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carbon trading, climate chagne, forest-based climate solution, public good, timberland investment
Forests not only produce fiber but also sequester atmospheric carbon, which offers a nature-based solution to global warming. To internalize the externality of forest carbon, additionality must be defined and quantified. This study applies the discounted cash flow approach to price forest carbon additionality. A carbon credit is derived from the annual marginal forest growth, while a carbon release penalty is triggered by a harvest based on biomass removal. The business-as-usual is defined by the Faustmann rotation, in which the profit from timber production from perpetual rotations is maximized. Accordingly, additionality is defined by the net present value of the extra carbon sequestration beyond the baseline on a perpetual basis. It is discovered that a higher planting density on a better quality site combined with no thinning provides a more cost-effective means for a southern pine plantation to sequester additional carbon. It is also found that a shorter carbon contract is more cost-effective in achieving additionality despite a lower total carbon benefit.