transaction costs in the offset system was also examined. / The results of the simulation indicated that crop shifts towards hay and alfalfa occurred in the Policy All scenario, while practice shifts towards moderate and no-till occurred in the Policy Till scenario. Simulation analysis indicated that carbon sequestration levels vary by province and region. Among the provinces, the Prairie provinces had the highest carbon sequestration levels ranging from 50 percent under the Policy Till scenario, while under the Policy All scenario it was close to 97 percent. Nationally at a medium price of $15/t of CO2 approximately 1.08 Mt of CO2 and 0.11 Mt of CO2 were sequestered under Policy All and Policy Till scenario. When transaction costs were included in the analysis, approximately 30 to 40 percent less sequestration from the baseline was estimated. The results varied by province and region.

Saltwater marshes in the Bay of Fundy act as greenhouse gases sinks and reservoirs by fixing atmospheric carbon dioxide and storing it in carbon rich deposits. There are approximately 3,131.5 hectares of saltwater marsh in the Bay of Fundy, of which 958 ha are currently owned by the government or conservation organizations and 2,173.5 ha are owned by private landowners. A multiple bounded discrete choice contingent valuation survey was conducted to estimate landowners' willingness to accept compensation for selling their saltwater marshes to a conservation program. A multiple bounded model developed by Gregory Poe and Michael Welsh (1995) was used to analyze the responses. Mean willingness to accept compensation for one hectare of saltwater marsh was estimated to be $1,004.22, and aggregate willingness to accept compensation for the total of 2,173.5 ha of saltwater marsh owned by private landowners was approximately $2,180,000. Using these estimates and the rate of carbon dioxide-equivalent absorption of saltwater marshes, the opportunity cost of one tonne of carbon dioxide-equivalent sequestered by saltwater marshes in the Bay of Fundy was calculated to range between $16.70 and $19.95. Decision-makers can use this result for policy purposes concerning the achievement by Canada of its greenhouse gases emission reduction commitment under the Kyoto Protocol (1997).

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This dissertation consists of three essays on private landowners' response to incentives for carbon sequestration in forests. The first essay examines private landowner response to incentives for carbon sequestration through various combinations of intermediate management practices. The second essay focuses on agricultural landowners' willingness to participate in an incentive program for carbon sequestration through afforestation, and estimates the potential for carbon sequestration from afforestation, as well as its cost. The third study examines relative performances of incentive targeting strategies for forest carbon sequestration under asymmetric information given spatially heterogeneous land types. The first essay uses an econometric approach to analyze the factors affecting non-industrial private forest landowners' choice of forest management practices, and examines how these choices might change in response to the use of incentives for carbon sequestration. I use estimated parameters to simulate the carbon sequestration potential for different combinations of management practices, and compare the effectiveness and costs of performance-based and practice-based incentive payment schemes in the Western U.S. The results suggest that incentive payments can increase the probability that desirable combinations of management practices are adopted, and particularly that incentives targeting increased fertilization yield the highest carbon sequestration potential. I also find that a performance-based payment scheme produces higher carbon sequestration than a practice-based payments scheme. However, the annual sequestration potential of intermediate forest management in response to incentive payment is not as large as the sequestration potential of afforestation. The second essay uses a survey-based stated preference approach to predict landowners' willingness to participate in a tree planting program for carbon sequestration as a function of various factors affecting landowners' decision making and different levels of incentive payments. The estimation results show that the annual payment for carbon sequestration significantly and positively affects landowners' stated level of enrollment in a tree planting program. I use the estimated parameters to conduct regional level simulations of carbon sequestration in response to incentive payments. These simulations show that the carbon supply function in the Pacific Northwest region is steeper than in the Southeast region because of the lower adoption rate and less available lands. The national level carbon supply functions derived from this study are steeper than those obtained from bottom-up engineering approaches and optimization models, and are in the same range as those from revealed preference approach studies. The third essay uses both a conceptual analysis and a numerical analysis to examine the relative performances of incentive programs for carbon sequestration using alternative targeting criteria in the presence of asymmetric information and heterogeneity in costs and benefits. The results show that in the presence of asymmetric information, the combination of high cost-high benefit variability and negative correlation, which is the combination that achieves the greatest benefit gains under perfect information, can result in the greatest benefit losses. Additionally, a comparison of two targeting schemes shows that if cost variability is greater than benefit variability with negative correlation, the benefit achieved under benefit-cost ratio targeting can be lower than that under acreage targeting, so that an optimal targeting strategy under perfect information may no longer be optimal under asymmetric information. / Graduation date: 2013

