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Ecosystem Services in plantations: from economic valuations to market-based instruments
New Generation Plantations Annual Summit, Cape Town 18-19 June
Himlal Baral & Romain Pirard
Economic evaluation of ecosystem goods and services under different landscape management scenarios
Study landscape background
Australian landscapes are changing due to changing demands of society and climate change and variability
Land use has gone through many cycles of land clearance, investment, abandonment
Since European settlement of Victoria in the1830s, ~66% of native vegetation has been cleared
Key NRM issues – declining water quality and quantity, salinity (irrigation and dryland), deterioration of soils, declining biodiversity, degradation of rivers and wetlands, increasing weeds and pest infestations
Background – policy context
Bold, strategic and landscape-scale initiatives are required to reverse the land degradation
The Australian Government and regional NRM agencies have adopted a wide range of sustainability approaches
Range of market-based instruments for NRM are being operated in Australia – e.g., bush tender, eco-tender
Carbon farming initiative – as a new economic opportunities for farmers and land managers
Study aims Identify and define the plausible future land use scenarios
Identify and assess the key ecosystem services such as, carbon sequestration, agriculture production, water, biodiversity and timber in heavily modified and fragmented landscape
Assess the projected changes in ecosystem goods and services under plausible future land use scenarios
Analyse trade-offs and synergies
Study area and major land use categories
• Largely degraded from clearing of native vegetation for agriculture as well as over allocation of irrigation water
• Rainfall ~350 mm, 70 m asl
• Size: 30,000 ha
• High conservation value
Timber
Methods: key research steps
Step I
• Collate spatial and attribute data • Land use and land cover classification• Identify and define ES for assessment
Step II
• 3 cost based scenarios, and assumptions• Estimation of ES flow• Value per ha
Step III
• Develop and define 5 future land use scenarios • Identify proposed land use change under each scenarios• Ecosystem services under each scenario
Step IV• Spatial assessment – tradeoffs, synergies and interactions• Policy implications
Carbon
Water
Biodiversity
Plausible future land use scenarios Business-as-usual
• current farming and management systems continue with no significant changes in land use and land cover in the future
Mosaic farming landscapes• reconfiguration of irrigated farming landscapes to more sustainable use,
such as improved farming, low rainfall forestry and biodiversity plantings
Eco-centric or environmental plantings• growing environmental concern and growth of new environmental
commodities such as carbon and biodiversity credits, there will be substantial increase in environmental plantings
Agro-centric or production oriented• higher demand of food/livestock production due to continued population
growth in Australia and globally
Abandoned land use• land abandonment due to the depopulation in rural areas, and significant
uncertainly due to changing climate
Timber
Methods: tools and resources
Water
Bush tender payments
Calculation - example
NPV is the net present value ($/ha)P is the price of carbon, Qt is the quantity of CO2e sequestrated in year t, EC is the establishment cost, MC is the annual management cost, andr is the rate of discount
Returns from Carbon under various scenarios
-$50 $0 $50 $100 $150 $200 $250
1%
3%
5%
7%
10%
NPV $/ha
Disc
ount
rate
Conservative
Optimistic
Central
Returns from carbon +environmental payments
-$50 $0 $50 $100 $150 $200 $250
1%
3%
5%
7%
10%
NPV $/ha
Disc
ount
rate
Conservative
Optimistic
Central
Returns from Timber Plantations
-$6,000 -$4,000 -$2,000 $0 $2,000 $4,000 $6,000 $8,000 $10,000 $12,000
1%
3%
5%
7%
10%
NPV $/ha
Disc
ount
rate
Conservative
Optimistic
Central
EGS trend under various scenarios
Land use scenarios
Ecosystem Services
Carbon Agri prodn Water Biodiversity Timber
Business-as-usual = =
Future farminglandscapes
=
Eco-centric =
Agro-centric =
Land abandonment ? =
For $ value see Baral et al. 2014, Land Use Policy
Conclusions
Against any realistic investment criteria returns from carbon alone may not be commercially attractive in the study region
Additional payments via the Victorian Government’s market based instruments such as, bush tender makes some scenarios attractive but they are nowhere close to current expected return from agriculture
