PROJECTION OF DEFORESTATION AND COST OF SLOWING DEFORESTATION IN INDONESIAN FORESTRY SECTOR

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1 PROJECTION OF EFORESTATION AN COST OF SLOWING EFORESTATION IN INONESIAN FORESTRY SECTOR Armi Susandi Max Planck Insiue for Meeorology Bundessrasse 55, Hamburg, Germany Phone: Fax.: ABSTRACT Besides, Indonesia has significan gas and coal resources, indeed, has a lo of oil reserves, Indonesia has also he second larges ropical fores afer Brazil and has abou 144 million ha or around 10% of wha remains of his resources (Trisasongko, 2002). Oherwise, Indonesian deforesaion coninues unabaed, making he counry a poenially big supplier of projecs under he CM (clean developmen mechanism). Since carbon emissions from foresry secor are also high, we would like o invesigae he poenial of emissions on foresry secor of Indonesia. We have modified an economeric model of ropical deforesaion from Kan s and Redanz, 1997, and apply hem o Indonesian deforesaion as a foresry sub-model. The rae of deforesaion is expressed as a funcion of he direc causes; pressure for fores producs, pressure on fores land alernaive land uses, and fores fire. We developed and exended he MERGE (a Model for Evaluaing he Regional and Global Effecs of greenhouse gas reducion policies) wih i added a foresry sub-model. This research also examines he cos of slowing deforesaion in Indonesia. This paper presens esimaes of deforesaion of Indonesia which used populaion and economic growh as driving force on projecs he rae of deforesaion. Populaion and economic growh leads o increasing of deforesaion. Indonesian deforesaion will increase gradually ill he end of cenury. We noice he cos of slowing deforesaion in Indonesia, increase exponenially $14.38 million in 2010 o $2,390 million in When Indonesia paricipaed in global emissions rade, Indonesia gains profi is fores such as revenue hrough he slowing deforesaion aciviies. The profis increase exponenially $0.39 million in 2010 o $10,216 million in 2100 if he OEC (Organisaion for Economic Co-operaion and evelopmen) counries reduce heir emissions wih global emissions rade. Indonesia received more and more profi when all counries reduce heir emissions, is $4.32 million in 2010 o $12,939 million in These indicaors also show Indonesia has a big poenial in miigaion of emissions via slowing deforesaion. KEYWORS eforesaion; slowing deforesaion; populaion; economy; emission reducion. Presened on he Inernaional Symposium on Earh Sysem, 8-10 Sepember 2004, Isanbul - Turkey

