Carbon trading could protect forests, reduce rural poverty

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 area	Annual forest loss	Carbon	Annual 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
	2005	1990-2005	Above ground biomass	from forest loss	$5	$10	$30	$5	$10	$30	$5	$10	$30
Country / Area	1000 ha	1000 ha	t/ha	M tons	$US million			$US million			$US million

Brazil	477,698	2,822	81	417	208	417	1,250	417	833	2,500	1,042	2,084	6,251
Indonesia	88,495	1,871	50	172	86	172	516	172	344	1,031	430	860	2,579
DR Congo	133,610	461	140	118	59	118	355	118	237	710	296	592	1,775
Nigeria	11,089	410	102	77	38	77	230	77	153	459	191	383	1,148
Myanmar	32,222	466	79	68	34	68	203	68	136	407	170	339	1,017
Ecuador	10,853	198	150	54	27	54	163	54	109	326	136	272	815
Venezuela	47,713	288	100	53	26	53	158	53	105	316	132	264	791
Philippines	7,162	227	109	46	23	46	137	46	91	274	114	228	684
Papua New Guinea	29,437	139	170	43	22	43	130	43	87	260	108	217	650
Tanzania	35,257	412	52	39	19	39	117	39	78	234	97	195	585
Bolivia	58,740	270	67	33	17	33	99	33	66	199	83	166	497
Peru	68,742	94	170	29	15	29	88	29	59	176	73	147	441
Cambodia	10,447	167	91	28	14	28	83	28	56	167	70	139	417
Cameroon	21,245	220	63	25	13	25	76	25	51	153	64	127	381
Malaysia	20,890	99	136	25	12	25	74	25	49	148	62	123	369
Mexico	64,238	319	40	23	12	23	70	23	47	140	58	117	350
Madagascar	12,838	57	186	19	10	19	58	19	39	117	49	97	291
Nicaragua	5,189	90	111	18	9	18	55	18	37	110	46	92	275
Sudan	67,546	589	17	18	9	18	54	18	36	107	45	89	268
Zambia	42,452	445	21	17	9	17	52	17	35	105	44	87	262
Honduras	4,648	182	50	17	8	17	50	17	33	100	42	84	251
Paraguay	18,475	179	50	16	8	16	49	16	33	98	41	82	246
Ghana	5,517	129	66	16	8	16	47	16	31	93	39	78	233
Angola	59,104	125	64	15	7	15	44	15	29	88	37	74	221
Nepal	3,636	79	99	14	7	14	43	14	29	86	36	71	214
Zimbabwe	17,540	313	24	14	7	14	41	14	28	83	35	69	207
Liberia	3,154	60	116	13	6	13	38	13	26	77	32	64	192
Laos	16,142	78	73	10	5	10	31	10	21	62	26	52	156
Guatemala	3,938	54	96	9	5	9	28	9	19	57	24	47	142
Colombia	60,728	47	98	9	4	9	26	9	17	51	21	43	128
Solomon Islands	2,172	40	100	7	4	7	22	7	15	44	18	36	109
Benin	2,351	65	60	7	4	7	21	7	14	43	18	36	107
Thailand	14,520	96	39	7	3	7	21	7	14	41	17	34	103
Guinea	6,724	46	76	6	3	6	19	6	13	38	16	32	96
Somalia	7,131	77	44	6	3	6	18	6	12	37	15	31	92
Congo	22,471	17	186	6	3	6	17	6	12	35	14	29	87
Central African Republic	22,755	30	99	5	3	5	16	5	11	33	14	27	82
Uganda	3,627	86	30	5	2	5	14	5	10	29	12	24	71
Senegal	8,673	45	33	3	1	3	8	3	5	16	7	13	40
Gabon	21,775	10	137	3	1	3	8	3	5	15	6	13	38
Mozambique	19,262	50	25	2	1	2	7	2	5	14	6	12	35
Malawi	3,402	33	38	2	1	2	7	2	5	14	6	12	35
Chad	11,921	79	16	2	1	2	7	2	5	14	6	11	34
Togo	386	20	50	2	1	2	5	2	4	11	5	9	27
Kenya	3,522	12	76	2	1	2	5	2	3	10	4	9	26
Equatorial Guinea	1,632	15	57	2	1	2	5	2	3	10	4	8	24
Burkina Faso	6,794	24	35	2	1	2	5	2	3	9	4	8	23
Sierra Leone	2,754	19	40	1	1	1	4	1	3	9	4	7	21
Panama	4,294	5	114	1	1	1	3	1	2	7	3	6	17
Timor-Leste	798	11	50	1	1	1	3	1	2	6	3	5	15
Burundi	152	9	60	1	1	1	3	1	2	6	3	5	15
Costa Rica	2,391	12	47	1	0	1	3	1	2	6	2	5	15
French Guiana	8,063	2	250	1	0	1	3	1	2	5	2	4	13
Sri Lanka	1,933	28	17	1	0	1	3	1	2	5	2	4	13
Brunei Darussalam	278	2	115	0	0	0	1	0	1	3	1	2	7
El Salvador	298	5	50	0	0	0	1	0	1	3	1	2	7
Guinea-Bissau	2,072	10	24	0	0	0	1	0	1	2	1	2	6
Trinidad and Tobago	226	1	84	0	0	0	0	0	0	1	0	0	1
Haiti	105	1	57	0	0	0	0	0	0	0	0	0	1
Jamaica	339	0	80	0	0	0	0	0	0	0	0	0	1
Bangladesh	871	1	29	0	0	0	0	0	0	0	0	0	1
Guadeloupe	80	0	50	0	0	0	0	0	0	0	0	0	0
Dominica	46	0	50	0	0	0	0	0	0	0	0	0	0
TOTAL					767	1,533	4,600	1,533	3,067	9,200	3,833	7,667	23,000

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