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Economic potential of land-use change and forestry for carbon sequestration and poverty reduction
Project ID
PLIA/2002/066
Project Country
Commissioned Organisation
University of New England, Australia
Project Leader
Dr Oscar Cacho
ocacho@une.edu.au
Phone:
02 6773 3215
Fax:
02 6773 3596
Project Budget
$400,001.00
Start Date
01/07/2003
Finish Date
30/06/2005
Extension Start Date
01/07/2005
Extension Finish Date
30/06/2006
ACIAR Research Program Manager
Dr Jeff Davis
Overview Objectives
The objectives are to:
determine the most appropriate land-use change and forestry systems for capturing carbon-credit payments and assisting in poverty reduction;
estimate the transaction costs of actual projects and identify principles of project design to minimise these costs.
Project Background and Objectives
Concerns over global warming, fuelled by greenhouse gas emissions, have led to the development of schemes to alleviate its impact. One such idea is the use of forests as 'carbon sinks'. This recognises the ability of trees to sequester CO2 through photosynthesis and to store it as biomass, rather than release it into the atmosphere.
Carbon sequestration, as the process is known, can be used to garner payments or credits for stored carbon. These credits can be traded or used as incentive payments in encouraging reforestation projects. Questions relating to the profitability of sequestration and appropriate systems for capturing carbon were addressed in an earlier ACIAR project (ASEM/1999/093). This developed infrastructure, bioeconomic models and skills to evaluate sequestration projects and proved its potential in Indonesia.
New forest growth and slowed deforestation leave Indonesia well placed to capitalise on carbon sequestration. Reforestation is a priority for Indonesia, but has had little impact in the smallholder sector. There is potential to use carbon credits to promote reforestation, a process that would also help in poverty alleviation during growth periods. Barriers to the widespread use of this process exist, most notably transaction costs and a lack of standards. The key is to find ways of reducing transaction costs and overcoming other barriers by developing standard, simplified ways of designing, registering and managing land-use change and forestry (LUCF) projects in exchange for carbon-credit payments. Research is an essential ingredient in achieving this.
Progress Reports (Year 1, 2, 3 etc)
Year 1:
Subproject 1 deals with farm-level analysis; the specific objective is to determine the most appropriate land-use change and forestry (LUCF) systems for capturing carbon-credit payments and assisting in poverty reduction. Substantial progress has been made towards achieving this objective:
24 different Indonesian agroforestry systems have been identified and described in detail. Each system is contained in a separate spreadsheet which includes inputs, outputs, prices and costs. These spreadsheets are designed to allow sensitivity analysis. The various systems have been evaluated in terms of carbon sequestration potential, profitability and potential to provide employment.
A relational tree database has been designed and is being populated with data on farm-forestry systems in Australia and Indonesia.
A prototype spreadsheet budget generator for farm-forestry systems in NSW has been developed and is currently being evaluated by potential users.
Three types of bioeconomic models of LUCF systems have been developed. These models range from a simple model of a monoculture plantation, based on the standard forestry-economics model, to a dynamic model that includes decisions on optimal area of trees to plant relative to crops as well as the optimal rotation length.
Subproject 2 deals with transaction costs and project design; the specific objective is to estimate the transaction costs of actual projects and identify principles of project design to minimise these costs.
Estimates of the costs of measuring biomass carbon in Indonesian agroforestry systems have been obtained. These include multi-species smallholder systems as well as monoculture plantations.
The tradeoffs between the accuracy of carbon-sequestration measurement and payment levels have been quantified by developing a model that combines statistical principles and economic concepts.
The Clean Development Mechanism (CDM) of the Kyoto Protocol allows for development of small-scale LUCF projects. To contribute to the policies required to capitalise on this opportunity, a survey has been conducted in an existing CDM-like project involving smallholders in West Java, the costs of project design and implementation have been estimated.
Results have been reported in four working papers (available on the internet), and four journal papers. Three more papers have been submitted to journals.
Year 2:
Subproject 1 deals with farm-level analysis; the specific objective is to determine the most appropriate land-use change and forestry (LUCF) systems for capturing carbon-credit payments and assisting in poverty reduction. Much of the progress on this objective was made in the first year of the project and has been previously reported. The period 2004-2005 has been one of consolidation and refinement of tools and outcomes:
The MUTAN MUTAN stands for Model Usahatani Hutan (Farm Forestry Model) spreadsheets containing details (inputs, outputs, prices and costs) of 24 agroforestry systems have been cleaned up and checked for errors. A carbon worksheet has been added to each spreadsheet, thus consolidating all the information required for farm-level analysis.
