Stopping export logging, oil palm expansion in PNG in 2012 would cost $1.8b, says economist

Stopping logging for timber export and conversion of forest for oil palm plantations would cost Papua New Guinea roughly $1.8 billion dollars from 2012 to 2025, but would significantly reduce the country's greenhouse gas emissions, according to a new analysis published by an economist from the University of Queensland.

Writing in Pacific Economic Bulletin, Colin Hunt estimates Papua New Guinea (PNG) could reduce greenhouse gas emissions from deforestation and degradation by 700-900 million metric tons by establishing a moratorium on the establishment of oil palm plantations and logging for export in 2012. He estimates the opportunity cost of cessation at $1.8 billion (in net present value terms) between 2012 and 2025, assuming a 10 percent discount rate.

Hunt cautions that while the cost of reducing emissions from deforestation and degradation in PNG may seem low, implementation would prove challenging due to high levels of corruption, poor governance, and the complex nature of benefits distribution, among other factors. Furthermore, payments for forest conservation are unlikely to sufficiently compensate the forgoing of industrial oil palm plantations unless carbon prices appreciate substantially.

"This study confirms the view of Howes (2009) that for Papua New Guinea the reduction in greenhouse emissions from land-use change and forestry (LUCF) will be cheap—at least in the case of logging for export—but will not be easy," Hunt writes.

"It is clear that enormous challenges face Papua New Guinea in the design of management arrangements that effectively deliver REDD compensation, particularly in the case of payments to the customary landowners. Donors would need to be satisfied that REDD compensation was indeed enhancing rather than disadvantaging the welfare of regional communities and that funds were being used wisely. Further research is needed to identify the mechanisms by which compensation payments could be made equitably and in a way that would benefit communities and the economy more generally."

Reference: Colin Hunt. Compensating for the costs of reducing deforestation in Papua New Guinea. Pacific Economic Bulletin Volume 25 Number 3