Economic Assessment of Mitigation Options for Enhancing and Maintaining Carbon Sink Capacity in Indonesia

Abstract

Land use, land-use change and forestry (LULUCF) projects may becomeeligible under Article 12 of the United Nations Framework Convention onClimate Change (UNFCCC) Kyoto Protocol's Clean DevelopmentMechanism (CDM). Some of the issues, which need to be addressed,include identifying the types of greenhouse gas (GHG) mitigation activitiesin LULUCF, which could be undertaken as CDM projects. Other issuesinvolve evaluating the mitigation potential and cost effectiveness of theactivities, as well as their likely socio-economic impacts and their influenceon the national carbon (C) stock. Three broad categories of mitigationactivities in LULUCF analyzed in this study include managing Cstorage, C conservation and carbon substitution. The C intensityof the activities was estimated to range from 37 to 218 Mg C per ha. The highest is in reforested land with slow growing species and the lowestin short-rotation plantations. At a real discount rate of 10%, investmentcosts required to implement the mitigation activities ranged from US$0.07 to 0.88 per Mg C, with life cycle costs ranging from US$ 0.07to 3.87 per Mg C, and benefits ranging from US$ –0.81 to 6.57 perMg C. Mitigation options with negative benefits are forest protection,reforestation, reduced impact logging and enhanced natural regeneration,while those with positive benefits are short rotation timber plantation, andbio-energy. Reforestation gave negative benefit since no revenue fromwood as trees are left in the forest for conservation, while Reduced ImpactLogging (RIL) and Enhanced Natural Regeneration (ENR)gave negative benefits because additional cost required to implement theoptions could not be compensated by the increase in round-hardwoodyield. Other factor is that the local price of round-hardwood is very low,i.e. US$ 160 per m3, while FOB price is between 250–400 US$ per m3. Total area available for implementing mitigationoptions (planting trees) in 1997 was 31 million hectares (× 106ha) (about 40% are critical lands, 35% grasslands and 25%unproductive lands).Total area being considered for implementing the options under baseline,government-plans and mitigation scenarios in the period 2000–2030 is12.6, 16.3 and 23.6 × 106 ha respectively. Furthermore, total area of production forest being considered for implementing reduced impactlogging and enrichment planting under the tree scenarios is 9, 26 and 16 × 106 ha respectively, and that for forest protection is 2.1, 3.7, 3.1× 106 ha respectively. The cumulative investment for implementingall mitigation activities in the three scenarios was estimated at 595, 892and 1026 million US$ respectively. National C stock under thebaseline scenario will continuously decline through 2030, while undergovernment-plans and mitigation scenarios the carbon stock increases. In2030, national C stock of the government and mitigation scenarios isalmost the same, 13% higher than that of baseline. However, the increasein national carbon stock in both scenarios could not offset carbon emissionsdue to deforestation.