Designing Payments for Ecosystem Services: Lessons from Previous Experience with Incentive-Based Mechanisms

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Global cost estimates of reducing carbon emissions through avoided deforestation Georg Kindermann*, Michael Obersteiner*, Brent Sohngen†‡, Jayant Sathaye§, Kenneth Andrasko¶, Ewald Rametsteiner*, Bernhard Schlamadinger , Sven Wunder**, and Robert Beach†† *International Institute of Applied Systems Analysis, A-2361 Laxenburg, Austria; †Department of Agricultural, Environmental, and Development Economics, Ohio State University, Columbus, OH 43210; §Lawrence Berkeley National Laboratory, Berkeley, CA 94720; ¶U.S. Environmental Protection Agency, ´ Washington, DC 20460; TerraCarbon, 8043 Graz, Austria; **Center for International Forestry Research, CEP 66.095-100 Belem-PA, Brazil; and ††RTI International, Research Triangle Park, NC 27709 Edited by Pamela A. Matson, Stanford University, Stanford, CA, and approved May 20, 2008 (received for review November 8, 2007)

Tropical deforestation is estimated to cause about one-quarter of anthropogenic carbon emissions, loss of biodiversity, and other environmental services. United Nations Framework Convention for Climate Change talks are now considering mechanisms for avoiding deforestation (AD), but the economic potential of AD has yet to be addressed. We use three economic models of global land use and management to analyze the potential contribution of AD activities to reduced greenhouse gas emissions. AD activities are found to be a competitive, low-cost abatement option. A program providing a 10% reduction in deforestation from 2005 to 2030 could provide 0.3– 0.6 Gt (1 Gt 1 105 g) CO2 yr 1 in emission reductions and would require $0.4 billion to $1.7 billion yr 1 for 30 years. A 50% reduction in deforestation from 2005 to 2030 could provide 1.5–2.7 Gt CO2 yr 1 in emission reductions and would require $17.2 billion to $28.0 billion yr 1. Finally, some caveats to the analysis that could increase costs of AD programs are described. carbon sequestration climate change reducing emissions from deforestation and ecosystem degradation (REDD) marginal cost tropical forest

Table 1. Average carbon per ha and number of ha for tropical forests in the three models used in this analysis t C/ha (million ha) Model GTM DIMA GCOMAP Central and South America 106 (913) 86.4 (842) 97.2 (965) Africa 100 (352) 87.7 (684) 54.6 (650) Southeast Asia 132 (202) 74.7 (181) 48 (286)

ropical deforestation is considered the second largest source of greenhouse gas emissions (1) and is expected to remain a major emission source for the foreseeable future (2). Despite policy attention on reducing deforestation, 13 million ha yr 1 of forests continue to be lost (3). Deforestation could have the effect of cooling the atmosphere (4), but it also leads to reductions in biodiversity, disturbed water regulation, and the destruction of livelihoods for many of the world’s poorest (5). Slowing down, or even reversing, deforestation is complicated by multiple causal factors, including conversion for agricultural uses, infrastructure extension, wood extraction (6–9), agricultural product prices (10), and a complex set of additional institutional and place-specific factors (11). Avoided deforestation (AD) was included alongside afforestation as a potential mechanism to reduce net global carbon emissions in the Kyoto Protocol (KP), but until recently, climatepolicy discussions have focused on afforestation and forest management. Discussions about new financial mechanisms that include AD provide optimism for more effective synergies between forest conservation and carbon policies (11–14). In 2005, Papua New Guinea and Costa Rica proposed to the United Nations Framework Convention on Climate Change that carbon credits be provided to protect existing native forests (15). The proposal triggered a flurry of discussion on the topic. SoaresFilho et al. (16), for example, suggest that protecting 130 million ha of land from deforestation in the Amazon could reduce global carbon emissions by 62 Gt (1 Gt 1 1015 g) CO2 over the next...
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