Unit Cost Estimation of Forest Offset Program Reflecting Greenhouse Gas Emissions from Deforestation

The Korean system of the forest offset program (compensation fund) legally mandates developers to pay ‘the cost of establishing new forest’, when forests are converted to other land uses. This system has generated about 100 billion Korean won (KRW) of tax revenue per year from 2003 to 2013 and is a significant revenue source for public forest management in Korea, which generally lacks financial resources otherwise. However, the current unit cost of establishing new forest does not consider a range of many direct and indirect losses of ecosystem services resulting from deforestation. The amount of greenhouse gas emissions from deforestation is one example of ecosystem services that are not currently included in the unit cost calculation, although it can be relatively simply and accurately estimated in a scientific way. This paper aims to examine ways the unit cost of establishing new forest is assessed, and projects the scale of additional national tax revenue, reflecting the real amount of greenhouse gas emissions resulting from deforestation and subsequent forest displacement. The value of carbon loss due to deforestation was estimated at 178~216 KRW per square meter, which is 5.3~10.2% of the imposed unit cost in 2014, 3,350 KRW. If the value of carbon loss is included, the offset program would bring about 21.4 billion KRW of additional revenue, which is 17.4% of total off-set revenue in 2013.