Sem: Luiza Martins Karpavicius

This Wednesday April 17 at 1 pm, our CERE Seminar Series will host Luiza Martins Karpavicius in Kronan A315, in SLU building. She is PhD student at the Department of Environment Science, Aarhus University.

The title of her presentation is

The role of transaction costs for the cost-effective supply of carbon sequestration from cover crops in Denmark

Abstract

Climate change deems the use of carbon dioxide removal technologies (CDRs), such as soil carbon sequestration in agriculture. However, there are significant challenges with implementing sequestration policies due to the trade-off between climate benefits and high abatement and transaction costs. The purpose of this study is to investigate how transaction costs affect the economics of carbon sequestration. We develop a model of the optimal adoption of cover crops as a carbon enhancing practice, which we empirically apply using Denmark as a case study.  Our findings indicate that, in the presence of transaction costs and at a carbon price of 220 €/tCO2e, additional cover crops can only offset 15.4 tCO2e per year in the country. This could contribute only to 0.002% of the Danish agricultural emissions reduction target. Assuming zero transaction costs overestimates the resulting sequestration at the same carbon price by 13.03 thousand tCO2 per year. We find total costs for cover cropping (i.e. abatement and transaction) ranging from 60.6 to 284.4 €/ha. Transaction costs represent on average 60.5% of the total costs and are found to alter the cost-effective supply of carbon sequestration in relation to farms’ location and size. The results are sensitive to the carbon price that applies.