Geoscience Reference
In-Depth Information
Chapter 7
prices
Georg E. Kindermann, Michael Obersteiner, Ewald Rametsteiner,
and Ian McCallum
INTRODUCTION
Global carbon stocks in forest biomass are decreasing by 1.1 gigatonnes of carbon
(GtC) annually, owing to continued deforestation and forest degradation. Deforesta-
tion emissions are partly offset by forest expansion and increases in growing stock
primarily in the extra-tropical north. Innovative financial mechanisms would be re-
quired to help reducing deforestation. Using a spatially explicit integrated biophysical
and socio-economic land use model we estimated the impact of carbon price incentive
schemes and payment modalities on deforestation. One payment modality is adding
costs for carbon emission, the other is to pay incentives for keeping the forest carbon
stock intact.
Baseline scenario calculations show that close to 200 mil ha or around 5% of
today's forest area will be lost between 2006 and 2025, resulting in a release of ad-
ditional 17.5 GtC. Today's forest cover will shrink by around 500 million hectares,
which is 1/8 of the current forest cover, within the next 100 years. The accumulated
carbon release during the next 100 years amounts to 45 GtC, which is 15% of the total
carbon stored in forests today. Incentives of 6 US$/tC for vulnerable standing biomass
payed every 5 years will bring deforestation down by 50%. This will cause costs of 34
billion US$/year. On the other hand a carbon tax of 12 $/tC harvested forest biomass
will also cut deforestation by half. The tax income will, if enforced, decrease from
6 billion US$ in 2005 to 4.3 billion US$ in 2025 and 0.7 billion US$ in 2100 due to
decreasing deforestation speed.
Avoiding deforestation requires fi nancial mechanisms that make retention of for-
ests economically competitive with the currently often preferred option to seek profi ts
from other land uses. Incentive payments need to be at a very high level to be effective
against deforestation. Taxes on the other hand will extract budgetary revenues from
the regions which are already poor. A combination of incentives and taxes could turn
out to be a viable solution for this problem. Increasing the value of forest land and
thereby make it less easily prone to deforestation would act as a strong incentive to in-
crease productivity of agricultural and fuelwood production, which could be supported
by revenues generated by the deforestation tax.
Deforestation is considered the second largest source of greenhouse gas (GHG)
emissions amounting to an estimated 2 GtC per annum over the last decade (IPCC,
2001). It is a persistent problem. The UN Food and Agriculture Organization, in its
