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Is Guyana’s logging deal in its best interests?

Is Guyana’s logging deal in its best interests?

Is Guyana’s logging deal in its best interests?
Rhett A. Butler,
February 22, 2008

In January Guyana awarded U.S. timber firm Simon & Shock International a 400,000-hectare (988,400-acre) logging concession near the Brazilian border.

Final approval hinges on the completion of an environmental impact survey and a tree inventory. While Simon & Shock International says it plans to conduct selective logging, the firm has not announced whether it will seek Forest Stewardship Council certification, a mark for responsibly-harvested timber.

To date it is unclear how much Guyana will see from the rainforest logging project. Initial reports indicated Simon & Shock International would invest $26 million developing the concession, or about $65 per hectare, but these are simply the firm’s costs for assessment, building logging infrastructure like roads and sawmills, government fees and tax, and employing loggers. Other guidance may come from an earlier deal signed between Conservation International (CI) and the Guyanese government to lease timber rights to 80,000 hectares of rainforest along the Essequibo River. Under that 2003 agreement, the government collected $41,000 in “fees” ($0.52 per hectare) while CI kicked in $46,000 for a timber inventory and $30,000 for training of rangers, and $10,000 annually for community development projects, according to an analysis published by Katherine Ellison in Renting Biodiversity. All said, the CI deal was worth about $200,000 or $2.50 per hectare.

These numbers suggest that logging in Guyana is worth between $2.50 and $65 per hectare, though $65 is generous since assumes all of Simon & Shock International’s investment is staying in the country through capital equipment purchases, employment, and taxes — an unlikely scenario.

What are Guyana’s other options?

Right now there are few — Guyana is the second poorest country in South America. For some, the best option seems to be paving the Georgetown-Lethem Road to the Brazilian city of Boa Vista, a development that could potentially turn Guyana’s forests into a vast sea of sugar cane plantations to supply the booming market for biofuels. Plantation development would spur more roads that could open up Guyana’s mostly untouched interior to logging and mining — activities that would surely benefit some elements of Guyana’s economy.

At the same time, clearing of Guyana’s dense and carbon-rich forests would release hundreds of millions of tons of carbon into the atmosphere, contributing to the buildup of greenhouse gases that is warming the planet. Further, extractive industries like logging and mining are rarely sustainable, nor do they create a more egalitarian economy. With violence already a concern in Guyana (two mass killings this month alone), it would seem unlikely that further class stratification would benefit Guyana. Finally by logging its forests, Guyana would forgo the future possibility of collecting ecosystem services payments and developing ecotourism and other sustainable economic activities.

Is there an alternative that can improve the lot for the average Guyanese? There may be. Last fall Guyana’s President, Bharrat Jagdeo, hinted at the potential of using the country’s forests as a giant carbon offset to counter climate change. While he has yet to see any takers, the emergence of REDD (Reducing emissions from deforestation and degradation) as a recognized mechanism for fighting climate change at the December climate talks in Bali, means that carbon offsets may well play an important part in the economic future of Guyana.

How would it work?

Because Guyana has a low rate of deforestation, it is an atypical example of a country that would qualify for REDD. Still because forests has been concessioned for logging, these lands may be candidates for compensation as REDD projects. Taking the Simon & Shock International concession as an example, one could make the case that REDD could offer competitive returns relative to logging. Here’s a look.

Returns from logging

Simon & Shock International plans to log 400,000 hectares over a 30-year period, or roughly 13,333 hectares per year assuming a single harvest (multiple harvests are likely, increasing the average area harvested annually). Based on the CI case study, the Guyanese government can expect to see a paltry $6500 per year in concession fees (surely more would come from taxes on log processing and exports). Using estimates from adjacent regions in the Amazon basin, Simon & Shock International could expect to see revenue in the range of $300-1000 per hectare, or $4-$13.3 million per year.

Returns from carbon

Aboveground live biomass (AGLB) class map of terra firme old growth forests derived from the decision rule classifier and multiple layers of remote sensing data. © Sassan Saatchi et al (2007) Global Change Biology.

Guyana’s forests are particular carbon-dense. Remote sensing data from Caltech, the Woods Hole Institute, and Brazil’s INPE suggests Guyana’s forests store 250 to more than 400 tons of above-ground biomass carbon per hectare. Selectively logged forest sequesters significantly less — on the order of 50 percent the amount of carbon stored in intact forest, according to Lasco 2005.

Conservatively assuming that Simon & Shock International’s selective logging reduces the carbon stock from 250 tons per hectare to 150 tons per hectare, harvesting of 13,333 hectares per year would release 1.3 million tons of carbon or about 4.9 million tons of carbon dioxide per year. Should these emissions be avoided — under a scenario whereby the concession instead qualifies as a REDD project, for example — Guyana would be able to see these credits on the international carbon market. Though the market does not yet exist in an official capacity, a deal signed last month in Aceh, Indonesia established a price floor for such credits of around $3.00 per ton of CO2 ($11 per ton of carbon), a price that will likely increase for high quality REDD projects. As such, the concession would see $14.3 million in annual revenue from the sale of carbon credits. After implementation and operational costs, even a small government tax rate would easily exceed the $6500 seen from logging.

Conclusion: REDD is a viable economic alternative to logging

These quick calculations suggest that under a qualifying REDD regime, preserving forests for carbon credits could offer Guyana favorable economic returns relative to logging. Further, maintaining forest cover provides Guyana option values, including the possibility of sustainably developing forests (ecotourism, non-wood forest products) and taking advantage of ecosystem services payments as they develop. REDD may be prove to be a wise course for Guyana.


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