The determinants of transaction costs for carbon sequestration projects: a meta-analytical review

Carbon sequestration is suggested as a cost-effective strategy for climate mitigation. However, transaction costs (TRCs) for carbon sequestration projects, that is, the costs of establishment, management, compliance with trading requirements, and monitoring, reporting and verification (MRV), are often overlooked. The purpose of this study is to investigate the determinants of TRCs in forest carbon sequestration projects through a meta-regression analysis. This study finds 31 peer-reviewed papers published from 2000 to 2022 in international journals and with sufficient information about TRCs and project contexts. The studies report TRCs that vary from <0.1 to 1,084.6 US$/tCO2e, with a median of 1.1 US$/tCO2e, and a couple of high-end outliers. This study explores the role of determinants of reported TRCs in terms of project characteristics, policy instrument applied, institutional context, methods used and TRC categories considered. Results reveal that overall TRCs increase proportionally with the amount of carbon sequestered. The findings further suggest that projects generating offset credits or receiving payments for ecosystem services, exhibit about 16 and 4 times higher TRCs, respectively, than projects not tied to specific policy instruments. Moreover, studies only reporting a single TRC category show systematically lower costs, raising concerns for the use of such studies in a real-world policy context due to the risk of TRCs being underestimated.