Our relational plant-species information database, for both trees and shrubs, (currently called Gertrude) has been populated with 111 Australian species that have agroforestry potential in medium to low rainfall areas (<600mm). Data on tree growth, soil type and climate has been obtained from various sources and entered into Gertrude. The dataset contains 32,000 observations representing 89 different species of trees in 99 sampling sites. Statistical analysis of these data will occur during the third year of the project.
A draft fact sheet containing a profile for each tree species have been produced and sent to 26 people around Australia along with feedback forms asking for comments on the fact sheet layout and design.
The SCUAF model (Soils Changes under Agroforestry) has been rewritten. The new version (SCUAF 5) is designed to work in conjunction with a spreadsheet, thus making it easier for users to design and manipulate their agroforestry systems. A set of examples was designed by Prof. Anthony Young, one of the original creators of the model. Examples include shifting cultivation, rotations and agroforestry systems. The software and examples are available for free download at: http://www.une.edu.au/febl/Economics/carbon/scuaf.htm
Data for seven agroforestry systems from the MUTAN spreadsheets have been extracted and used to undertake stochastic analysis. This will form the basis for risk analysis to be undertaken during the third year of the project.
Subproject 2 deals with transaction costs and project design. Now that the Kyoto Protocol has been ratified, there has been some activity under the Clean Development Mechanism (CDM). However, the projects approved under the CDM so far do not include LUCF projects. So our analysis has been based on existing smallholder development projects.
The Indonesian teams have visited project sites in East Nusa Tenggara, Muara Sungkai (Lampung) and Lombok. They gathered information on the design, operation, and costs of these projects. This information will form the basis for analysis of transaction costs.
Project Outcomes
The project posed three questions:
How do smallholders compare with other landholders in terms of efficiency in sequestering carbon?
How likely is it that smallholders will want to adopt carbon sequestering activities?
What sorts of policies and projects will make this more likely?
To answer these questions the research team collected data on agroforestry systems that have been adopted by smallholders in three regions of Indonesia. These systems were evaluated in terms of their economic performance, their labour requirements, and their carbon sequestration potential. It was found that some of these systems are competitive with other climate-mitigation measures in terms of abatement costs per tonne of CO2 emissions reduced. The team also obtained evidence on the transaction costs that may be faced by projects involving smallholders by studying several reforestation projects located in Indonesia and Latin America.
Researchers derived a project feasibility frontier (PFF), which shows the minimum project size viable for a given carbon price. They found the PFF to be a useful tool for project evaluation. They also found that project viability is highly sensitive, not only to transaction costs and carbon-sequestration potential but also to the size of participating farms.
Throughout the project the team placed emphasis on producing papers and presenting at conferences to ensure that their findings were disseminated as far as possibleof particular importance in the rapidly evolving climate-change policy environment. Outputs can be placed in the following categories:
An integrated system of parameter values and bioeconomic models to analyse the performance of different agroforestry systems.
Estimates of transaction costs associated with different project designs.
Identification of constraints caused by political and social factors.
Enhanced capacity of government research agencies, both in Indonesia and Australia.
Three software packages were produced:
TreeSmart: A relational database containing 110 Australian species that have agroforestry potential in medium to low rainfall areas (<600mm) and data on tree growth, soil type and climate from various trials.
SCUAF (a model of soil changes under agroforestry)- rewritten to work in conjunction with a spreadsheet, thus making it easier for users to design and manipulate their agroforestry systems. A set of examples, including shifting cultivation, rotations and agroforestry systems, was designed by Prof. Anthony Young, one of the original creators of the model.. The software and examples are available for free download at: http://www.une.edu.au/carbon/scuaf.php.
BRASS (Bioeconomic Rubber Agroforestry Support System). This is one of a new generation of models originally developed by the Bioeconomic Agroforestry Modelling Project at the University of Wales. The software and examples are available for free download at: http://www.une.edu.au/carbon/software.php.
An important outcome of the project is the integration of scientific and economic information and methods. The project has also built up the capacity of Indonesians to be involved in the debate about carbon sequestration. Members of the research team have become members of the CDM Secretariat recently created within the ministry of Forestry, and they have made use of the resources produced by the project. CDM (the Clean Development Mechanism) is an arrangement under the Kyoto Protocol allowing industrialised countries with a greenhouse gas reduction commitment (so-called Annex 1 countries) to invest in emission-reducing projects in developing countries as an alternative to what is generally considered more costly emission reductions in their own countries.
On the Australian side of the project, development of the TreeSmart database has enhanced the capacity of the research team, and its future use by New South Wales DPI has the potential to lead to high adoption rates. TreeSmart is being made available to extension agents, Catchment Management Authorities (CMAs), and other people involved in research and/or management of dryland salinity through tree planting.
Location
There are no project locations defined for this project.
