Mitigation Potential and Costs of Avoided Deforestation Presented by Brent Sohngen, The Ohio State University Robert Beach, RTI International Presented at Fourth USDA GHG Conference: Positioning Agriculture and Forestry to Meet the Challenges of Climate Change February 6-8, 2007 Baltimore, Maryland 3040 Cornwallis Road P.O. Box 12194 Research Triangle Park, NC 27709 Phone 919-485-5579 Fax 919-541-6683 e-mail rbeach@rti.org RTI International is a trade name of Research Triangle Institute
Tropical Deforestation as a Source of GHG Emissions Forest removals for shifting cultivation and selective logging, as well as permanent forestland conversion to agricultural or other uses, contribute to releases of C stored in vegetation and soils to the atmosphere Our focus is net deforestation Tropical deforestation accounts for as much as 25% of global anthropogenic emissions (Houghton, 2005) Emissions depend on: Rate of deforestation Change in C stock/ha Use of removed forest biomass (e.g., burning vs. slow decay) 2
Study Overview Large potential for emissions reductions from reducing tropical deforestation Heightened interest recently in providing incentives for avoided deforestation Not currently eligible projects under CDM Few existing studies have examined marginal abatement costs across multiple tropical regions Important to assess technical and economic mitigation potential to assess possible role in GHG abatement portfolios This study uses a market model, the Global Timber Model, to quantify potential emissions reductions and costs for 4 tropical regions 3
Change in Forest Cover Total Forest Cover (1 000 ha) Region 1990 2000 2005 Change in Forest Cover, 1990 2000 Annual Annual Rate Change of Change (1 000 ha) (%/year) Change in Forest Cover, 2000 2005 Annual Annual Rate Change of Change (1 000 ha) (%/year) Africa 699 361 655 613 635 412-4 374.8-0.65% -4 040.2-0.63% Asia 574 487 566 562 571 577-792.5-0.14% 1 003.0 0.18% East Asia 208 155 225 663 244 862 1 751.8 0.81% 3 839.8 1.63% SE & S Asia 323 156 297 380 283 127-2 578.6-0.83% -2 850.6-0.98% W & C Asia 43 176 43 519 43 588 34.3 0.08% 13.8 0.03% Central America 102 008 95 086 92 626-692.2-0.70% -492.0-0.52% Europe 989 320 998 091 1 001 394 877.1 0.09% 660.6 0.07% North America 608 782 612 428 613 223 364.6 0.06% 159.0 0.03% Oceania 212 514 208 034 206 254-448.0-0.21% -356.0-0.17% South America 890 818 852 796 831 540-3 802.2-0.44% -4 251.2-0.50% Total 4 077 290 3 988 610 3 952 026-8 868.0-0.22% -7 316.8-0.18% 4
Deforestation and Carbon Emissions Carbon consequences of these relatively large changes in forest cover are substantial Net loss in forest cover Lower carbon density in newly afforested or reforested stands than mature stands being deforested Tropical regions experiencing net deforestation have higher average carbon density than temperate regions experiencing net afforestation (FAO, 2005): North America: 117.8 tc/ha Central America: 179.2 tc/ha South America: 194.6 tc/ha Previous estimates of about 1-2 billion tons annual C emissions due to tropical deforestation 5
Methods Global Timber Model Timber market and land use model that accounts for changes in carbon stock Dynamic optimization model that maximizes NPV of consumer surplus less costs of managing, harvesting and holding forests Global demand for timber logs 250 forest supply regions meet this global demand Age class distributions and biomass growth functions developed for all forest types Cost functions developed for both accessible and remote forests Land supply functions 6
Baseline Simulation of Future Land Use Change in Tropical Regions Million ha/yr 6 5 4 Africa Deforestation Africa Net Change SA Deforestation SA Net Change SEA Deforestation SEA Net Change CA Deforestation CA Net Change 3 2 1 0 2005 2025 2045 Results for 2005-2015 Year Deforestation C loss Million ha/yr Million t C/yr South America 3.94 415.7 Central America 1.18 124.4 SE Asia 2.59 361.1 Africa 5.24 526.3 Total 12.94 1427.5 7
Incorporating Carbon Prices To implement scenarios with non-zero C prices, we assumed C gained above baseline is rented at an annual rate of: R C = r*p C, where r is interest rate and P C is C price C price assumed constant over time For analyses presented, all C gains are included Land use change (reduced deforestation and afforestation) Management intensity Rotation age Product storage Focus on four regions where deforestation is largest 8
