The potential of carbon sequestration in a cost-effective EU climate policy

The aim of the project is to investigate the potential cost savings from carbon sequestration measures in agriculture and forestry with respect climate targets in EU. We address the challenges to design cost-efficient policies and policy instruments, given nonpermanence of sequestration measures, and transaction costs that accrue over time when policy instruments are applied. A Danish case study elaborates on policy instrument choice in the national context, where agricultural land dominates. We will apply empirical optimization modelling, accounting for trade-offs between carbon sequestration and bioenergy/biomaterials, and the potential policy synergies between forestry and agriculture. Transaction cost functions for sequestration, bioenergy and fossil fuel policies are developed and implemented in the model to analyze the impact on policy instrument choice,and potential gains from EU’s flexibility mechanisms. Results can contribute to informed decisions at EU and national levels.