Opportunity Costs Of Conserving A Dry Tropical Forest: The Case Of The Spiny Dry Forest In Southwestern Madagascar

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1. Introduction

The need to conserve tropical dry forest cannot be over emphasized. According to Portillo-Quintero et al., (2015) such forest support high biodiversity species and exists in high population density regions in less developed world and consequently prone to uncontrolled exploitation. Reducing Emissions from Deforestation and Degradation (REDD+) is a universal approach meant to curb exploitation of forest resources, thereby regulating greenhouse gas emissions. The paper therefore attempts to address the viability of REDD+ with a low opportunity cost of conserving dry tropical forest taking into account risk and uncertainty attributed to climate variability and market value fluctuations in the Mahafaly Plateau region in South West Madagascar.

2. REDD+ and its implementation in Madagascar

2.1 The REDD+ mechanism

REDD+ is an initiative by the United Nations Framework Convention on Climate Change (UNFCCC) to mitigate climate change by reducing deforestation and ensuring forest conservation and sustainable management of forests resources at national levels. The initiative encourages national governments to monitor emission levels under business as usual (BAU) and propose an equivalent of Carbon-dioxide emissions annually, otherwise referred to as Reference Emission Level (REL).

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2.2 State of REDD+ implementation in Madagascar

Madagascar through its programs in protected areas aims at implementing REDD+ initiatives. In order to implement such activities, the country joined UN-REDD program, the Forest Carbon Partnership Facility (FCPF) to implement REDD+ readiness programs. The country established a technical committee in place and a national readiness coordination office.

3. Materials and methods

3.1 Study region

Mahafaly Plateau region is located in south west Madagascar and stretches for 800, 000 hectares and has an annual mean temperature of 24 degrees Celsius and precipitation of between 300 to 600 mm. Approximately 203,400 hectares is under protected areas with clearing and cultivation together with charcoal burning leads to forest degeneration in this region.

3.2 Analytical framework

Analysis of the opportunity cost and accrued benefits from forest conservation under REDD+ was carried out. Returns from alternative land use decisions using basic unit of one hectare of forest land which can either be conserved or deforested for the other two uses was calculated. Net Present Value (NPV) for two alternatives was considered (1) a clear and burn for maize production compared to conservation under REDD+ was considered together with (2) clear for charcoal production with REDD+ initiative. Annual profits accruing from clearing forest for cultivation and charcoal production was computed. The profits accruing per year was calculated using the formulae;

Where , and denotes the annual profit, revenue and costs for land use per hectare. The opportunity costs were evaluated as value derived per hectare for the local practices while for REDD+ it was value accrued from per ton carbon.

Assuming a plausible scenario where one hectare of forest is conserved and protected from BAS, protected forest cover would attract carbon credit compensation under REDD+ given by;

Where profit arising from one hectare from REDD+ compensation for avoiding other use over the total time frame, represent avoided carbon emission over period of consideration from preventing alternative land use (in tC/ha), while is carbon price per ton of carbon and share of total carbon benefits attributed to local communities according to the benefit sharing mechanism. Total annual profit from REDD+ , annual profit realized from REDD+ over time period by;

Evaluating the NPV over a 25-year duration typically applied in REDD+ scheme is arrived at through the relation;

Discounting pegged at 5% and 10% to depict long term planning and immediate short sighted needs by users respectively. Monte Carlo simulation used as a measure to depict variances and uncertainties for the opportunity costs and REDD+ benefits.

In order to assess the advantage of various land use scenarios under risk and uncertainty, second order stochastic dominance (SSD) approach was employed through comparison of areas falling under cumulative distribution function. This approach, forest conservation is advantageous if;

In the above relation, represent least realized NPV of conserved use and land use, respectively. , covers for the cumulated NPV from forest conservation and land use while is the integration variable.

3.3 Carbon stock assessments

Emphasis was laid on above ground carbon stock assessment since it largely affects carbon sequestration and is prone to destruction. Data was collected from northern part of Tsimanampetsotsa National Park and surrounding undisturbed forest. The sample plots considered was 162 in total of concentric circles covering 200m2 and 500m2 respectively. Total and commercial heights of trees were also considered. Individual above ground biomass of each tree is calculated by;

Where, , are the basal area (i.e. the cross-sectional area of the stem at breast height), length of tree j, tree form factor, and a default wood density of 0.62 given by IPCC.

3.4 Profit assessments for slash-and-burn and charcoal production

Snow ball procedure was used for sampling 30 and 24 community members who are either practicing or have practiced slush and burn agriculture or charcoal burning respectively for a semi structured interview. Costs and revenues were converted to a base value of USD as at 2016 exchange rate. Profits were calculated based on per hectare and per ton of carbon for comparison sake.

3.5 Profit assessment for forest protection under REDD+

The assumption was that the carbon credit attributed nationally, 50% will be devolved to the local community and out of this, 40% will be given to the community to use as they wish. While 10% is used for management purposes and benefits discounted to NPV.

