Tropentag, September 19 - 21, 2012 in Göttingen "Resilience of agricultural systems against crises"

Assessing the Opportunity Cost of Avoided Deforestation in Central America: Case Studies in Nicaragua and Costa Rica

¹University of Bonn, Center for Development Research (ZEF), Germany
²Johann Heinrich von Thünen-Institut, Forest Based Sector Economics, Germany

Abstract

This research examines the scope and equity implications of REDD through case studies located in Central America. First, a CO₂ emission baseline scenario was built considering current deforestation rates and change in carbon stock due changes in biomass. Second, feasibility and competitiveness of REDD areas were identified through estimating the opportunity cost of land use decisions and benefits from potential carbon offsets. Later, the spatial distribution of REDD among service providers was identified through overlaying net benefits, land use and land tenure using ArcGis. Analysis is done at regional level focusing on Bosawas protected area in Nicaragua, including transaction and implementation cost information from Costa Rica's PES scheme and data from enhancement of law enforcement in protected areas in both countries. Bosawas, the most extensive moist broadleaf forest in Central America, is the living space of two indigenous communities: Miskitu and Mayagna with annual deforestation rates between 0.3% - 7.4% in the last decade. Costa Rica has successful experiences in implementing forest conservation policies based on PES scheme. The work relies on empirical data from group discussions and interviews with local experts, considering a 30-year land use trajectory. The economic activities analysed were: maize, beans, cocoa plantation, coffee plantation, beef and dairy cattle. In parallel, information about land market values was also collected as an alternative way to estimate opportunity cost. Transaction and implementation cost information were obtained through interviews with civil servants, project developers, and verifiers / certifiers company representatives. Results suggest that indigenous areas are better off to become service providers due to well-defined property rights, but opportunity cost lies above carbon off-sets and became uncompetitive areas for REDD payments (up to -303 US $ ha^-1 yr^-1) due to low input crop production and reforestation projects influencing land use values; while sites located close to markets and main mean of transportation report positive net benefits up to 1300 US $ ha^-1 yr^-1; where land tenure is unsecured and high deforestation rate. In addition, land market values are below estimates from cash flow approach and it may lead to underestimation of opportunity costs.

Keywords: Land tenure, opportunity cost, REDD, transaction costs, implementation costs

Contact Address: Tania Osejo Carrillo, University of Bonn, Center for Development Research (ZEF), Walter - Flex Str. 3, 53113 Bonn, Germany, e-mail: tosejouni-bonn.de