Uncertainty Discounting for Land-Based Carbon Sequestration
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The effect of stochastic factors on soil carbon makes the quantity of carbon generated under a
sequestration project uncertain. Hence, the quantity of sequestered carbon may need to be
discounted to avoid liability from shortfalls. We present a potentially applicable uncertainty
discount and discuss difficulties that might arise in empirical use. We insist that the variance
in historical crop yields across geographical areas is used to derive a proxy variance for
forming an uncertainty discount for carbon projects. Application of our approach suggests
that project level uncertainty discounts would be 15–20% for the East Texas region.