4. Results

4.1 Estimation of aboveground carbon stocks

Figure 1 shows the distribution of the aboveground carbon stocks in the 162 samples. The average value for an area covering basal of 9.7 ± 1.7 square meters per hectare with mean height of trees at 3.65 ± 0.08 meters gives a total of 7.9 ± 1.8 tons of carbon per hectare.

Figure 1: Distribution of carbon stocks per hectare of 162 sample plots (histogram and y-axis on the left) and fitted log-logistic probability distribution for the Monte Carlo simulation (black curve and y-axis on the right).

4.2 Profits from slash-and-burn agriculture

In general, households cultivate 2.2 hectares under slash and burn agriculture and mostly the same area is cultivated for a period of two to three years. Precipitation variation is the major factor contributing to varying harvest. Through economic analysis, 194.6 ± 139.7 US$/ha is realized annually. There is intercropping mainly involving maize mung beans and watermelons with maize contributing 70% of earning followed by mung beans at 25% and watermelons at 5% on average.

Table 1: Cost-revenue calculation for slush and burn agriculture

4.3 Profits from charcoal production

Charcoal production is labor intensive with little returns and all interviewed persons acknowledge they would stop in case there is an alternative source of livelihood. A single bag of charcoal weighs 23kg and based on earlier calculations, 8.8 ± 2.1 bags of charcoal would result in emission of one ton of carbon. From carbon stock assessment 16.8 ± 15.3 bags can be realized from one hectare.

Table 2: Cost-revenue calculation for charcoal production

4.4 Profits from forest protection under REDD+

The revenue generated is a factor of aboveground carbon stock and the alternative land use and the result is as indicated in Table 3 while Table 4 presents the computed NPV under each of the scenarios.

Table 3: Revenues and community profits realized from avoiding deforestation and degradation under REDD+ over duration of 25 years

Table 4: NPV of profits realized from alternative use of primary forest in Mahafaly plateau region

4.5 Comparison of profits from land use vs. forest protection

Table 4 above and Figure 2 below presents the NPV discounted at 5% and 20% and clearly shows conservation measures under REDD+ has got all positive value with much certainty than all the other options. Compared to charcoal production, REDD+ is almost always profitable while when compared to slush and burn agriculture, REDD+ is still more profitable under 5% discounting rate while at 20%, there are instances where slush and burn appears to have high yields.

Figure 2: Violin plots of NPV at 5% discounting rate of forest use and conservation of the dry spiny forest

4.6 Risk and uncertainty in land use vs. forest protection comparisons

The cumulative distribution function derived from SSD shows conservation of forest curve falling on the right of the forest use for charcoal production at 5% discounting rate even with labor charges excluded indicating that conservation still yields positive results as indicated in Figure 4. When conservation is compared to slush and burn agriculture in Figure 5, they may show equal benefit for conservation under REDD+ and slush and burn, however, numeric calculation shows that conservation is more beneficial as represented by the comparison of areas under each curve.

Figure 4: Second-order stochastic dominance of charcoal production (without labor costs) and avoided charcoal production under REDD+

Figure 5: Second-order stochastic dominance of slash-and-burn agriculture and avoided slash-and-burn agriculture under REDD+

5. Discussion and conclusion

From the study, returns from REDD+ program far outweigh the benefits and opportunity costs from charcoal burning. The study has also shown that REDD+ initiative has high NPV values than slash and burn agriculture in 54% to 57% of the cases. The returns from REDD in dry forest is low as compared to the rain forest due to the low aboveground biomass which is influenced by the low precipitation exhibited in such areas (Phan et al., 2014). This low rainfall greatly affects return from slush and burn agriculture and makes REDD+ a more viable option since payments can be made during dry and lean periods to households. Risks and uncertainty was factored in through variable rainfall pattern and fluctuation in the global market prices that control REDD+ scheme. The study did not consider all the opportunity costs involved in implementing the REDD+ in the dry forest region, as for this, some benefits like non timber products derived from conservation were not included. Such may provide more incentive for conservation and as such can be used to supplement REDD+ through payment of ecosystem services and biodiversity.

6. References:

  1. Neudert, R., Olschofsky, K., Kübler, D., Prill, L., Köhl, M., Wätzold, F., 2018. Opportunity costs of conserving a dry tropical forest under REDD+: The case of the spiny dry forest in southwestern Madagascar. Forest Policy and Econ. 95, 102-114.
  2. Phan, T.H.D., Brouwer, R., Davidson, M., 2014. The economic costs of avoided deforestation in the developing world: a meta-analysis. J. For. Econ. 20, 1–16.
  3. Portillo-Quintero, C., Sanchez-Azofeifa, A., Calvo-Alvarado, J., Quesada, M., Santo, M.M.D., 2015. The role of tropical dry forests for biodiversity, carbon and water conservation in the neotropics: lessons learned and opportunities for its sustainable management. Reg. Environ. Chang. 15, 1039–1049.

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