Opportunities for Avoided Deforestation with Sustainable Benefits”

ASB Report ((www.asb.cgiar.org).

Executive Summary

Trees and forests play important roles in global climate change mitigation. On the one hand, trees

growing in forests and on farms are one of the world’s greatest sinks of carbon. Afforestation in Europe

now offsets significant amounts of global emissions and there are many unexploited opportunities for

afforestation and reforestation in the developing world. On the other hand, tropical deforestation is one of

the largest sources of greenhouse gas emissions. The Intergovernmental Panel on Climate Change

estimate that in 2004, the forest sector was responsible for 17.4% of global greenhouse gas emissions.

Global-level studies of the economics of climate change mitigation indicate that afforestation and avoided

deforestation are among the most attractive investments for reducing net greenhouse gas emissions (total

emissions less total sequestration). The ASB Partnership for the Tropical Forest Margins has conducted

biophysical, socioeconomic and institutional research on the tradeoffs associated with alternative land

uses in the humid tropics. Building on previous research at the ASB benchmark sites, this paper presents

spatially-explicit analyses of the tradeoffs between carbon and economic returns in three sites in

Indonesia, and one site in each of Peru and Cameroon. Located in the humid forest zones of Southeast

Asia, the Amazon basin, and Central Africa, these sites represent a range of the conditions that shape tree

and forest management across the humid tropics. Indonesia is particularly distinguished by having the

world’s highest levels of land-based emissions of greenhouse gases and largest CO2 emissions from

conversion of peat lands.

Results presented in this report indicate similarities and differences across the sites. The patterns of land

use transition over the last 10-20 years vary considerably, with some sites experiencing general trends of

carbon-emitting land use changes, while others experiencing a balance of carbon-emitting and carbon-sequestering

land use changes. In general, however, the carbon losses due to carbon-emitting forest

conversion vastly exceed the carbon gains due to carbon-sequestering land use changes. This is

exemplified by the Indonesian province of East Kalimantan. Although it has experienced more

sequestering land use changes than emitting land use changes, the province has on net lost huge

amounts of carbon overall since 1990. . This is because the carbon-emitting land use changes have

resulted in average losses of 230 tonnes per hectare per in the year that they occur, while shifts from

lower to higher carbon-sequestering land uses have resulted in just 4 tonnes of sequestration per hectare

per year.

Further results from across the 3 provinces of Indonesia indicate that there is, even without specific

support programs, substantial activity to restore carbon to landscapes that have been previously

degraded. In East Kalimantan, the bulk of the carbon-sequestering land use changes are natural regrowth

from cleared land, while in Jambi the transition to carbon-sequestering land uses mostly represent

transitions from cropland to rubber agroforestry systems. Win-win solutions are possible: transitions from

cropland to rubber agroforestry in Jambi and from coffee to complex damar agroforestry in Lampung

increase returns to farmers and time-averaged carbon stocks. In Cameroon, shifts from crop-fallow

systems agriculture into shaded cocoa systems can also be such a win-win solution.

The analysis of the economic returns associated with the land use transitions (measured in terms of

discounted net present value) shows that there is clear economic rationale for almost all of the land use

transitions occurring in the 5 sites. That is, almost every land use transition has been economically

rational from the perspective of private land users responding to: market incentives to harvest and sell

timber; market opportunities for new cash crops; the lack of incentives they have to maintain the value of

standing carbon, and high interest rates in local financial markets.

Expressed in terms of tonnes of emissions of carbon dioxide equivalents (CO2eq), however, the economic

gains associated with deforestation are very low. In the three provinces of Indonesia included in the study,

between 6 and 20% of the area where emissions increased have generated returns less than 1$ per tonne

of CO2eq and between 64 and 92% of the emission generating changes have resulted in returns less than

5$ per tonne of CO2eq. In the benchmark site in Ucayali Province in Peru, over 90% of emissions from

land use change have generated returns less than 5$ per tonne of CO2eq. If carbon stock of standing

forests were valued and sellable during 20 years, a large percentage of greenhouse emissions from

deforestation in the Indonesia and Peru sites might have been avoided. Current market and incentive

conditions in the humid tropics continue to inadequately provide incentives for cost-effective reduction of

CO2 emissions.

