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This chapter explores the role of property rights in the design of appropriate legal structures for biotic carbon sequestration. The objective is a regime that permits creation of biotic sequestration rights which can be integrated into offset trading systems. Two main issues will be explored, building on earlier, broader-scale, preliminary research: (1) defining foundational legal rights to carbon sequestration potential and sequestered carbon; and (2) shaping a property rights regime for sequestered carbon. This will be done in a particular context — in effect a case study — namely, private and public or ‘Crown’ lands in the province of Alberta, Canada.

This chapter reveals the international dimensions and contradictions of California’s climate change regulatory program. It provides an account of the rise of a coalition of translocal justice actors—California-based environmental justice activists and Indigenous rights leaders in Chiapas, Mexico and Acre Brazil—who mobilized against linking California’s forest carbon offsets in the Global South.

This chapter examines why states decided to delegate key monitoring tasks to private actors in the Clean Development Mechanism (CDM) of the Kyoto Protocol. It first provides an overview of the origins of the CDM before discussing the involvement of the Global Environment Facility, the World Bank, the UN Framework Convention on Climate Change Secretariat, and the International Organization for Standardization (ISO) in the CDM. It also presents three reasons behind delegated authority in the CDM, and specifically why private actors were selected to serve as the “atmospheric police” of the CDM. First, the private sector had relatively long-standing experience in the intricacies of measuring carbon offsets. Second, powerful states agreed that this market mechanism should be part of the Protocol, and that a third-party verifier was needed to monitor the quality of offset projects. Finally, there was a focal institution, the CDM Executive Board, to screen and oversee agents.

This chapter further tests the aiming big hypothesis by tracing the origin and evolution of four ELOs that certify carbon neutrality or carbon reduction efforts: The Carbon Trust, The CarbonNeutral Company, Enviro-Mark Solutions, and Carbonfund.org. Through comparative case studies and careful process tracing, illuminated by both interviews and primary document research, the chapter demonstrates that the decision to target large firms in global markets explains superior adherence to best practices in The CarbonNeutral Company and Enviro-Mark Solutions. Conversely, the narrow regional focus of The Carbon Trust and Carbonfund.org explains their comparative lack of best practice adherence. The cross-case comparison proves that a focus on the targets of governance offers more explanatory leverage than a focus on public versus private ownership or for-profit versus not-for-profit structure. The chapter concludes with implications for strengthening the credibility of carbon labels in the future.

This chapter presents a methodology for estimating carbon sequestration and storage (i.e., change in storage over time) on a landscape and the social value of the sequestration process. It presents two approaches for estimating carbon sequestration and storage on a landscape. In the simpler tier 1 approach, carbon storage is a function of land use and land cover (LULC), and sequestration is given by the difference in storage at two points in time. Carbon sequestration is not accounted for in a parcel of land unless its LULC changes or it is subject to harvest of wood. In the more complex tier 2 model, carbon storage in a parcel of land is a function of its LULC, the age of its LULC, and its previous LULC. Carbon sequestration is accounted for even if LULC or land management does not change over time, such as when a forest accumulates carbon in its standing biomass due to tree growth. The chapter illustrates both of these approaches with examples from Tanzania and the United States, and also demonstrates a method for determining the economic value of sequestration using the social cost of carbon.

This chapter discusses the potential of carbon offset mechanisms for reducing mitigation costs. Offset programs involve paying firms to reduce their greenhouse gas emissions rather than raising the costs of continuing to emit. The chapter discusses the institutional factors that cause enforcement problems, including two classic regulatory problems—moral hazard and adverse selection—and also considers the various policy tools which have been adopted to address the difficulties in offset market design.

The 24,000-acre Garcia River Forest, about 100 miles north of San Francisco, is a coastal redwood/Douglas fir forest owned by The Conservation Fund (TCF), a national nonprofit organization that engages in land conservation projects that balance ecological and economic goals and addresses the priorities of the local organizations with whom it partners. TCF purchased the forest in 2004 from industrial timber companies using public and private grants, a conservation easement, and donations. The forest is now managed for continued—but now ecologically sensitive—selective timber harvesting; 35% of the forest has been set aside as an ecologic reserve network. The forest is also California’s first working forest to be managed for producing carbon offsets for the voluntary carbon market; more than 77,000 tons of carbon emissions are being offset annually and the sale of offset credits has doubled net revenues from the forest.

Observers of the European Union Emissions Trading System have puzzled over the use, or lack thereof, of carbon offset credits. Emitters eschewed an arbitrage opportunity by forgoing these credits to account for verified emissions. Even though the spread option was in the money throughout the phase, emitters preferred to wait to exercise. Faced with the prospect of expiring options, the use of offsets increased later in the phase—especially in the final year. A simple model of compliance decisions is combined with a trinomial option pricing model to derive values of waiting in each year of the compliance period, and is then applied to the data on surrendering offset assets. Given the observed behavior, the model also yields implied volatilities regarding market expectations for allowance and offset price volatility. Those implied volatilities indicate the considerable uncertainty about the optimal decision to use offset assets.

This chapter reviews alternative approaches to putting a price on pollution to control greenhouse gas emissions. It reviews the history of the Clean Air Act and Corporate Average Fuel Economy (CAFE) standards and demonstrates that these policies cut pollution at a much higher cost than by simply putting a price on pollution. It also reviews subsidies for clean energy, state-level renewable portfolio standards, and information and voluntary programs and demonstrates that a carbon tax is superior to any of these alternatives.