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The land use change time-accounting failure

Journal article
Authors Marion Dupoux
Published in Ecological Economics
Volume 164
ISSN 0921-8009
Publication year 2019
Published at Department of Economics
Language en
Links dx.doi.org/10.1016/j.ecolecon.2019....
Keywords Biofuel, Cost-benefit analysis, Discounting, Land use change dynamics, Public assessment of projects, Relative carbon prices, cultivation, discount rate, ecological economics, energy policy, environmental economics, land use change, project assessment, wheat, France, Triticum aestivum
Subject categories Environmental Biotechnology

Abstract

This paper builds on the disconnection between scientific evidence and policy assumptions about the temporal profile of land use change (LUC) emissions. Whereas natural scientists find evidence of a decreasing time profile of LUC emissions, European energy policy relies on a steady time profile. We investigate the consequences of using such a uniform (constant) time profile when assessing biofuel projects with cost-benefit analysis, a widespread economic tool for public project assessment. We show that the use of the uniform time profile distorts LUC emissions costs downwards (upwards) when carbon prices grow slower (faster) than the discount rate. We illustrate our results with the conversion of grassland to wheat cultivation for bioethanol production in France. Under current assumptions in public project assessment, we find a 70% overestimation of costs related to direct LUC emissions. We propose two tools to aid in decision-making and address the decision error. Finally, we provide contextual policy recommendations. © 2019 Elsevier B.V.

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