Three Essays on Private Landowners' Response to Incentives for Carbon Sequestration through Forest Management and Afforestation

This dissertation consists of three essays on private landowners' response to incentives for carbon sequestration in forests. The first essay examines private landowner response to incentives for carbon sequestration through various combinations of intermediate management practices. The second essay focuses on agricultural landowners' willingness to participate in an incentive program for carbon sequestration through afforestation, and estimates the potential for carbon sequestration from afforestation, as well as its cost. The third study examines relative performances of incentive targeting strategies for forest carbon sequestration under asymmetric information given spatially heterogeneous land types.;The first essay uses an econometric approach to analyze the factors affecting non-industrial private forest landowners' choice of forest management practices, and examines how these choices might change in response to the use of incentives for carbon sequestration. I use estimated parameters to simulate the carbon sequestration potential for different combinations of management practices, and compare the effectiveness and costs of performance-based and practice-based incentive payment schemes in the Western U.S. The results suggest that incentive payments can increase the probability that desirable combinations of management practices are adopted, and particularly that incentives targeting increased fertilization yield the highest carbon sequestration potential. I also find that a performance-based payment scheme produces higher carbon sequestration than a practice-based payments scheme. However, the annual sequestration potential of intermediate forest management in response to incentive payment is not as large as the sequestration potential of afforestation.;The second essay uses a survey-based stated preference approach to predict landowners' willingness to participate in a tree planting program for carbon sequestration as a function of various factors affecting landowners' decision making and different levels of incentive payments. The estimation results show that the annual payment for carbon sequestration significantly and positively affects landowners' stated level of enrollment in a tree planting program. I use the estimated parameters to conduct regional level simulations of carbon sequestration in response to incentive payments. These simulations show that the carbon supply function in the Pacific Northwest region is steeper than in the Southeast region because of the lower adoption rate and less available lands. The national level carbon supply functions derived from this study are steeper than those obtained from bottom-up engineering approaches and optimization models, and are in the same range as those from revealed preference approach studies.;The third essay uses both a conceptual analysis and a numerical analysis to examine the relative performances of incentive programs for carbon sequestration using alternative targeting criteria in the presence of asymmetric information and heterogeneity in costs and benefits. The results show that in the presence of asymmetric information, the combination of high cost-high benefit variability and negative correlation, which is the combination that achieves the greatest benefit gains under perfect information, can result in the greatest benefit losses. Additionally, a comparison of two targeting schemes shows that if cost variability is greater than benefit variability with negative correlation, the benefit achieved under benefit-cost ratio targeting can be lower than that under acreage targeting, so that an optimal targeting strategy under perfect information may no longer be optimal under asymmetric information.