Measuring leakage from carbon projects in open economies: a stop timber harvesting project in Bolivia as a case study

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Abstract
This paper develops methods for estimating leakage from forest-based carbon projects that seek to reduce carbon emissions from timber harvesting in tropical forests. A theoretical framework is presented in which a specific country, in this case Bolivia, is treated as a supplier to the global timber market. Leakage is measured, over a 30- to 50-year time period, as the difference in net national carbon emissions from timber harvesting between the baseline case and a scenario in which some of the land is removed from the concession base. Estimates of timber leakage are made for several different assumptions about future global sequestration policies, capital constraints, demand elasticity, and deadwood decomposition rates. The results suggest that leakage could range from 5% to 42% without discounting carbon, and from 2% to 38% when carbon is discounted. Demand elasticity and wood decomposition rates have the largest effects on the leakage calculation. Leakage is lowest when demand is more elastic and wood decomposition rates are faster, and vice-versa when these conditions are reversed. Leakage appears to be sensitive to capital constraints only when project benefits are measured over a shorter time period.