Methodology for carbon off-sets pricing under stochastic conditions through afforestation projects
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The general goal of this paper is to develop a methodology for the pricing of carbon offsets under stochastic conditions through afforestation projects. Consequently, it is required to design an algorithm for modeling the growth and carbon absorption capacity of a tree, considering variables such as diameter at breast height, total height, and tree age. In addition, the cash input and output variables for an afforestation project to calculate the free cash flow were defined. Furthermore, a case study applying the proposed methodology is developed in Antioquia Colombia, the results evidence a fair selling price per carbon offset of $25 USD in a 5000 hectares project and of $46 USD in a 10-hectare project. Lastly, attempting to have an accessible methodology, an evaluation tool is introduced.