Date of Completion

Spring 5-9-2010

Thesis Advisor(s)

Robert J. Martel

Disciplines

Business | Finance and Financial Management

Abstract

This paper evaluates land-use conflict between cattle pasture and tropical rainforest in the Brazilian Amazon and attempts to reconcile negative production externalities within the framework of carbon finance. Specifically, it analyzes the price per metric ton of CO2e that would make reforestation projects, in terms of restoration ecology, a viable land-use alternative. Regional information on opportunity, implementation, and transaction costs is used to develop a partial equilibrium cost-benefit analysis, in which carbon sequestration is the only benefit. Financing is employed through Kyoto’s Clean Development Mechanism and long-term certified emission reductions (lCERs) are the carbon financial instrument modeled. Results indicate that carbon revenue alone cannot provide the incentives necessary to induce the reforestation of high diversity rainforest. In order to cover the costs of several landuse changes analyzed, current prices would need to grow from $4/tCO2e to approximately $7.5/tCO2e.

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