Carbon trading could protect forests, reduce rural poverty
mongabay.com
February 26, 2008 [corrected March 3]




Carbon trading from avoided deforestation (REDD) credits could yield billions of dollars for tropical countries, according to analysis by mongabay.com, a leading tropical forest web site.

Using conservative estimates for carbon storage in tropical forests for 63 countries, mongabay.com estimates that reducing deforestation by 10 percent would generate $767 million to $4.6 billion per year at carbon prices ranging from $5-30 per ton of CO2 [tCO2e]. For comparison, the EU's ETS market for carbon credits is presently around $32/tCO2e. A 20 percent reduction would generate $1.5 to 9.2 billion, while a 50 percent reduction would yield $3.8 to 23 billion annually. The figures show the proceeds from REDD carbon credits would dwarf the $1.1 billion in international funding for forestry spent annually over the past decade and could offer developing countries a way to diversify earnings in their forestry sector while at the same time safeguarding important ecosystem services — like watershed protection and biodiversity conservation — and forest option values.

"Conservationists have long struggled to find a way to finance forest protection. Now REDD offers the potential to make forest conservation profitable," said Rhett A. Butler, founder and editor of mongabay.com. "The key going forward will be ensuring that forest communities and rural populations see benefits from REDD. Without addressing the underlying drivers of deforestation — rural poverty and, increasingly, industrial actors — REDD will be dead in the forest."

Still Butler says the potential financial gains from REDD are immense — likely well above the projections.


Chart for 63 tropical countries
"The figures used in these calculations are quite conservative, especially in terms of carbon stored in forest biomass. For example, the U.N. figures for Indonesia — 50 tons of carbon per hectare — are only a fraction of what is seen in peatlands and rainforests — upwards of 300 t/ha. Indonesia could potentially see several billion dollars per year from REDD."

The calculations use average annual deforestation rates from 1990-2005 as a baseline and assume 50 percent of above-ground biomass is lost through deforestation. Forest carbon data comes from the U.N. Food and Agriculture Organization. Actual carbon savings from reducing deforestation are likely to be considerably higher, translating to increased carbon credit potential. The calculations exclude forest-rich countries for which FAO data is missing or incomplete, including Guyana, Suriname, and Belize. Adding these countries would further boost REDD earnings forecasts.

The updated projections come less month after the first REDD deal was signed in the Indonesian province of Aceh. The project — backed by the Government of Aceh, Fauna & Flora International (FFI) and Carbon Conservation — will protect the 1.9 million-acre Ulu Masen forest, a tract of rainforest home to the Sumatran elephant, the Clouded leopard , the Sumatran tiger, and the Sumatran orangutan. By preventing logging and conversion of Ulu Masen forest for oil palm plantations, planners expect to reduce carbon dioxide emissions by 100 million tons over 30 years. The proceeds — in the form of carbon credits — will help fund health and education projects in the local community.

Butler says that REDD may offer attractive economic returns relative to conventional logging and agricultural use of forest land, especially for rural communities which too often miss out on the benefits from industrial development of rainforests.

"Based on work by Dan Nepstad at the Woods Hole Research Institute, we're talking break-even points of around $3 per ton of carbon for forgoing development of most of the Amazon. Cattle ranching — by far the leading driver of deforestation in the Brazilian Amazon — has offered far less than that on a historical basis," said Butler. "In Indonesia, a study by the World Agroforestry Centre (ICRAF) and the Center for International Forestry Research (CIFOR) showed that Indonesia currently is seeing benefits of $0.34 per ton of CO2 — mostly from agriculture. For comparison EU carbon prices are presently over $32 per ton."

"These studies show that in addition to making sense from a conservation standpoint, REDD could be an economically viable form of land use for some of the world's most disadvantaged populations."

Potential market value of REDD in 63 tropical countries [expanded chart]

Forest areaAnnual forest lossCarbonAnnual CO2
Proceeds from a 10% reduction in deforestation rate
Proceeds from a 20% reduction in deforestation rate
Proceeds from a 50% reduction in deforestation rate
20051990-2005Above ground biomassfrom forest loss$5$10$30$5$10$30$5$10$30
Country / Area1000 ha1000 hat/haM tons
$US million
$US million
$US million
Brazil477,6982,822814172084171,2504178332,5001,0422,0846,251
Indonesia88,4951,87150172861725161723441,0314308602,579
DR Congo133,610461140118591183551182377102965921,775
Nigeria11,089410102773877230771534591913831,148
Myanmar32,22246679683468203681364071703391,017
Ecuador10,85319815054275416354109326136272815
Venezuela47,71328810053265315853105316132264791
Philippines7,1622271094623461374691274114228684
Papua New Guinea29,4371391704322431304387260108217650
Tanzania35,25741252391939117397823497195585
Bolivia58,7402706733173399336619983166497
Peru68,7429417029152988295917673147441
Cambodia10,4471679128142883285616770139417
Cameroon21,2452206325132576255115364127381
Malaysia20,8909913625122574254914862123369
Mexico64,2383194023122370234714058117350
Madagascar12,838571861910195819391174997291
Nicaragua5,18990111189185518371104692275
Sudan67,54658917189185418361074589268
Zambia42,45244521179175217351054487262
Honduras4,64818250178175017331004284251
Paraguay18,4751795016816491633984182246
Ghana5,5171296616816471631933978233
Angola59,1041256415715441529883774221
Nepal3,636799914714431429863671214
Zimbabwe17,5403132414714411428833569207
Liberia3,1546011613613381326773264192
Laos16,142787310510311021622652156
Guatemala3,938549695928919572447142
Colombia60,728479894926917512143128
Solomon Islands2,1724010074722715441836109
Benin2,351656074721714431836107
Thailand14,520963973721714411734103
Guinea6,72446766361961338163296
Somalia7,13177446361861237153192
Congo22,471171866361761235142987
Central African Republic22,75530995351651133142782
Uganda3,62786305251451029122471
Senegal8,67345333138351671340
Gabon21,775101373138351561338
Mozambique19,26250252127251461235
Malawi3,40233382127251461235
Chad11,92179162127251461134
Togo3862050212524115927
Kenya3,5221276212523104926
Equatorial Guinea1,6321557212523104824
Burkina Faso6,794243521252394823
Sierra Leone2,754194011141394721
Panama4,294511411131273617
Timor-Leste798115011131263515
Burundi15296011131263515
Costa Rica2,391124710131262515
French Guiana8,063225010131252413
Sri Lanka1,933281710131252413
Brunei Darussalam27821150001013127
El Salvador2985500001013127
Guinea-Bissau2,07210240001012126
Trinidad and Tobago2261840000001001
Haiti1051570000000001
Jamaica3390800000000001
Bangladesh8711290000000001
Guadeloupe800500000000000
Dominica460500000000000
TOTAL7671,5334,6001,5333,0679,2003,8337,66723,000


NOTES
  • "Above-ground biomass" is derived from FAO figures
  • "Annual CO2 emissions from forest loss M tons" assumes that 50 percent of above-ground biomass carbon is lost during deforestation
  • Numbers in final 9 columns represent CO2 offset prices per tCO2e









CITATION:
mongabay.com (February 26, 2008).

Carbon trading could protect forests, reduce rural poverty.

http://news.mongabay.com/2008/0226-redd.html