Opportunity costs of conserving a dry tropical forest under REDD+: The case of the spiny dry forest in southwestern Madagascar

Reducing Emissions from Deforestation and Degradation (REDD+) has been identified as a potentially cost-effective climate change mitigation strategy. The success of REDD+ in preventing deforestation and degradation in dry forests will depend partly on whether financial incentives for forest conservation can cover smallholders' opportunity costs of forgone uses of the forest. We therefore compared the opportunity costs of the main forest use activities (slash-and-burn agriculture or charcoal production) with potential benefits from the sale of carbon credits under REDD+ from a smallholder perspective for a case study in southwestern Madagascar. Calculations are based on an assessment of carbon stocks in the dry spiny forests as well as benefit and cost data from interviews with smallholders. To assess the risks and uncertainties associated with opportunity costs and the REDD+ benefits, we used a Monte Carlo modeling approach. We compare net present values for opportunity costs and potential community profits from REDD+ at discount rates of 5% and 20% over a project period of 25 years. Our results show that REDD+ community profits can outweigh the profits from charcoal production and the profits from slash-and-burn agriculture in 54–57% of the cases, despite opportunity costs being highly variable for both land uses. Charcoal production in particular has low opportunity costs as smallholders only engage in this activity when no other sources of income are available. The case study shows that potential REDD+ payments can provide sufficient financial incentives to preserve dry forests with low carbon stocks but relatively low opportunity costs of preservation.