2 INTROUCTION Indonesia has he second larges ropical fores afer Brazil and has abou 144 million ha or abou 10% of wha remains of his resources (Trisasongko, 2002). Fores producs are significan in Indonesia economy. When he oil was declined in 1982, foresry secor became second highes conribuor o foreign exchange in Indonesia economy afer oil and gas secor (BPS, 2000). However, he large imber rade poorly regulaed and finally leads o climae changes as well as species exincion and disrupion of he hydrological cycle. Thus, Indonesian fores secor is he second large as main conribuor of Indonesian s emissions, responsible for beween 58 MT and 480 MT of carbon dioxide. Emissions resuling from changes in land use flucuaed srongly due o changes in he rae of fores harvesing. As far as he las decade, Indonesian fores area decreased significanly from year o year, which is called as deforesaion, i has from million ha in 1990 o million ha in 2000 a average loss rae of 1.2%. eforesaion rae esimaes by FAO (2001) which give a figure of 1.3 million ha per year, and he World Bank (2000) esimaes a rae of 0.9 million ha per year. A recen World Bank sudy esimaes ha he rae of deforesaion now sands a 2 million ha per year, as also repored by Sari e al., The causes of fores degradaion and loss are complex a vary widely from place o place. Major causes of fores degradaion are expansion of agriculure, ransmigraion developmen and relaed infrasrucure, shifing culivaion, illegal logging and fores fire (Boer, 2001). ue o anicipaes o coninually of deforesaion, Indonesian governmen has regulaed ha area of conservaion, proecion and producion foress have o be mainained, while conversion foress can be convered ino oher uses, such as indusrial imber planaion, nonfores ree planaions, ransmigraion program, ec. However, a reducion of one hecare conversion fores ino non-fores land has o be compensaed by he conversion of wo hecares non-fores land ino fores land (ALGAS, 1997a). Wih his regulaion, in he long run oal area of fores land would be expeced o increase. There are some aciviies for miigaing carbon emissions, exising policies and regulaions included in poenial miigaion aciviies in Indonesia are fores planaion and imber esae, afforesaion, reforesaion, enhanced naural regeneraion, fores proecion, bioelecriciy, reduced impac logging. Poenial of each opion o avoid emissions or sequeser C per ha varied considerably ranging from 37 o 218 Mg C ha -1 (Boer, 2001). Reforesaion aciviies is he highes poenial and planaion is he lowes ones (Boer, 2001). INTERACTION BETWEEN IRECT AN INIRECT CAUSES OF EFORESTATION Causes of ropical deforesaion have been classified ino wo levels. The firs-level (or direc) causes are grouped ino wo classes, i.e., pressure for fores producs (for consumpion and expors) and pressure on fores land alernaive (cropland) land uses. The second-level (or indirec) causes of deforesaion are populaion, gross domesic produc, exernal deb and governmen policies. The rae of deforesaion is expressed as a funcion of he direc causes; each of hese has previously been expressed as a funcion of he indirec causes. We have modified an economeric model of ropical deforesaion and apply hem o Indonesian deforesaion. See Kan s and Redanz (1997) for a deail descripion. We have grouped agriculure developmen and shifing culivaion as cropland land uses. Roundwood consumpion and fores produc expor are also he common causes of deforesaion afer agriculure developmen. In addiion, fores fire mosly occurs every year. Based on he fores

3 fire daa from , i was showed ha he average of fores fire was abou 100,000 ha per year (BAPPENAS, 1992). We have chosen he firs-level (direc) causes of deforesaion in Indonesia as roundwood consumpion, expor of fores producs, change in cropland and fores fire. Undersanding he linkages beween he firs-level (direc) causes and he secondlevel (indirec) ones is also imporan. The ineracion beween he firs-level and he second level causes are shown in Figure 1. According o find he relaionship beween deforesaion and populaion growh and economic growh, we would like o sudies he effecs of fossil fuel reducion on deforesaion. The equaion describes he relaionship beween he amouns of deforesaion as a dependen variable. The equaion can be expressed as: roundwood exp or cropland = fire (1) wih roundwood P = P roundwood 1 (2) exp or Y 0.18 T exp or = T 1 Y (3) T 1 cropland Y = Y cropland 1 (4) fire fire f ( ) 1 = (5) where is oal deforesaion in year roundwood is deforesaion of round wood consumpion in year or exp is deforesaion of fores producs expor in year cropland is deforesaion of cropland in year fire is deforesaion of fores fire in year P is he oal populaion of Indonesia in year Y Y T is he GP growh of he res if he world in year is he GP growh of Indonesia in year Coefficiens and elasiciies values of Indonesian fores as repored by Kan and Redanz, We applied his model in MERGE (Model for Evaluaing he Regional and Global Effecs of greenhouse gas reducion policies is an iner-emporal general equilibrium model, which combines a boom-up represenaion of energy supply secor wih a op-down perspecive on he remainder of he economy). See Manne and Richels (1992) and Manne e al. (1995) for a deailed descripion. The populaion growh and economic growh predicion in MERGE is as indirec cause of deforesaion in his model.

