Economic Potential of Land-Use Change and Forestry for

Carbon Sequestration and Poverty Reduction

Presentation Outline

Background

Output

Objective

Farm Level Policy Level

Recommendation for Future research

Problem 2(tropical countries)

deforestation,land degradation,

poverty

Problem 1Global Warming

demand for CERs

supply of CERs

the market

energy sector

industrialplantations

smallholderagroforestry

Transformation Costs

Transaction Costs

Background

1. Determine the most appropriate farm forestry systems for capturing carbon credit payments and assisting in poverty reduction

Objectives

2. Estimate the transaction costs of actual projects and identify principles of project design to minimise these costs

Objective 1 deals with farm-level analysis with tools and outcomes:

The MUTAN spreadsheets containing details (inputs, outputs, prices, costs and carbon) of 24 farm forestry systems

Relational plant-species information database, for both trees and shrubs, (currently called TreeSmart) contains over 100 species.

The SCUAF model (Soils Changes under Agroforestry) has been rewritten. The new version (SCUAF 5) is designed to work in conjunction with a spreadsheet. Examples include shifting cultivation, rotations and agroforestry systems. The software and examples are available for free download at: http://www.une.edu.au/carbon/scuaf.php

•MUTAN stands for Model Usahatani Hutan (Farm Forestry Model)

OutputOutput

OutputOutput

Figure 1. Mean annual increment (MAI) and current annual increment (CAI) of two tree species in different sites. Arrows represent the cycle length basedOn the traditional forester solution (maximisation of MAI)

Figure 2. Net present Value (NPV) of two species of trees grown in different sitesAnd under two accounting procedures: with no carbon credits (thin line) or withCarbon credits under the ideal accounting system (solid line). Arrow represent the optimal Cycle length

Table 1. Financial Analysis

Size of Project to Reach 8000 t CO2 (Small Scale CDM)

0 1000 2000 3000 4000 5000 6000

Are

a (

ha)

Number of House Hold to Reach 8000 t CO2

0 1000 2000 3000 4000 5000 6000

No

.HH

SOURCE: CESERF-ACIAR, 2003

Performance of the Systems: Small Scale CDMPerformance of the Systems: Small Scale CDM

• Objective 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 from East Nusa Tenggara (IFSP and HKM), Muara Sungkai (Lampung) ICRAF Project and Lombok (JIFPRO).

OutputOutput

Project Design Document project developer

National approval host government (DNA)

Implementation + Monitoring

CDM executive board

Verification and certification

CER issuance

operational entity

operational entity

CDM executive board

Validation Stakeholder comments

Registration

project developer

CDM CycleCDM Cycle

Project Design Document

National approval

Implementation + Monitoring

Verification and certification

CER issuance

Validation Stakeholder comments

Registration

Rp. 361.52 juta

Rp. 0

Incl in certification

2% of CERs

Rp. 148.4 juta

Rp. 400 juta

* projects < 15,000 t C/y

projects >8000 ha

Estimation of Transaction Costs for JIFPRO Pre-CDM ProjectEstimation of Transaction Costs for JIFPRO Pre-CDM Project

Sumber: Prasetyo, 2005.

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Generate & disseminate information

Bundle projects

Teach landholders to measure C

Encourage community self-regulation

Promote secure land tenure

Reducing transaction costsReducing transaction costs

Publications:

• 16 working papers available in ACIAR manuscript• 4 published journals and 3 under review

Computer Programs:

• BRASS (Bioeconomic Rubber Agroforestry Support System)• SCUAF (Soil Change Under Agroforestry)• MUTAN (Model Usahatani Hutan / Farm Forestry Model)• TreeSmart (Relational Tree Database)

Output DiseminationOutput Disemination

Eligible Location(TA ADB Project 2005/6)

Deli Serdang, Nth. Sumatra Singkarak, West Sumatra West Lampung, Lampung Sidrap, South Sulawesi

Bombana, SE Sulawesi

Hu. Su. Sel., S. Kalimantan

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Indonesian closed forest cover - 1995

1. Potential of carbon trading for regional economic and community development

2. Research on designing simplified carbon trading

3. Research on how CDM community forestry have effect on combating global change

Possibility for future research :