Managing Dependencies in Forest Offset Projects: Toward a More Complete Evaluation of Reversal Risk
July, 2011. David M. Cooley, Christopher S. Galik, Thomas P. Holmes, Carolyn Kousky and Roger M. Cooke. Mitigation and Adaptation Strategies for Global Change. DOI: 10.1007/s11027-011-9306-x
Although forest carbon offsets can play an important role in the implementation of comprehensive climate policy, they also face an inherent risk of reversal. If such risks are positively correlated across projects, it can affect the integrity of larger project portfolios and potentially the entire offsets program. Here, authors discuss three types of risks that could affect forest offsets—fat tails, micro-correlation, and tail dependence—and provide examples of how they could present themselves in a forest offset context. Given these potential dependencies, they suggest several new risk management approaches that take into account dependencies in reversal risk across projects and which could help guard the climate integrity of an offsets program. They also argue that data collection be included as an integral part of any offsets program so that disturbance-related dependencies may be identified and managed as early and to the greatest extent possible.
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Keywords: l. Risks & Risk Mitigation, Other Publications, climate, Forest, forest carbon, mitigation, offset, risk