4 THE EFFECTS OF FOSSIL FUEL EMISSION REUCTION ON EFORESTATION The resuls are given in Figure 2. In business as usual, increasing of populaion growh and GP growh leads o increasing of deforesaion. Indonesian deforesaion increase gradually from 2.18 million ha per year in 2000 o 2.50 million ha per year in Increasing of one percen of growh populaion will increase round wood consumpion 0.24 percen or increasing reach 367,000 ha per year in Changing in cropland is he main conribuor o he rae of deforesaion since increasing of populaion and GP in Indonesia during his simulaion; has increasing of GP from 155 o 7,744 billion dollars would increase of cropland change 1.79 million ha in 2000 o 2.13 million ha in Fores produc expor is he lowes conribuor on deforesaion, has some 17,000 ha per year in Oherwise fores fire aciviies should be considered wih he rae of deforesaion by 100,000 per year. If all counries reduces heir emission and also Indonesia (KAT scenario), Indonesian GP growh will slighly decrease 0.35% afer he dae of commimen (we assumed Indonesia will accep a arge in 2050); leads o decrease of deforesaion. The GP growh elasiciy is more dominan han he growh of populaion on deforesaion, especially on changing in cropland, such as 0.75 by GP and 0.12 respecively (Kan and Redanz, 1997). So, he rae of deforesaion as effec of fossil fuel reducion scenario is lower han business as usual scenario (Figure 2) and he disincion of rae deforesaion beween business as usual scenario and reducion scenario (KAT scenario) of fossil fuel reducion shown on Figure 2 by righ ordinae. The rae of deforesaion would slighly lower while Indonesia aemp reduces heir emissions. We have also aemped o make a predicion of carbon emissions from land use change and foresry secor as business as usual. I was obained ha carbon emission from deforesaion would release from Indonesian fores, i releases amoun 474 million on of C in 2000; rise gradually reach 543 million on of C in 2100 (Figure 3). I has slighly lower han SME-ROI, 1999 repor as repored ha is 479 million on of C in 1994 THE PROFITS OF SLOWING EFORESTATION Emissions avoidance can make be meaningful by change in he use and managemen of fores as repored on Third Assessmen Repor of he Inergovernmenal Panel on Climae Change (IPCC, 2001). Miigaion carbon emission in foresry secor can be divided ino hree caegories: slowing deforesaion, reforesing degraded lands, and adopion of susainable agriculure pracise. Governmen policy can keep by slowing deforesaion alhough he bes miigaion opions in his secor seem o be susainable fores managemen, afforesaion, reforesaion and agroforesry. Slowing deforesaion is one of ohers aciviies in he conservaion of fores which could be develop due o significan miigaing carbon emissions. Alhough developing counries have no specific emission arges under curren climae consideraion, bu here are many opporuniies for miigaing carbon emission in susainable land managemen in developing counries (IPCC, 2000a, IPCC 200b). We would esimae he cos of slowing deforesaion from Indonesian fores, we do based on opimal rae of he slowing deforesaion. The opimal rae of ha is achieved o he poin where he marginal cos of slowing ha equal he shadow price of carbon. We calculae he marginal cos of slowing deforesaion, as repored in ALGAS 1997c, by he price of carbon in he wo emission reducion scenarios wih global rade from MERGE. We implemened he

