What does our carbon cost us? Analytical methods to estimate the opportunity costs of REDD

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1 What does our carbon cost us? Analytical methods to estimate the opportunity costs of REDD Vanessa Meadu, Doug White, Peter Minang ASB Partnership for the Tropical Forest Margins

2 What costs and Benefits? Costs Opportunity costs (Opportunities forgone/ as a results of not doing something) Implementation costs (Policies, etc) Transaction Costs (MRV, etc) Benefits Carbon / Climate benefits Biodiversity Monetary Water Benefits

3 What costs arise after agreeing to a REDD programme? Opportunity costs the economic costs of foregoing benefits from an activity future land use restrictions

4 When to do opportunity costs analysis?

5 Tons Carbon or $ profit per hectare A tradeoff Natural forest Agriculture 8yr fallow Profit gain Carbon loss C-stock 1 Profitability 2

6 tc/ha, Profit $NPV/ha Many potential tradeoffs Natural forest Agriculture 8yr fallow Degraded pastures Agroforest C-stock 1 Profitability 2

7 Even more tradeoffs per type of land use change Initial \ End Forest Pasture Forest Pasture Agriculture Agroforestr y Agriculture Agroforestry

8 Another way to look at tradeoffs

9 Natural forest Logged forest Heavily logged forest Agroforest Tree plantations Oil palm plantations Secondary forest 10yr Degraded pastures Agriculture 8yr fallow More tradeoffs Land use category

10 Land use category More tradeoffs C stock timeaveraged (tc/ha) Profitabilit y (NPV, $/ha) Rural employment (workdays/ha) Natural forest Logged forest Heavily logged forest Agroforest Tree plantations Oil palm plantations Secondary forest 10yr Degraded pastures

11 $/tco2e Opportunity cost curve Emission reduction supply curve Forest to pasture Forest to agriculture MtCO2e Forest to agroforestry

12 Opportunity cost curve Emission reduction supply curve Emission that could be avoided at negative total economic costs Emission that could be offset at feasible levels of financial transfer Emission with substantial economic gains that can not be offset under current carbon prices Source: Indonesia GHG Abatement Cost Curve

13 Method Remote sensing data interpretation and spatial analysis Time-averaged C-stock of land use systems Private and social profitability: Net Present Value of land use 3.67 * Time 1 Land use/ cover C-stock Net present value Time 2 NPV before - NPV after Time series at pixel level Land use/ cover C-stock Net present value LULC C matri timeaveraged x C-stock= CO 2 emission NPV= economic gain Cstock after - Cstock before in $ / t CO 2 eq

14 Findings from sites across the tropics About 80% of emitting land-use changes in the study areas since 1990 could have been offset by payments of less than $5 / tonne. Agroforestry and intermediate land uses offer best opportunities for meeting C, biodiversity, and poverty alleviation benefits Prospective studies needed as future opportunity costs will depend on REDD incentives and land-use incentives, price etc. Understanding cost and benefits in totality would require extensive research in our countries as current estimates of other costs remain coarse Source: Swallow et. al Opportunities for Avoided Deforestation with Sustainable Benefits.

15 A useful tool As cross-sectoral negotiation tool for assessing trade-offs between different land uses due to both carbon/emission and economic reasons Assists science-based policy making Tool for land use planning at the national level Limitation: Only carbon and economic benefits, but not yet other social and cultural aspects.

16 Sharing this methodology ASB is working with the World Bank FCPF Preparing detailed training manuals on how to apply ASB opportunity cost methodologies Land cover and use analysis Profitability analysis Carbon measurement Co-benefits Convening and leading workshops for national researchers involved in REDD readiness efforts

17 Training materials Methods and tools that estimate the economic cost of foregoing land use changes in forest landscapes Case studies of ASB experiences Other important REDD research and projects Objective: to enable professionals working in organizations (governments, university, nongovernmental) to learn, adapt and use the analytical methods, interpret results, and recommend policies

18 Training manual content O. Overview L. Land cover and land use type analysis S. Spatial analysis of deforestation & land use change C. Carbon measurement in different land uses P. Profitability estimates of land uses B. Co-benefits: Water & Biodiversity T. Opportunity cost and tradeoff analysis F. Scenario analysis and next steps

19 Land Identify Locate Quantify How the modules fit together

20 How the modules fit together Land Identify Locate Quantify Analytical framework (assess feasible resolution Tier 1,2,3)

21 How the modules fit together Land Identify Locate Quantify Covers (remote sensing) Use types (GIS) Goods & Services Identify Measure Value Analytical framework (assess feasible resolution Tier 1,2,3) Carbon Biodiversity Co-Benefits Water Agriculture & timber products

22 How the modules fit together Land Identify Locate Quantify Covers (remote sensing) Use types (GIS) Goods & Services Identify Measure Value Integrate Analyze Interpret results Implications, next steps National data needs (Tiers 1,2,3) Analytical framework (assess feasible resolution Tier 1,2,3) Carbon Biodiversity Co-Benefits Water Opportunity costs & tradeoffs Agriculture & timber products

23 Thank you Asanteni Sana

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