|
About | Contact | Mongabay on Facebook | Mongabay on Twitter | Subscribe |
|
|
Could peatlands conservation be more profitable than palm oil? Rhett Butler and Sarah Conway mongabay.com August 22, 2007 On August 22, 2007 an edited version of this editorial appeared in the Jakarta Post. What follows is the original version. In a July 29th editorial we argued that in some cases, preserving ecosystems for carbon credits could be more valuable than conversion for oil palm plantations (known as sawit kelapa in Indonesia), providing higher tax revenue for the Indonesian treasury while at the same time offering attractive economic returns for investors.
Indonesia, thanks to its nearly 20 million hectares of peatland swamps, is well-positioned to capitalize on the growth of carbon credit mechanisms in the future. In fact, conversion, draining, and burning of these peatlands (often for the establishment of sawit kelapa) is presently estimated by Wetlands International, a Dutch NGO, to release some 2 billion tons of carbon into the atmosphere each year. This equates to 8 percent of human global carbon emissions and is why Indonesia is the world's third largest emitter of carbon after China and the US. While conventional wisdom says that converting these peatlands for sawit kelapa is the best economic use of the land, our analysis shows that carbon credits could prove a better long-term investment for Indonesian businesses and the government. In fact, not only would slowing deforestation and protecting carbon-rich ecosystems allow Indonesia to potentially earn billions of dollars a year from carbon markets, it would also reduce national exposure to price fluctuations of sawit kelapa, as well as the potential risk of European backlash against sawit kelapa as a biofuel. Here we will take a closer look at these possibilities, using a specific example from the peatlands of Central Kalimantan. Central Kalimantan Few places are more suitable for carbon finance projects than Central Kalimantan, which has 3 million hectares of peatlands that store 6.3 gigatons carbon. To illustrate the economic potential of carbon credits versus oil-palm, we compared the net present value (NPV) of a standard 1,000-hectare sawit kelapa plantation to a 1,000-hectare peat swamp preserved for its carbon value. Sawit kelapa plantation assumptions:
Our results show that preserving land for its carbon value is worth more than sawit kelapa at present prices for carbon in legally binding markets: $9.99 million for the EU ETS Trading Scheme, $8.02 million for the Secondary Clean Development Mechanism, and $6.32 million for State of the Voluntary Markets report. This compares with $6.58 million in net income over a 25-year period for sawit kelapa plantations. Even if sawit prices were to go to $1,000 per metric ton, net income would still be less than current ETS prices. Results for government Carbon credits could also provide the Indonesian treasury with greater tax revenues than sawit kelapa, especially given the recent report that 90% of the country's plantations had underpaid their taxes (Jakarta Post 14 Aug). At a 7 percent tax rate for carbon, the present value of tax revenue for the Indonesian government ranges from $476,000 to $752,000, whereas the oil palm plantation generates $495,000. In fact, the model suggests that at some carbon prices the Indonesian government could actually charge a slightly higher tax rate for carbon credits than sawit kelapa, and still leave Indonesian businesses better off financially than if they were to rely on sawit kelapa.
These results show that carbon credits offer a great deal of economic potential for central Kalimantan at a low investment cost. Furthermore, carbon offsets are applicable to virtually any part of Indonesia that has intact forests and peatlands. Such a development could make conservation profitable in Indonesia, an important step to protecting the environment and biodiversity. Given the immense possibility for carbon markets in the future land owners should give serious consideration to carbon values in making land use decisions. While sawit kelapa can and will continue to play an important role in the economy, carbon offsets offer a mechanism to bolster and diversify Indonesia's financial exposure while at the same time minimizing their negative environmental footprint.
Related articles Low deforestation countries to see least benefit from carbon trading (8/13/2007) Countries that have done the best job protecting their tropical forests stand to gain the least from proposed incentives to combat global warming through carbon offsets, warns a new study published in Tuesday in the journal Public Library of Science Biology (PLoS). The authors say that "high forest cover with low rates of deforestation" (HFLD) nations "could become the most vulnerable targets for deforestation if the Kyoto Protocol and upcoming negotiations on carbon trading fail to include intact standing forest." Papua seeks funds for fighting global warming through forest conservation (8/10/2007) In an article published today in The Wall Street Journal, Tom Wright profiles the nascent "avoided deforestation" carbon offset market in Indonesia's Papua province. Barnabas Suebu, governor of the province which makes up nearly half the island of New Guinea, has teamed with an Australian millionaire, Dorjee Sun, to develop a carbon offset plan that would see companies in developing countries pay for forest preservation in order to earn carbon credits. Compliance would be monitored via satellite. Indonesia's peat swamps worth $39B/year (7/11/2007) Indonesia's peat swamps are worth $39 billion in carbon credits per year, according to rough calculations by Bloomberg. World Bank to raise $250M for avoided deforestation in tropics (6/11/2007) The World Bank will soon launch an "avoided deforestation" pilot project that will pay tropical countries for preserving their forests, reports The Wall Street Journal. The $250 million fund will reward Indonesia, Brazil, Congo and other tropical forest countries for offsetting global warming emissions. Tropical deforestation accounts for roughly 20 percent of global greenhouse gas emissions, but slowing deforestation slows emissions of heat-trapping emissions. Researchers estimate that "avoided deforestation" schemes may be one of the most cost effective ways to slow climate change. Further, avoided deforestation offers simultaneous benefits including preservation of ecosystem services and biodiversity.
(5/10/2007) Scientists have lent support to a plan by developing countries to fight global warming by reducing deforestation rates. Tropical deforestation releases more than 1.5 billion metric tons of carbon into the atmosphere every year, though in some years, like the 1997-1998 el Nino year when fires released some 2 billion tons of carbon from peat swamps alone in Indonesia, emissions are more than twice that. Writing in the journal Science, an international team of scientists argue that the Reducing Emissions from Deforestation (RED) initiative, launched in 2005 by the United Nations Framework Convention on Climate Change, is scientifically and technologically sound, and that political and economic challenges facing the plan can be overcome.
Tags: environmental politics indonesia asia palm oil deforestation ecosystem services biofuels happy-upbeat environmental bioenergy biodiesel carbon trading carbon finance avoided deforestation redd carbon offsets environmental economics climate science climate change featured bold and dangerous ideas that may save the world farming rainforests forests carbon sequestration carbon dioxide greenhouse gas emissions peatlands rainforest destruction rainforest agriculture agriculture conservation green News index | RSS | News Feed | Twitter | Home Advertisements: Organic Apparel from Patagonia | Insect-repelling clothing
|
WEEKLY NEWSLETTER 
Photos HIGH RESOLUTION PHOTOS / PRINTS 
CALENDARS 
CANVAS BAGS 
|
||||||||||||||||||||||||||||||||||
|
Copyright mongabay 2010 Carbon dioxide (CO2) emissions generated from mongabay.com operations (server, data transfer, travel) are mitigated through an association with Anthrotect, an organization working with Afro-indigenous and Embera communities to protect forests in Colombia's Darien region. Anthrotect is protecting the habitat of mongabay's mascot: the scale-crested pygmy tyrant. |
