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Forestry & Development E-News – Special Edition: November
2009 |
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Forestry & Development (F&D) is an online resource on sustainable forestry. It
supports commercial forestry as a viable source of economic growth which is
compatible with sustainability. |
PNGFIA releases study on
economic importance of land-use in PNG
The Papua New Guinea Forest Industries
Association (PNGFIA) recently released a comprehensive report on the economic
importance of land use in Papua New Guinea.
The report, entitled "The Economic Benefits of Land-Use in Papua New Guinea", examines how reduced emissions from
deforestation and forest degradation (REDD) proposals may impact PNG's economy. The report can be downloaded here. The key findings from the report are: -
A UN-backed international trading scheme in forest
carbon is not foreseeable in the near future; -
Land use management practises in the forestry and
agricultural industries are essential for sustainable long-term economic
growth, and an appropriate balance is required between development needs and
environmental considerations; -
Agriculture remains an integral part of PNG's economy – halting land conversion will threaten
livelihoods; -
There is a significant opportunity cost for land use
decisions that use land purely for conservation purposes; -
Using forestry concessions for sustainable forestry
offers estimated financial returns that are up to six times greater than
using the same forest area for REDD credits, with returns from palm oil
plantations being even greater; and -
If REDD is to be pursued in PNG there is a need for
an economic impact assessment that considers the regional development
implications and a social impact assessment. The executive summary of the report in reprinted below. |
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The Economic Benefits of Land-Use
in Papua New Guinea: Executive Summary Global discussions on ways to reduce GHG
emissions have considered the role of forests. A concept known as REDD (reducing
emissions from deforestation and forest degradation) has been proposed. It is
being treated by donors, the World Bank and even some arms of the UN system
as an agreed concept. But there is no agreement on what it will embrace.
There are numerous practical difficulties in making the concept work in the
real world. A global trade in carbon permits does not look feasible or practical
in the foreseeable future. It is highly unlikely there will be agreement on
such an ambitious scheme in the upcoming UNFCCC conference in Copenhagen.
This means the large revenue benefits claimed by the proponents of the REDD
concept may not eventuate. The purchasing of REDD carbon credits by developed economies looks to
be unrealistic. Developed economy aid in exchange for adopting a REDD scheme
may be possible but the value of this approach in comparison to the
opportunity cost of land use restrictions is highly uncertain. Policy measures that affect the prospects for rural sector growth need
careful assessment. PNG does not have the economic wealth to impose highly
restrictive environmental policies that curtail development. Land use
management practises in the forestry and agricultural industries are
essential for sustainable long-term growth. An appropriate balance is
required between development needs and environmental considerations. The scientific knowledge and technical analysis behind claims about
the GHG emissions from forestry land use is not strong enough to make sound
policy judgements. A cautious approach would seem prudent. Most people still live and work in rural areas. Agriculture and
forestry are substantial contributors to GDP, a key source of export earnings
and provide an occupation for more than 80 per cent of the population. Their
contribution to the economy relies on continued access to natural forest lands
for development purposes. Agriculture will remain a central pillar of the PNG economy for the
foreseeable future. Over the past decade agriculture sector growth has been
limited while the population has grown. Most industries were either stagnant
or had negative growth. Oil palm has been the exception and provided a means
to redress this imbalance: land suitable for oil palm is limited so policy
decisions that lead to land access constraints could erode one of the few
bright spots for rural development. The forestry industry makes a significant contribution to the PNG
economy by creating employment opportunities in remote areas. An estimated
10,000 people were directly employed in the forest industry in 2007. Strong population growth in a rural based society is not compatible
with a scheme that restricts land use. Access to land is the critical
ingredient for economic development in PNG. Over time a REDD scheme will
intensify the land use pressures in the remaining areas. If the opportunities
for jobs or cash-based occupations are limited, the pressure for people to
migrate from their village areas will rise. Forestry production is not a major factor in deforestation. Concerns
about deforestation and PNG land use in general are not supported by the
facts. The amount of agricultural land is just over one million ha, which is
just over two per cent of the total land area. Forested land is still the
dominant component of the total land area in PNG. There is no evidence of substantial deforestation. Forested areas have
declined since 1990 but the rate of change could not be described as a
serious concern. The reality of population growth and the need for economic
development is that some natural forest land will need to be used for other
purposes. From an economic development perspective it is crucial to consider the
opportunity cost of implementing any schemes that involve leaving land idle.
The opportunity cost of participating is the economic returns from the
alternative uses of the land. There has been some research assessing the alternative economic
returns of the different land use options for natural forest areas in PNG.
The estimates indicate there are high returns from oil palm in PNG at
US$9,275 per ha. The estimated returns on pre-plantation timber harvesting
are also substantial at US$1,099 per ha. The returns from shifting
subsistence agriculture are estimated at US$745 per ha which shows the
substantial gains in shifting from subsistence agriculture to commercial oil
palm plantations. Further analysis of the returns from a typical forest concession using
a current log price of US$100 per cubic metre gave some illuminating results
when compared with the value of the same land as a REDD concession based on
selective logging. Using carbon prices of US$1/tonne based on average 2009
prices and a market peak of US$7/tonne in 2008, results show that: -
Returns for timber harvesting were between US$303
and US$500 per ha; and -
Returns as a REDD concession were between US$45 and
US$240 per ha. The implications are straightforward. The carbon price would have to
rise substantially from recent levels to compete with sustainable forestry
production as the November 2009 price had fallen to US$0.10 per tonne. In
comparison to returns on large scale oil palm of US$9,275 per ha the
estimates show carbon storage does not give the necessary financial rewards. If consideration of the REDD concept is to be pursued there is a need
for an economic impact assessment that considers the regional development
implications and a social impact assessment. In many areas the pressure to
revert to a subsistence way of life or to migrate to other rural regions and
urban areas would seem a realistic outcome. REDD outcomes at Copenhagen should also support land use policies
which underpin strategies to raise living standards as well as protecting the
environment. |
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