5 opion of he slowing deforesaion in MERGE as a conrol variables, we would invesigae i cos, revenue and profi in fores secor of Indonesia. We noice he cos of slowing deforesaion in Indonesia, increase exponenially $14.38 million in 2010 and $2,390 Million in 2100 (Figure 4) if he OEC counries reduce heir emission and all counries paricipaed in global rade (KBG scenario). When all counries commi o limied heir emission (KAT scenario), he cos of slowing deforesaion is upper. espie, Indonesia sill has profi from is fores such as revenue hrough he slowing deforesaion aciviies. The profi increases exponenially by $0.39 million in 2010 o $10,216 million in 2100, if he OEC counries reduce heir emission wih global rade (Figure 5). Indonesia receive more profi when all counries reduce heir emission, $4.32 million in 2010 o $12,939 million in 2100, even hough, his profi jus a lile bi conribue o per capia GP of Indonesia, by 0.13% in CONCLUSION We have developed he new fores model and merged in MERGE model. We have assessmen he impac of inernaional climae policy on deforesaion in Indonesia. We have also compued he cos of slowing deforesaion on Indonesian fores, resuls ha Indonesia gain of slowing deforesaion will increase exponenially o he end of cenury. REFERENCES ALGAS, Taxonomy of Greenhouse Gases Miigaion Opions for Energy and Non Energy Secors, Technical Repor TASK B 2, Jakara, 1997a. ALGAS, Prioriized of Greenhouse Gases Miigaion Opions for he Energy and Non Energy Secors, Technical Repor TASK B 5, Jakara, 1997b. ALGAS, Miigaion Opions Assessmen for Energy and Non Energy Secors, Technical Repor TASK B 3, Jakara, 1997c. BAPPENAS (Naional evelopmen Planning Board), Inernaional workshop on Long-Term Inegraed Fores Fire Managemen in Indonesia, Bandung, June Bappenas, Jakara, Boer R, Economic assessmen of miigaion opions for enhancing and mainaining carbon sink capaciy in Indonesia, Miigaion and Adapaion Sraegies for Global Change 6: , BPS (Cenral Bureau Saisical), Saisical year book of Indonesia 1999, Cenral Bureau Saisical, Jakara, FAO, Sae of he world s fores. FAO, Rome, IPCC. 2000a. IPCC Special Repor on Land Use, Land-Use Change and Foresry. A special repor of he Inergovernmenal Panel on Climae Change. Approved a IPCC Plenary XVI (Monreal, 1-8 May, 2000).

6 IPCC. 2000b. Special Repor on Emission Scenarios. A special repor of working group III of he Inergovernmenal Panel on Climae Change. Cambridge Universiy Press, UK. Kan S and Redanz A An economeric model of ropical deforesaion, Journal of Fores Managemen 3:1. Sari A e al, oes money growh on rees? Opporuniies and Challenges of Foresry CM in Indonesia, Pelangi, Jakara, SME-ROI, Indonesia: The firs Naional Communicaion under UNFCCC, Sae Minisry for Environmen Republic of Indonesia, Trisasongko, B. and M.A. Raimadoya, evelopmen of Paricipaory Fores Inspecion Sysem for Indonesian Communiy Planaion Foresry (Berlin Conference on he Human imensions of Global Environmenal Change, Free Universiy of Berlin [Germany], 6-7 ec 2002). Manne A S and Richels R G, Buying Greenhouse Insurance - The Economic Coss of CO2 Emission Limis, Cambridge: The MIT Press, Manne A S, Mendelsohn R O and Richels R G, MERGE - A Model for Evaluaing Regional and Global Effecs of GHG Reducion Policies. Energy Policy 23(1):17-34, World Bank, The World Bank Fores Sraegy: Sriking he Righ Balance. The World Bank, Washingon,.C., 2000.

7 Figure 1. Ineracion beween deforesaion, populaion growh and economic growh GP Roundwood Consumpion Fores Produc Expor Populaion Change in Fores Growh Cropland Fire in GP Noe: Modified from Kan and Redanz model Figure 2. The effecs of fossil fuel reducion on deforesaion 2,800,000 1,200 2,400,000 1,000 eforesaion (ha/year) 2,000,000 1,600,000 1,200, , Ref KAT ela (Ref-KAT) 400, Year -200 KAT Kyoo All counries wih Trade scenario ela = (Reference KAT)

8 Figure 3. Carbon emission from land use change and foresry Million on of C Year Figure 4. The revenues and coss of slowing deforesaion 16,000 14,000 12,000 rev. ka rev. kbg 2,500 2,000 Million $ 10,000 8,000 6,000 1,500 1,000 Million $ 4,000 2,000 0 cos ka cos kbg Year KBG Kyoo Annex B wih Global rade scenario; KAT Kyoo All counries wih Trade scenario

9 Figure 5. The Profis of slowing deforesaion 14,000 12,000 10,000 ka kbg Million $ 8,000 6,000 4,000 2, Year KBG Kyoo Annex B wih Trade scenario; KAT Kyoo All counries wih Trade scenario