Cost of reducing deforestation in Papua New Guinea

I am currently investigating, for the purposes of an LRD project, the complexities of REDD and REDD+ and the economic issues underlying them.  As part of this I recently read a Pacific Economic Bulletin (PEB) article by Dr Colin Hunt, a Visiting Fellow at the University of Queensland, entitled “Compensating for the costs of reducing deforestation in Papua New Guinea” from November 2010, and skimmed an article in the same issue of the PEB by Colin Filer.

Using financial models the article by Hunt estimates the opportunity costs of reducing the level of exports of raw logs, or reducing the establishment of new oil-palm plantations in order to reduce deforestation and degradation (REDD) and thus achieve carbon abatement (reduction in the amount of carbon dioxide released into the earth’s atmosphere).  Although the article is richer and more expansive in its scope, its key messages are:

  • Carbon abatement achieved by cessation of logging is far greater in quantity and far cheaper per tonne than cessation of new oil-palm plantation establishment.  Total abatement achieved by cessation of logging in 2012 is estimated at between 658 and 788 million tonnes of carbon dioxide at an opportunity cost of between 3.40 and 5.64 US dollars, nationally.  Total abatement achieved by cessation of new oil-palm development totals between 45 and 113 million tonnes, much less than for stopping logging, at a national cost of about 40 US dollars per tonne, about 10 times greater per tonne than for stopping the logging industry.  Thus the policy implication is of course to focus on slowing or stopping log exports because this is the cheapest way to abate the release of carbon dioxide.
  • In line with Colin Filer’s article , the PNG government, like other governments applying for REDD funding, has a perverse incentive to inflate its projections of “business-as-usual” deforestation and carbon emissions figures.  And this is apparently indeed the case: emissions from expanded agriculture, says Dr Hunt, are inflated.

Colin Filer’s article suggests that the PNG government has used processes to report on baseline (business as usual) carbon emissions from forestry and agriculture that ignore significant supply-side constraints to their expansion.  Thus, he says, the government’s projections for deforestation rates – and thus carbon emissions – are exaggerated.

Hunt’s article also mentioned the difficulties around the distribution of the compensation provided under REDD. It is important – but very difficult to ensure that the compensation is:

  • equitably and fairly distributed
  • transparently distributed
  • well used – for example, investments are made in such a way that generates at least a similar level of national income and livelihoods to that foregone

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