Research On The Value Evaluation Of Forestry Carbon Sink Projects Based On Fractional Real Option Theory

With the intensification of global greenhouse effect and severe climate problems,forest carbon sink is regarded as one of the most cost-effective and environmentally friendly ways to alleviate excess carbon release by strengthening forest carbon absorption capacity through afforestation and reforestation to achieve the purpose of carbon sequestration and emission reduction.The value evaluation of forestry carbon sink project is of great significance to promote the development of forestry carbon sink and help realize the strategic goal of double carbon.Compared with the traditional valuation methods of forestry carbon sink projects,the real option method evaluates the value of forestry carbon sink projects more objectively and accurately,considering the impact of management flexibility and market risk changes on the project value in the process of project performance.It is one of the effective means to evaluate the value of forestry carbon sink projects,and also an important theoretical basis for the rising value of China’s forestry carbon sink projects.However,at present,only the traditional real option method applicable to the efficient market has been introduced into the evaluation of forestry carbon sink projects.The application of the option model in the inefficient market is relatively rare in the evaluation of forestry carbon sink projects.In fact,the development time of China’s carbon market is short,the market activity is low,and various regulations and systems are not yet perfect.For example,local carbon markets have problems such as high entry threshold,many restrictions,lack of liquidity,low legal level and low effective trading volume.Although the national carbon market has learned from the operation experience of local carbon markets,allowing equal participation of market players and free circulation of resource elements,and forming a unified and standardized industry standard and trading mechanism,it still has not solved the problems of low industry coverage,loose quota allocation,relatively low carbon price and information opacity.Therefore,no matter in the local carbon market or the national carbon market,the change of carbon price is not independent,or will be affected by historical information,showing a partial random walk characteristic,and has not yet reached the standard of efficient market.Therefore,combined with the actual situation of China’s carbon market,this paper studies the impact of market inefficiency on the value of forestry carbon sink projects.First of all,this paper reviews past studies,defines the core concepts of forestry carbon sink and inefficient market,summarizes the valuation methods of forestry carbon sink projects and the uncertain factors affecting the project value,and expounds the relevant theoretical basis.Secondly,this paper puts forward the basic hypothesis of inefficient market,constructs the pricing model of fractional real option,quantifies the data memory intensity of carbon market based on fractional real option theory,that is,quantifies the degree of inefficiency of carbon market,and solves the model based on radial basis theory.Then,taking the carbon sink afforestation project in Ninghua County of Fujian Province as an example,dynamic evaluation of project option value and sensitivity analysis under different memory intensities were carried out.The research results show that: 1.Under the condition of inefficient market,compared with the traditional real option method,the value of the project option decreases gradually with the increase of market inefficiency due to the influence of out-of-the-money information.2.Annual volatility of carbon price,Chinese fir price and carbon price have a positive impact on option value,while operating cost has a negative impact on option value.3.In addition,the increasing degree of market inefficiency will aggravate the impact of uncertain factors such as carbon volatility,Chinese fir price,operating cost and carbon price on the option value of forestry projects.Compared with the classical B-S option pricing model,the fractional option pricing model extends the research on the value assessment of forestry carbon sink projects from the efficient market to the inefficient market,which is more in line with the actual situation of the value assessment of Chinese forestry carbon sink projects.At the end of this paper,from the government,market,management of three levels of relevant policies and suggestions.First,at the government level,it is necessary to increase government support,reduce the threshold of carbon market access and transaction costs,increase the enthusiasm of social participants,and enhance the market activity.Secondly,from the market level,the carbon market should be improved,the market-based trading mechanism of carbon emission rights should be innovated,the carbon price should be maintained within a reasonable range,the modern financial system should be used to serve the emission reduction cause,and the carbon market should be transformed from an inefficient market to an efficient market.Finally,from the level of operation and management,personnel and technical services should be provided,management mode should be updated,operation costs of forestry carbon sink projects should be reduced,and ecological and economic benefits of forestry carbon sink projects should be taken into account.