Planting for timber is not commercially attractive as it delivers only negative or very low returns under all except the most optimistic scenario (low cost with low discount rate)
Conclusions
Business-as-Usual and Abandoned Land Use are not a sustainable solutions the for future as they lead to a decline in ecosystem services
Abandoned Land Use potentially threatens native biodiversity and produces ecosystem dis-services due to potential growth of weeds and pest animals
Although Agro-centric is commercially attractive but produces poor environmental outcome, there is also a growing uncertainty due to declining rural populations, volatile commodity market, and climate variability
Mosaic Farming Landscapes and Eco-centric produces better environmental outcomes. However, Eco-centric is not commercially attractive due to harsh environmental condition and associated low carbon and timber productivity
Supplemental payments are required to reverse the declining environmental situation and restore fragmented natural capital
Acknowledgements
Contributors • Dr. S Kasel, Melbourne School of Land and Environment • Prof. RJ Keenan, Melbourne School of Land and Environment• Prof. NE Stork, Griffith University • Dr. SK Sharma, Carbon Planet
Data and support• Kilter Pty Ltd• Bureau of Rural Sciences• North Central Catchment Management Authority• Victorian Department of Sustainability and Environment • Dr. R Benyon, CSIRO/ Uni of Melb
Financial support • University of Melbourne • CRC For Forestry
Himlal Baral © University of Melbourne 2012
Another economic approach to plantations:
Market-based instruments for ES
THE ‘DISCOVERY’ OF A NEW GALAXY
With assumed strengths…
Economic signals more effective and flexible
Better resource allocation and efficiency
Filling the funding gap for ES provision
… but also lots of confusion
Inconsistent use of terms
Mis-information of policy-makers
An impediment to policy evaluation
1. Direct markets (e.g. NTFPs for conservation)
2. Tradable permits (e.g. transferable development rights, carbonmarkets)
3. Regulatory price changes (e.g. eco-taxes or subsidies)
4. Voluntary price signals (e.g. FSC certification)
5. Coasean-type agreements (some PES, conservation concessions)
A rough guide to the literature jungle
Broad range of analytical approaches:
0%
10%
20%
30%
40%
50%
Local case-study (ex-post)
Case-study onnational
mechanism(ex-post)
Theory &discourse
Comparativeanalysis
Advocacy Linkage marketand
biodiversity
Modelling orsimulation (ex-ante analysis)
Broad range of evaluation criteria:
0% 10% 20% 30% 40% 50% 60%
Efficiency
Environmental effectiveness
Equity
Feasibility
Food security
Freedom of choice
Legitimacy
Participation
Pro-poor
Welfare
Governance
Development
Payments for Ecosystem Services
2.3%7%
4.7%
34.9%
20.9%
0%
30.2%
0%
10%
20%
30%
40%
Do PES improve governance of reforestation?
Two Indonesian cases
General implications of relying on PES
Establishment of multi-stakeholder agencies as intermediary bodiesbetween funder and planters to manage funds / distribute incentives
Specific contracts assign objectives to planters with conditionalpayments
Results from case studies
Evaluation procedures for the internal governance of farmer groups are necessary
Multi-stakeholder bodies do not guarantee equal power in decision making
The effectiveness is affected by political purposes
… but is this specific to ‘PES’?
Converging results from previous researches
Governance needs to complement economic tools to achieve outcomes
- Impacts of P&P expansion depend on corporate governance and political will;
- Impacts of plantations on forest conservation depend on public support policies;
- Economic valuations in response to demand by policy makers;
- MBIs require proper regulatory frameworks.
CIFOR Planted forests initiative
- Stakeholders’ perceptions and expectations;
- Labor issues;
- Conflict mediation;
- Community forestry / company-community partnerships;
- Mapping of planted forests.
Further reading
Pirard R., de Buren, and R. Lapeyre, 2014, Do PES improve governance of forest restoration?, Forests, 5 (3), pp. 404-24.
Pirard, R., 2012, Payments for Environmental Services (PES) in the public policy landscape: “Mandatory” spices in the Indonesian recipe, Forest Policy and Economics, 18, pp. 23-29.
Pirard, R., 2012, Market-based instruments for biodiversity and ecosystem services: A lexicon, Environmental Science & Policy, 19-20, pp. 59-68.
