The social value of offsets.

It is unclear how much carbon should be stored in temporary and risky offsets to compensate one ton of CO2 emissions. Here we cast the social value of an offset (SVO), measured in terms of economic damages avoided, as a well-defined fraction of the social cost of carbon reflecting offset duration, and risks of non-additionality and failure. The SVO reflects the value of temporary storage, and overcomes shortcomings in the climate science and economics of previous contributions1-4. The SVO is policy relevant. An efficient net-zero policy will consist of offsets if their SVO/cost ratio exceeds the benefit/cost ratio of alternatives. The SVO yields an indicator of the equivalence of offsets to permanent carbon storage measured by the ratio of the SVO to the social cost of carbon. We provide a matrix of equivalence factors for different risks, permanence and climate scenarios. Estimation yields a rule of thumb: one offset sequestering one ton for 50 years is equivalent to between 0.33 and 0.5 tons permanently locked away. Equivalence offers a means of replacing perpetual offset contracts by simpler, easy to monitor short-term contracts, has applications to carbon life cycle analysis5 and the valuation of carbon debts6, and can be the basis of comparing offsets of different qualities in the voluntary and compliance markets.

Carbon emissions reductions from Indonesia's moratorium on forest concessions are cost-effective yet contribute little to Paris pledges.

International initiatives for reducing carbon emissions from deforestation and forest degradation (REDD+) could make critical, cost-effective contributions to tropical countries' nationally determined contributions (NDCs). Norway, a key donor of such initiatives, had a REDD+ partnership with Indonesia, offering results-based payments in exchange for emissions reductions calculated against a historical baseline. Central to this partnership was an area-based moratorium on new oil palm, timber, and logging concessions in primary and peatland forests. We evaluate the effectiveness of the moratorium between 2011 and 2018 by applying a matched triple difference strategy to a unique panel dataset. Treated dryland forest inside moratorium areas retained, at most, an average of 0.65% higher forest cover compared to untreated dryland forest outside the moratorium. By contrast, carbon-rich peatland forest was unaffected by the moratorium. Cumulative avoided dryland deforestation from 2011 until 2018 translates into 67.8 million to 86.9 million tons of emissions reductions, implying an effective carbon price below Norway's US$5 per ton price. Based on Norway's price, our estimated cumulative emissions reductions are equivalent to a payment of US$339 million to US$434.5 million. Annually, our estimates suggest a 3 to 4% contribution to Indonesia's NDC commitment of a 29% emissions reduction by 2030. Despite the Indonesia-Norway partnership ending in 2021, reducing emissions from deforestation remains critical for meeting this commitment. Future area-based REDD+ initiatives could build on the moratorium's outcomes by reforming its incentives and institutional arrangements, particularly in peatland forest areas.

Better predictions, better allocations: scientific advances and adaptation to climate change.

Climate science initially aspired to improve understanding of what the future would bring, and thereby produce appropriate public policies and effective international climate agreements. If that hope is dashed, as now seems probable, effective policies for adapting to climate change become critical. Climate science assumes new responsibilities by helping to foster more appropriate adaptation measures, which might include shifting modes or locales of production. This theoretical article focuses on two broader tools: consumption smoothing in response to the risk of future losses, and physical adaptation measures to reduce potential damages. It shows that informative signals on the effects of climate change facilitate better decisions on the use of each tool, thereby increasing social welfare.