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Economics of carbon sequestration in community forests: Evidence from REDD+ piloting in Nepal

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  • Pandit, Ram
  • Neupane, Prem Raj
  • Wagle, Bishnu Hari

Abstract

Reducing Emissions from Deforestation and Forest Degradation (REDD+) has been piloted in developing countries as a climate change mitigation strategy, providing financial incentives for carbon sequestration in forests. This paper examines the economic feasibility of REDD+ in community forests within two watersheds in central Nepal, Ludikhola and Kayarkhola, using data on forest product demand, carbon sequestration, carbon price and REDD+ related costs. The benefits of REDD+ are about $7994, $152, and $64 per community forest, per hectare of forest area, and per household in Ludikhola watershed compared to $4815, $29, and $56 in Kayarkhola watershed, respectively, under the business-as-usual scenario. Compared to the EU ETS carbon price ($10.3/tCO2e), the average break-even carbon price in community forests is much higher in Kayarkhola watershed ($41.8/tCO2e) and much lower in Ludikhola watershed ($2.4/tCO2e) when empirical estimates of annual expenditure in community forests are included in the analysis. The incorporation of annual expenditure estimates and opportunity cost of sequestered carbon (in the form of firewood prices in local markets) in the analysis suggests that community forests are economically infeasible for REDD+ at the prevailing carbon prices. The implication of our findings is that economic feasibility of REDD+ in community forests depends on the local contexts, carbon prices and the opportunity costs, which should be carefully considered in designing REDD+ projects.

Suggested Citation

  • Pandit, Ram & Neupane, Prem Raj & Wagle, Bishnu Hari, 2017. "Economics of carbon sequestration in community forests: Evidence from REDD+ piloting in Nepal," Journal of Forest Economics, Elsevier, vol. 26(C), pages 9-29.
    • Handle: RePEc:eee:foreco:v:26:y:2017:i:c:p:9-29
    DOI: 10.1016/j.jfe.2016.11.002
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    1. Juan Wu & Fangmiao Hou & Wenjing Yu, 2021. "The Effect of Carbon Sink Plantation Projects on Local Economic Growth: An Empirical Analysis of County-Level Panel Data from Guangdong Province," Sustainability, MDPI, vol. 13(24), pages 1-19, December.
    2. Rakatama, Ari & Pandit, Ram & Iftekhar, Sayed & Ma, Chunbo, 2018. "How to design more effective REDD+ projects – The importance of targeted approach in Indonesia," Journal of Forest Economics, Elsevier, vol. 33(C), pages 25-32.
    3. Neudert, Regina & Olschofsky, Konstantin & Kübler, Daniel & Prill, Laura & Köhl, Michael & Wätzold, Frank, 2018. "Opportunity costs of conserving a dry tropical forest under REDD+: The case of the spiny dry forest in southwestern Madagascar," Forest Policy and Economics, Elsevier, vol. 95(C), pages 102-114.
    4. Luintel, Harisharan & Bluffstone, Randall A. & Scheller, Robert M., 2018. "An assessment of collective action drivers of carbon storage in Nepalese forest commons," Forest Policy and Economics, Elsevier, vol. 90(C), pages 39-47.
    5. Pandit, Ram, 2018. "REDD+ adoption and factors affecting respondents' knowledge of REDD+ goal: Evidence from household survey of forest users from REDD+ piloting sites in Nepal," Forest Policy and Economics, Elsevier, vol. 91(C), pages 107-115.
    6. Aryal, Kishor & Ojha, Bhuwan Raj & Maraseni, Tek, 2021. "Perceived importance and economic valuation of ecosystem services in Ghodaghodi wetland of Nepal," Land Use Policy, Elsevier, vol. 106(C).

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    JEL classification:

    • Q23 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Forestry
    • Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

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