Economics of Carbon Sequestration Projects Involving Smallholders

  • Oscar Cacho
Part of the Natural Resource Management and Policy book series (NRMP, volume 31)


Afforestation and reforestation projects have the potential to help mitigate global warming by acting as sinks for CO2. However, participation in carbon-sink projects may be constrained by high costs. This problem may be particularly severe for projects involving smallholders in developing countries. Of particular concern are the transaction costs incurred in developing projects and measuring, certifying, and selling the carbon-sequestration services generated by such projects. This chapter addresses these issues by analyzing the implications of transaction and abatement costs in carbon-sequestration projects. A typology of transaction costs is presented, and estimates of the five cost types are derived based on a review of existing projects. The influences of project design on abatement costs and transaction costs are explored, and the critical values of a set of three project-design variables (farm price, number of participating farms, and minimum farm area) are identified for any given combination of transaction costs.


Transaction Cost Carbon Stock Clean Development Mechanism Abatement Cost Carbon Market 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.



This chapter was prepared under contract with FAO. The research was largely funded by the Australian Centre for International Agricultural Research (ACIAR) under project ASEM 2002/066. The author is grateful to Robyn Hean for valuable comments on previous drafts, to Russell Wise for research assistance, and to colleagues in CESERF and ICRAF, Indonesia, for providing data and information.


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Copyright information

© FAO 2009

Authors and Affiliations

  1. 1.School of EconomicsUniversity of New EnglandArmidaleAustralia

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