Opportunity Costs of Emissions Caused by Land-Use Changes

S. Suyanto, Andree Ekadinata, Muhammad Sofiyuddin, Arif Rahmanullah

World Agroforestry Center (ICRAF Southeast Asia Program), Bogor, Indonesia.

DOI: 10.4236/ojf.2014.41013                

Abstract

Amid the euphoria of Reducing Emissions from Deforestation and Forest Degradation (REDD) and REDD+ discussions, the expectations of large financial gains raise the interest of all. A country, however, will only enjoy REDD benefits if the cost of REDD is lower than the benefit. The opportunity cost analysis is an effective tool for assessing the feasibility of REDD+ since the largest portion of costs associated with REDD+ and can help to identify fair compensation for those who change their land use. The opportunity cost analysis has been exercised in Tanjung Jabung Barat (Tanjabar) district-Indonesia to examine the economic-feasibility of carbon emission reduction under different type carbon price scenarios. This study reveals a sharp decline of land-use systems with high carbon-stock and low profitability is obvious. On mineral soil, low carbon-stock and high profitability (mostly oil palm) has increased rapidly, especially in the period 2000-2009. It has become the dominant land-use system. The low-to-medium carbon stock and medium profitability land-use category increased from 1990 to 2005 but declined from 2005 to 2009. The low carbon-stock and low profitability category was constant and the proportion of the area was below 15%. The ex-ante analysis in predicting the potential for future emissions reduction in Tanjabar through REDD+ approaches shows that the cumulative emission of Tanjabar in 2020 is estimated at 61.91 Mg CO_2-eq/Ha.Year, while the reduced emission by excluding all land use conversion below $5 threshold is estimated at 51.71 Mg CO_2-eq/Ha.Year. This means that there is a potential for 16% emission reduction using $5/ton CO_2-eq incentive. Another important finding in this study is that if the price of carbon increases by double to $10, the amount of reduced emission does not change much. This can use as a basis for determining the right amount of incentive for trade-off between economic profitability and climate change mitigation effort in Tanjabar using REDD+ scheme both at seller and buyer perspectives.

Keywords

Opportunity Cost; Land Use Change; Carbon Emission; REDDS

Conflicts of Interest

The authors declare no conflicts of interest.

References

[1]	Bottcher, H., Eisbrenner, K., Fritz, S., Kindermann, G., Kraxner, F., McCallum, I., & Obersteiner, M. (2009). An assessment of monitor- ing requirements and costs of “Reduced Emissions from Deforesta- tion and Degradation”. Carbon Balance and Management, 4, 7. http://www.cbmjournal.com/content/4/1/7/
[2]	BPS (2011). Tanjung Jabung Barat Dalam Angka 2010. Jambi: Badan Pusat Statistik Kabupaten Tanjung Jabung Barat.
[3]	Gittinger, J. P. (1982). Economic analysis of agricultural project (2nd ed.). Baltimore: John Hopkins University Press.
[4]	Grieg-Gran, M. (2008). The cost of avoiding deforestation. London: International Institute for Environment and Development (IIED). http://pubs.iied.org/pdfs/G02290.pdf
[5]	Huettner, M. (2011). Risks and opportunities of REDD+ implementa- tion for environmental integrity and socio-economic compatibility. Environmental Science, 15, 4-12. http://www.sciencedirect.com/science/article/pii/S1462901111001523
[6]	Harja, D., Dewi, S., Van Noordwijk, M., Ekadinata, A., & Rahmanulloh, A. (2011). REDD Abacus SP. User Manual and Software. http://www.worldagroforestry.org/sea/projects/allreddi/softwares
[7]	Kindermann, G., Obersteiner, M., Sohngen, B., Sathaye, J., Andrasko, K., Rametsteiner, E., Schlamadinger, B., Wunder, S., & Beach, R. (2008). Global cost estimates of reducing carbon emissions through avoided deforestation. Proceedings of the National Academy of Sciences of the United States of America, 105, 10302-10307. http://dx.doi.org/10.1073/pnas.0710616105
[8]	Kindermann, G., Obersteiner, M., Rametsteiner, E., & McCallum, I. (2006). Predicting the deforestation-trend under different carbon- prices. Carbon Balance and Management, 17.
[9]	Mollicone, D., Freibauer, A., Schulze, E. D., Braatz, S., Grassi, G., & Federici, S. (2006). Elements for the expected mechanisms on “re- duced emissions from deforestation and degradation (REDD)” under UNFCCC. Environmental Research Letters, 2, 7.
[10]	Pagiola, S., & Bosquet, B. (2009). Estimating the costs of REDD+ at country level. Version 2.2, Washington, DC: Forest Carbon Partner- ship Facility, World Bank.
[11]	Peters-Stanley, M., & Hamilton, K. (2012). Developing Dimension: State of the voluntary carbon market 2012. Washington, DC: The Ecosystem Marketplace and Bloomberg New Energy Finance.
[12]	Sofiyuddin, M., Rahmanulloh, A., & Suyanto, S. (2012). Assessment of profitability of land use systems in Tanjung Jabung Barat District, Jambi Province, Indonesia. Open Journal of Forestry, 2, 252-256. http://dx.doi.org/10.4236/ojf.2012.24031
[13]	Sohngen, B., & Beach, R.H. (2006). Avoided deforestation as a green- house gas mitigation tool: Economic issues for consideration (p. 40). Columbus: The Ohio State University.
[14]	Rahayu, S., Khasanah, N., & Asmawan, T. (2011). Above and belowground carbon stock. In A. Widayati, S. Suyanto, & M. van Noordwijk (Eds.), Towards reduced emissions in a high-stake dis- trict REALU project design for Tanjung Jabung Barat (Tanjabar), Jambi, Indonesia (pp. 59-73). Project Report, Bogor: World Agrofor- estry Centre—ICRAF Southeast Asia.
[15]	Swallow, B., Van Noordwijk, M., Dewi, S., Murdiyarso, D., White, D., Gockowski, J., Hyman, G., Budidarsono, S., Robiglio, V., Meadu, V., Ekadinata, A., Agus, F., Hairiah, K., Mbile, P. N., Sonwa, D. J., & Weise, S. (2007). Opportunities for avoided deforestation with sus- tainable benefits. An interim report by the ASB partnership for the tropical forest margins. Nairobi: ASB Partnership for the Tropical Forest Margins.
[16]	White, D., & Minang, P. (2011). Estimating the opportunity costs of REDD+. A training manual. Washington, DC: World Bank Institute.
[17]	World Bank (2012). State and trends of carbon market report 2012. http://web.worldbank.org/WBSITE/EXTERNAL/TOPICS/ENVIRONMENT/EXTCARBONFINANCE/0,,contentMDK: 23206428~menuPK:5575595~pagePK:64168445~piPK:64168309~theSitePK:4125853~isCURL:Y,00.html