The global analysis also reveals heterogeneity in carbon stocks in humid tropical forests. Results from the

Indonesian province of Jambi show that peat forests, as well as other peat lands, should be given special

attention in negotiations and programmes for reduced emissions from deforestation and forest

degradation. The customary slash-and-burn system known as “sonor” is particularly damaging to the

atmosphere, releasing large amounts of carbon from the rich peat soils, while providing very little return in

terms of income to the local farming populations. The return per tonne of CO2 emitted is as low as

US$0.10-0.20 in those landscapes.

Policy makers concerned about carbon emissions can and should harvest some low hanging fruits by

devising early and effective mechanisms for compensating land users for the carbon storage value of

forests and trees. Policy makers should pay greater attention to below-ground carbon, particularly the

need to conserve the peat lands of Indonesia that store large amounts of carbon. Investments in these

high carbon payoff areas can clearly be a good deal for investors and for the planet. To be effective,

sustainable and fair, the deals will also have to make good sense for the tens of millions of farmers and

other rural residents whose actions together drive land use change in the tropical forest margins.

Key Messages:

This report contains the following key messages for international, national and local efforts to mitigate

climate change.

(1) There are cost-effective opportunities for large reductions in CO2 emissions from avoided deforestation

in the humid tropics, provided that appropriate institutions and incentive systems are created. Every year

of delayed action means a year more of large emissions that could have been avoided at relatively little

cost to the world economy. Governments and other stakeholders should take positive pragmatic steps at

the same time as they negotiate how to incorporate REDD into new long-term agreements.

(2) Urgent attention should be given to reducing emissions from the peatlands of Southeast Asia. This

includes stopping conversion of peat forests and modifying farming practices on previously-converted

peatlands, mostly by reducing the depth of drainage. Current negotiations about Reduced Emissions from

Deforestation and Forest Degradation (REDD) should cover not just forested peat lands, but all peat

lands.

(3) In the absence of incentives for landowners to maintain forest resources, market conditions generally

favour conversion of forests over conservation. However, accounting for lost carbon values, this study

shows huge economic losses associated with land use change in all of the study sites. Accounting for the

value of other environmental services (such as biodiversity conservation), other climate benefits of forests,

and the economic loss due to climate change, would undoubtedly show even greater losses. To be

effective in the long-term, REDD mechanisms must provide land users with financial incentives that

outweigh the returns from conversion to other land uses. Our study shows this could be done costeffectively.

In the absence of carbon markets for avoided deforestation, emission reduction in Europe may

cost 100 times greater per unit than the financial value that is generated by emissions in the tropical forest

margins

(4) We have observed a considerable amount of carbon-sequestering land use changes that have also

increased net returns to farmers. This implies that incentives for re/afforestation may foster further land

use changes that increase income and sequester carbon. This study shows that establishing multi-strata

agroforestry systems on degraded lands– where farmers integrate a range of trees into their farming

systems -- is such an opportunity. Elsewhere, some community forestry systems have been shown to

represent a similar opportunity.

(5) Besides providing appropriate monetary or in-kind compensation for avoided land-use change, REDD

schemes should address both the need for alternative sources of livelihood for the affected populations,

well as the need to produce alternative sources of wood products for local uses. Again, both agroforestry

systems and community forestry can produce such win-win solutions.

(6) Given the importance of international market conditions in shaping land use transitions in the humid

tropics, it is highly likely that patterns of consumption, trade and environmental regulation in the countries

that consume the products of tropical forest landscapes will spill over into incentives for land use change

in developing countries. International organizations, national governments and industry groups should be

aware of these positive spillovers and take action to reduce negative impacts. Green premiums for rubber,

cocoa and coffee produced from carbon-rich systems need further encouragement and support.