Central African Republic could make millions under carbon-trading deal
Central African Republic could make millions under carbon-trading deal
mongabay.com
November 6, 2006
The Central African Republic could earn tens of millions of dollars under a carbon-trading initiative proposed by a coalition of developing countries. The proposal will likely be discussed this week at U.N. climate negotiations in Nairobi, Kenya.
Deforestation — most of which occurs in the tropics — is responsible for about one-fifth of annual emissions of greenhouse gases. By reducing deforestation that would otherwise occur in developing countries, industrialized countries could effectively “offset” emissions limits set under international agreements like the Kyoto Protocol. Money would flow to the Central African Republic via an “avoided deforestation” fund financed by contributions from wealthy countries. In theory the strategy could help fight climate change at a low cost while, at the same time improving living standards for some of the world’s poorest people, safeguarding biodiversity, and preserving other ecosystem services.
Mongabay.com analysis of U.N. deforestation data suggests that an avoided deforestation initiative could be worth $10.4-172.8 million per year to the Central African Republic, depending on how much deforestation it could “avoid” and the market price for carbon offsets.
Between 2000 and 2005 the Central African Republic lost an average of 29,600 hectares of forest per year according to figures from the Food and Agriculture Organization of the United Nations (FAO). How much carbon does this represent? At the low end, FAO estimates that each hectare of Cenrtal African forest stores an average of 99 metric tons of carbon in above-ground biomass (more exists in below-ground biomass, dead wood, vegetation litter, and soil) that would be otherwise released by deforestation and subsequent land conversion for agriculture or pasture. Other research suggests that net carbon released from deforestation of secondary and primary tropical forest, allowing for the carbon fixed by subsequent land use, is of the order of 100-200 metric tons per hectare. So deforestation in the Central African Republic releases on the order of 99-200 metric tons of carbon for each hectare of cleared or converted for agriculture. As such, the Central African Republic’s annual deforestation rate of 29,600 hectares may produce 2.9-5.9 million tons (megatons) of carbon emissions per year.
Assuming a market rate of $4 per metric ton of carbon dioxide — the current trading price of CCX Carbon Financial Instrument contracts on the Chicago Climate Exchange, but higher in Europe — the Central African Republic’s avoided deforestation could be worth at minimum $11.6-23.6 million per year, using a simplified model for calculating carbon values. At the higher end, using studies that show “carbon damage” is closer to $20 per ton, avoided deforestation could be valued from $58-118 million per year. Of course determining what constitutes “avoided deforestation” is a matter of definitions but nonetheless, for a country with a total income of around $1.4 billion (official exchange rate) funds from avoided deforestation could make an important economic contribution, potentially adding as much as 8 percent to GDP.
What is the opportunity cost to the Central African Republic of reducing its deforestation rate? Well, this is a bit more difficult to calculate but a recent World Bank study said that land worth $200-500 per hectare as pasture could be worth $1,500-$10,000 if left as intact forest and used to offset carbon emissions from industrialized countries. Using this figure, avoided deforestation could be a net economic benefit to the Central African Republic in addition to the ecological payoffs afforded by leaving forest intact.
This paper is based on an earlier mongabay.com article: Avoided deforestation could help fight third world poverty under global warming pact
