Implementing carbon credits for forests based on green accounting

This paper presents a carbon-accounting method for forests that is implementable in the sense that it makes use of observable information. The valuation of the effects of carbon dioxide is based on asset values rather than rental values. With minor differences due to the treatment of such accidents as fires and pestilence, the method corresponds to the flow method of the physical carbon-accounting literature. The stock-change method of carbon accounting, however, is incompatible with economic principles. Rather than set carbon values to their optimal levels in the Pigovian tradition we use current societal standards. We also present a discussion of how to implement the scheme in the face of uncertainty.