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Several approaches have been proposed for accounting for temporary carbonsequestration in land-use change and forestry projects that are implemented to offsetpermanent emissions of carbon dioxide from the energy sector. In a previous paper,we evaluated the incentives provided by some of these approaches. In this paper, weinvestigate further what we call the “ideal” accounting system, where the forest ownerwould be paid for carbon sequestration as the service is provided and redeempayments when the forest is harvested and carbon is released back into theatmosphere. We demonstrate how discounting affects the net present value of theforest when carbon sequestration is taken into account under this ideal system. Not allcarbon is released back into the atmosphere at harvest, however, since a largeproportion may remain fixed in forest products for many years. Here, we compare theprofitability of the forest under full redemption of credits at harvest, with partialredemption of credits at harvest followed by annual redemption post-harvest as thecarbon decays in a durable forest product. The analysis is based on simulation offarm-forestry systems in south-eastern Australia.
