Carbon Taxes, Forest Carbon Sequestration, Climate Induced Land Yield Changes, and Their Interactions

Luis Moisés Peña-Lévano, Purdue University


This dissertation is comprised of three essays that evaluate the economic benefits and costs of mitigating climate change at the global scale. Each essay relies on computable general equilibrium (CGE) modeling. The first essay evaluates the economic and environmental interactions among climate change, agriculture, forest carbon sequestration and food security. It addresses changes in land use, commodity and food prices, economic welfare, emission reductions, among other economic factors. This study finds that an aggressive sequestration subsidy can represent a threat for food security due to the land competition between agriculture and forestry. Likewise, the results suggest that there are benefits from mitigating climate change versus a business-as-usual scenario. The second essay evaluates the cost-efficiency of alternative mitigation methods such as carbon taxes, sequestration subsidies and biofuels. This piece illustrates the interaction between cost-efficiency and food security under each of the alternative instruments. This study suggests that the carbon tax and sequestration subsidy are cost-effecting depending on the region. Sequestration subsidy is more cost-effective in places with high sequestration intensity and large forested area. Carbon tax is cost-effective in regions with low carbon-intensive industries. The third essay examines the impacts of climate change induced crop, pasture and forest yield changes and mitigation policies on the livestock sector. This essay highlights the impacts on prices and production of ruminant and non-ruminant products. In summary, this study illustrates that mitigating climate change by either carbon tax or tax-sequestration subsidy to reduce 50% global emissions can result in similar impacts for the ruminant sector although the mechanisms are different. In the tax case, the price increases are due to the high tax imposed on emissions ($150/tCO2e). In the tax-subsidy regime, the boosts in prices are driven by the land use change and by the tax rate ($100/tCO2e). Thus, the sequestration subsidy helps to decrease the share of ruminant emissions in total emission reduction, but the competition of land between pasture and forest provoke increases in prices. Overall, one of the important messages from this set of climate studies is that results can be quite different when considering major emission reduction targets such as in the Paris accord compared with the much more modest emission reduction activities being undertaken today. At high levels of emission reduction, land becomes a limiting factor.




Taheripour, Purdue University.

Subject Area

Climate Change|Environmental economics|Agricultural economics

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