This research simulates the response of the Quebec cropping sector to the introduction of carbon credit revenue which could be made available through the implementation of a greenhouse gas emissions trading and offset system in Canada. Eligible carbon sequestering practices investigated in the simulations include adoption of moderate tillage and no-till as well as the conversion to a permanent cover crop. Monetary demand for greenhouse gas emissions offsets from the cropping sector is endogenized in the objective function of the Canadian Regional Agriculture Model (CRAM) which has been modified to account for the simulations and for the disaggregation of the single crop region of Quebec into eleven sub-regions. Changes in the cropping sector induced by the introduction of seven different carbon price levels, ranging from $1/t CO2 to $100/t CO2, are compared to a baseline. Variables covered in the simulation results include: relative profitability of carbon sequestering crops/technology; adoption rates of moderate tillage and no-till; carbon sequestration levels; carbon credit revenue; cropping pattern, crop production and livestock. / Results indicate that carbon sequestration in agricultural soils could only contribute a minor share of the total emission reduction in Quebec, even with very high carbon price levels. At a carbon price of $15/t CO2, it is estimated that changes in tillage practices and permanent cover would result in an additional 12,328 t CO2 per year sequestered by the cropping sector in Quebec. However, some regions display higher adoption rates of carbon sequestering practices than other regions and appear to be more responsive to the price incentive. The introduction of a monetary demand for GHGE offsets from the cropping sector induces some changes in terms of cropping pattern and crop production level, while it has almost no impact on the livestock sector.

The study investigates farmers' decision to afforest marginal agricultural land to create carbon sinks in western Canada. A real option model, which incorporates price risks related to carbon and timber revenues as well as opportunity cost uncertainty, is used to assess the impact of a carbon market on farmers' afforestation decision. Irreversibility of the decision is also modeled by including sunk cost of forest establishment and the cost of reversing the afforestation process. In addition, the non-permanence impact on the profitability of afforestation was analyzed by assessing the effect of two non-permanence carbon accounting schemes. / Results indicate that both, actual non-permanence policies and the presence of real options, have a significant negative impact on afforestation incentives. However, the carbon market has a positive effect as it increases the expected revenues to afforestation and also represents a diversification opportunity. Yet, even in the presence of a carbon market the investment barrier remains considerable. Despite the positive effect of the carbon market, results show that unless carbon prices reach levels well above $100/tC a subsidization of afforestation cost is needed in order to generate substantial GHG abatement from marginal agricultural land afforestation in western Canada.

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This paper models the supply curve of carbon sequestration on Pacific Northwest rangelands. Rangeland managers have the ability to sequester carbon in agricultural soils by implementing alternative management practices on their farms. Their low adoption rate in practice suggests a high opportunity cost associated with their implementation. To increase their adoption, a payment for ecosystem services plan is proposed, where the public compensates farms for lost profits. The TOA-MD model is used to estimate the resulting sequestration incentivized by payments for soil carbon sequestration. Methodological questions of geographical stratification and estimating variation from available data are tested. Sensitivity analysis is also run on key assumptions in the study. Results show that while the economic potential of both systems is much lower than the technical potential, at reasonable CO��� payment levels rangeland sequestration could be a significant mitigation strategy for Pacific Northwest states. / Graduation date: 2012