Valuing external effects of carbon sink in ley production for energy use

In this study, an attempt is made to calculate the external effects of carbon sink in soil and biomass on land use for ley production. A crop production including ley is compared with the energy obtained from the forest and other crop outputs without ley. Ley production occupies a larger portion of the carbon sink into the soil than the energy obtained either from the forest or from crop production without ley. Considering the amount of energy obtained from living materials, the portion gained from the forest covers a larger sink than the two other crop systems. A carbon sink, which keeps the carbon away from the atmosphere, helps reduce the greenhouse effect. Hence, the value of this effect is calculated by following the overall cost-benefit analysis principles. Furthermore, as the carbon sink will be in use for a very long time, the analysis also covers the issue, importance and choice of discounting rates. Accordingly, it is argued that the social discount rate should be the same as the expected economic growth rate for the actual period in question. For instance, during the last 20 years, the growth rate has been less than 2% per year. From this rate one must subtract environmental costs which were not included in the GDP. Likewise, including the logistic discount rate, the future growth rate may be restricted by environmental legislations. In addition to the choice of social and logistic discount rates, different valuation methods are also discussed. The Swedish Parliament's target for stabilizing the emission rate of carbon dioxide by the year 2000 to the level of 1990 is taken as a basis for valuation. The marginal cost for reaching this target is used as a main valuation method and is calculated at the rate of 0.386 SEK/kg carbon dioxide. 38 refs, 11 figs, 26 tabs