Nature-based Carbon Pricing of Full Ecosystem Services for Peatland Conservation—A Case Study in Riau Province, Indonesia

Abstract

Peatlands are recognized as the largest reservoirs of terrestrial carbon, and provide a multitude of ecosystem services if used appropriately. Here, we assessed carbon-based incentives and incentives from full ecosystem services as a means of conserving peatlands in comparison with benefits from other existing types of land use. A benefit-cost analysis was conducted to determine the carbon price and assess the ecosystem services of peatlands with three land use options: conservation, clearing for oil palm plantations, and rubber plantations. Key informant interviews were conducted to analyze current land-use practices. Our results indicate that the peatland conservation option under the business-as-usual scenario would yield carbon pricing at US$0.03 tCO2−1. This is less than that obtained from the oil palm and rubber plantation options where pricing ranges from US$0.28–1.17 tCO2−1. Pricing for the peatland conservation option was US$24.8–26.8 tCO2−1 with the inclusion of full ecosystem services vis-à-vis US$47.6–148.96 tCO2−1 under plantation options. Nevertheless, internal rate of return for the conservation option was consistently higher than that for the plantation options. This suggests that the conservation option would be more attractive than plantation options when the discount factor is high. Combining carbon pricing and payment for an ecosystem services scheme can contribute to the conservation of peatlands and thereby reduce carbon emissions.