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Ecosystem Services in plantations: from economic valuations to market-based instruments

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This document summarizes a study that evaluated ecosystem services under different landscape management scenarios in Australia. The study assessed carbon sequestration, agriculture production, water, biodiversity and timber across 5 future land use scenarios: business-as-usual, mosaic farming landscapes, eco-centric, agro-centric, and abandoned land use. The analysis found that business-as-usual and abandoned land use were not sustainable and led to declining ecosystem services. Agro-centric produced good economic outputs but poor environmental outcomes. Mosaic farming landscapes and eco-centric produced better environmental outcomes but eco-centric was not commercially attractive. Supplemental payments were needed to restore the environment.

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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, and r 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 Discountrate Conservative Optimistic Central
Returns from carbon +environmental payments -$50 $0 $50 $100 $150 $200 $250 1% 3% 5% 7% 10% NPV $/ha Discountrate 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 Discountrate Conservative Optimistic Central
EGS trend under various scenarios Land use scenarios Ecosystem Services Carbon Agri prodn Water Biodiversity Timber Business-as-usual  =   = Future farming landscapes   =   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, carbon markets) 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 on national mechanism (ex-post) Theory & discourse Comparative analysis Advocacy Linkage market and biodiversity Modelling or simulation (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 bodies between funder and planters to manage funds / distribute incentives Specific contracts assign objectives to planters with conditional payments
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.
Ecosystem Services in plantations: from economic valuations to market-based instruments

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Ecosystem Services in plantations: from economic valuations to market-based instruments

  • 1. 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
  • 2. Economic evaluation of ecosystem goods and services under different landscape management scenarios
  • 3. 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
  • 4. 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
  • 5. 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
  • 6. 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
  • 7. 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
  • 8. 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
  • 9. Timber Methods: tools and resources Water Bush tender payments
  • 10. 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, and r is the rate of discount
  • 11. Returns from Carbon under various scenarios -$50 $0 $50 $100 $150 $200 $250 1% 3% 5% 7% 10% NPV $/ha Discountrate Conservative Optimistic Central
  • 12. Returns from carbon +environmental payments -$50 $0 $50 $100 $150 $200 $250 1% 3% 5% 7% 10% NPV $/ha Discountrate Conservative Optimistic Central
  • 13. 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 Discountrate Conservative Optimistic Central
  • 14. EGS trend under various scenarios Land use scenarios Ecosystem Services Carbon Agri prodn Water Biodiversity Timber Business-as-usual  =   = Future farming landscapes   =   Eco-centric   =   Agro-centric     = Land abandonment   ?  = For $ value see Baral et al. 2014, Land Use Policy
  • 15. 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)
  • 16. 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
  • 17. 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
  • 18. Another economic approach to plantations: Market-based instruments for ES
  • 19. THE ‘DISCOVERY’ OF A NEW GALAXY
  • 20. With assumed strengths… Economic signals more effective and flexible Better resource allocation and efficiency Filling the funding gap for ES provision
  • 21. … but also lots of confusion Inconsistent use of terms Mis-information of policy-makers An impediment to policy evaluation
  • 22. 1. Direct markets (e.g. NTFPs for conservation) 2. Tradable permits (e.g. transferable development rights, carbon markets) 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
  • 23. Broad range of analytical approaches: 0% 10% 20% 30% 40% 50% Local case- study (ex-post) Case-study on national mechanism (ex-post) Theory & discourse Comparative analysis Advocacy Linkage market and biodiversity Modelling or simulation (ex- ante analysis)
  • 24. 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
  • 25. Payments for Ecosystem Services 2.3% 7% 4.7% 34.9% 20.9% 0% 30.2% 0% 10% 20% 30% 40%
  • 26. Do PES improve governance of reforestation? Two Indonesian cases
  • 27. General implications of relying on PES Establishment of multi-stakeholder agencies as intermediary bodies between funder and planters to manage funds / distribute incentives Specific contracts assign objectives to planters with conditional payments
  • 28. 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’?
  • 29. 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.
  • 30. CIFOR Planted forests initiative - Stakeholders’ perceptions and expectations; - Labor issues; - Conflict mediation; - Community forestry / company-community partnerships; - Mapping of planted forests.
  • 31. 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.