Reduction in Average Annual Deforestation Rate, 2005 2055 Carbon Price ($/tc) Region $5 $10 $20 $50 $100 Africa -15.3% -28.0% -43.9% -78.0% -97.4% Central America -17.7% -39.3% -65.2% -83.0% -94.7% South America -8.4% -16.2% -28.9% -62.3% -101.5% Southeast Asia -9.8% -18.9% -34.1% -69.8% -96.4% Total -14.0% -28.3% -47.0% -76.7% -98.1% 9
How Much May C Incentives Reduce Deforestation? Million ha/yr 5 Annual Deforestation South America Baseline $10/tC $5/tC $20/tC 4 $50/tC $100/tC 3 2 1 0-1 2005 2015 2025 2035 2045 2055 Year Note: All Carbon Prices, Pc, are assumed to be constant over time 10
Effects of C Incentives In baseline, tropical deforestation is simulated to lead to around 55.7 billon tc cumulative loss from 2005-2055 For $5/tC, this could be reduced to a loss of about 50.4 billion tc (5.3 billion tc gain relative to baseline by 2055) At higher prices, C emissions are reduced farther At $50/tC, most losses are avoided Some deforestation still occurs, but net losses are fairly small For $100/tC, forest areas rise by 422.2 million ha and carbon storage by around 76 billion tc relative to baseline conditions 11
Abatement Cost Curves for Avoided Deforestation $100 $90 $80 $70 $60 $/t C $50 $40 $30 $20 $10 $0 Central America Africa South America SE Asia 0 100 200 300 400 500 600 Million t C per year (Annual Equiv. Amt.; r=5%) 12
What Do These C Prices Mean On the Ground (Rental Payments per ha)? Carbon Price ($/tc) Region $5 $10 $20 $50 $100 South America $29.84 $59.68 $119.37 $298.46 $596.98 (3.17, 34.13) (6.35, 68.27) (12.72, 136.54) (31.92, 341.35) (64.2, 682.7) Central America $23.22 (3.19, 33.46) Southeast Asia $32.93 (3.06, 61.21) Africa $24.97 (3.18, 29.92) $46.44 (6.39, 66.93) $65.87 (6.13, 122.43) $49.94 (6.37, 59.85) Estimates assume an efficient program Leakage could be large $92.96 (12.81, 133.87) $131.77 (12.3, 244.86) $99.9 (12.78, 119.71) Note: Range in rental payments across forest types in parentheses $232.66 (32.2, 334.69) $329.55 (30.88, 612.15) $249.83 (32.22, 299.28) $465.83 (64.91, 669.38) $659.37 (62.83, 1224.31) $499.79 (66.42, 598.56) Ex: 50% leakage, may reduce all payments by 50%. 13
Supply Curve for Reducing Deforestation (2005 2055) $100 $80 $60 Points on the curves Are $5, $10, $20, $50, and $100 /tc $/tc $40 $20 $0 0 1 2 3 4 Reduction in Deforestation (Million ha/yr) Central America SE Asia South America Africa 14
Conclusions One of the first studies to consider how different carbon prices will affect potential levels of deforestation in tropical countries over time Results indicate there is large potential for avoided deforestation globally $100/tC would virtually eliminate deforestation Net cumulative gain of 76 billion tc through 2055 (an average of about 1.5 billion tc/year) and 422 million ha of forests Largest gains in SE Asia (almost 30 billion tc), followed by South America (22 billion tc), Africa (19 billion tc), and Central America (6 billion tc) However, this is an extremely large sum of money Based on the average carbon per hectare in tropical forests today, policy makers, or traders in the carbon market, would have to pay $465 to $660 per hectare per year to ensure that land does not convert to agriculture Across the four regions considered above Southeast Asia, South America, Africa, and Central America the total costs of reducing deforestation would be $2.5 trillion at the $100/tC price 15
Conclusions (2) At $5/tC, about 3 million additional ha of forest and 5 billion tc by 2055 (average of about 100 million tc per year) At $10/tC, about 147 million additional ha of forest and 12 billion tc by 2055 (average of about 240 million tc per year) Results assume overall changes in regional carbon stock can be measured and do not account for monitoring costs Primary approach for incorporating forestry into global climate change policy is project-based. Must account for: Additionality to baseline Permanence Leakage Incorporating these factors would raise the cost of C sequestration relative to those in the analyses presented. 16
Future Research/Extensions Alternative baseline specifications Accounting for forest degradation Additional heterogeneity for carbon densities Interactions with agricultural markets (e.g., endogeneity of agricultural prices) Further regional disaggregation 17