Date of Award


Degree Type


Degree Name

Master of Science


Agricultural Economics

Major Professor

Seong-Hoon Cho

Committee Members

Dayton M. Lambert, Christopher D. Clark, Burton English, Donald G. Hodges


Human activity, particularly the conversion of natural land cover into human-dominated cover types, is putting increasing pressure on the health of the global ecosystem. Loss of forestland is a major contributor to greenhouse gas (GHG) emissions, which cause climate change because forests can help sequester GHG emission in the atmosphere. However, mitigating climate change by sequestering carbon through reforestation and/or avoiding deforestation is an appealing option because of the potential scale of such sequestration, the possible cost advantages over other mitigation efforts, and the opportunity it provides to incentivize the sustainable use of rural lands. Incentive payments can support forest-based carbon sequestration by internalizing the positive externalities generated by carbon storage in private forests.

In this thesis, we present two essays focusing on the efficiency of different incentive payment approaches that intend to account for the variations in the costs of supplying forestbased carbon storage. The first essay entitled, “Cost Efficiency of Payment Systems for Forest Carbon Sequestration Incorporating Spatial and Temporal Heterogeneities,” mainly focuses on assessing the spatial and temporal heterogeneities in the costs of supplying forest-based carbon storage. The spatial distributions of the cost efficiency of carbon storage for each of the three periods are mapped to visually highlight the spatial and temporal variations of the cost efficiency of carbon storage (referred to as “cost-efficiency maps”). The cost-efficiency maps for each of the three periods can be used as a reference for spatial targeting of incentive payments under different periods. Our findings are particularly important and interesting as the growing literature on the cost efficiency of payment programs for ecosystem services has not considered the potential room for improvement in regards to their cost efficiencies using temporal heterogeneity.

The second essay, essay entitled, “Optimal Provision of Forest-Based Carbon Storage and Cost Effectiveness of Incentive Payment Approaches”, deals with estimating how much cost efficiency can be improved by incorporating asymmetric information between landowners and government agencies seeking to purchase forest-based carbon sequestration. Both essays use the U.S. Bureau of Economic Analysis’ (BEA) Economic Area 88, which consists of one Kentucky and 17 Tennessee counties as a case study.

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