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1
The Valuation of Conservation Options Versus Tropical Deforestation
Edmund Hoh, Project Leader
Gunung Palung National Park , West Kalimantan, Indonesia.
International Conference on Biodiversity, Climate Change,
and Food Security 3 July 2013
2
Outline
• Project Objectives• Context• Study Site• Methods• Data Collection• Results & Discussions• Conclusion
30-Year Net Present ValuesUS$
Non-Timber Forest Products
Illegal Woodfuel Collection Ecotourism
Illegal Agriculture Biodiversity CreditsBioprospecting
Illegal LoggingCarbon Credits
BAU PortfolioGHG emissions
High in tons of CO2e Low
Project Objectives
Assess the economic case for reducing greenhouse gas emissions (GHG) from deforestation in Gunung Palung National Park.
Compares ‘Business As Usual’ (BAU) high GHG emissions activities …
[hypothetical chart, for illustration only]
… a Portfolio of low emission alternatives
… versus
Frequently proposed ‘solutions’ but …
… are these viable alternatives to BAU practices?
4
Context – Deforestation & CO2 Emissions
Rapid deforestation in Borneo:
Indonesia is the world’s third largest emitter of greenhouse gas, accounting for 2.1 billion tons of CO2e in 2005.
Source: Nelleman et al 2007; NCCC Indonesia GHG Cost Curve.
Project Site
5
Study Site – West Kalimantan, Indonesia
oRich in bio-diversity*oHistory of empirical data
Gunung Palung National Park (GPNP) - 90 000ha.
*One of the most species rich parks, orangutan, clouded leopards, sun bears, others.Credits: Google Earth
oAccess to local stakeholdersoHistory of illegal deforestation
HealthinHarmony.org
NatGeo
Edmund Hoh Edmund Hoh
6
Study Site – Illegal Deforestation @ GPNP
Illegal logging on the edge of GPNP.
Credits: Edmund Hoh, 2011.
GoogleEarth
Over 9,000ha lost within GPNP in 2002 (Curran et al 2004)
NatGeo Surrounding area slated for palm oil developments.
7
Methods - Project Phases
Stakeholder Buy-in
Model Validation
Model Design
• Project briefing to key local stakeholders Bupati. GPNP Admini-
stration . Ministry of
Forestry. Local
Community and NGO’s.
• Literature review of existing models.
• Meta architecture design and key modules.
• Mapping of socio-economic drivers and assumptions.
• Scenario generation.
• Model feedback from experts: Bogor
Agriculture University.
Centre for International Forestry Research.
UN FAO Forestry Department.
Data Collection
• Secondary research + literature data gathering .
• Primary research EOS Household
Survey of villages surrounding GPNP.
Findings & Stakeholder
Review
• Interim results:• Final results:• Final stakeholder
discussions.• Final publications.
Develop a valuation tool that allows for decision making
- valuation based on Discounted Cash Flow (DCF)
Methods - Model Design, meta architecture
Toggles between scenarios, which are based on 3 scenarios parameters that drive the value levels of key assumptions.
Calculates physical units in the model for BAU (e.g. volume of timber extracted in m3)
and for Portfolio (e.g. CO2 emissions).
Scenario Layer
Physical Layer
Economic Layer
Output Layer
Calculates economic values for key stakeholders by converting physical units into values using prices, costs, margins, etc.
Displays key model outputs via tables and graphs.
8
9
Methods - Main Scenarios
ScenariosScenario Parameters Base Case Pessimistic Optimistic
Economic Growth
MediumModerate Indonesian GDP
growth at ~5.5% p.a.
HighStrong economic growth at 7% p.a., higher prices.
LowLower economic growth at 4% p.a., lower prices.
Physical Impact of Climate
Change
MediumIPCC A1B scenario, 25%
reduction in crop yields by 2100, pro-rated annually.
HighUp to 40% rice yield reduction by 2100.
LowNo reduction in rice yield
assumed.
Policy Support for the
Environment
MediumNo change in CO2 emissions,
log extraction rates from GPNP.
LowIllegal logging
accelerates; no carbon credit program.
HighLower log extraction rate
in GPNP; 70% of CO2 results in credits.
RemarksMost assumptions follow historical trends.
Table shows assumption levels of scenario parameters for each scenario.
10
Data Collection - EOS Household Survey
255 households (HH) from 21 villages around GPNP and Sukadana were surveyed in 2011 to obtain data on farming, logging practices, socio-economic.
11
EOS Household Survey – Profile of Loggers, GPNP
• Households (HH) income of active loggers was 22% lower compared to non-logging HH’s.
• Had 20% fewer common HH assets.
Cash Income & Assets
Motivation & Perception
• Engage in logging due to lack of alternative jobs* (40%), (perceived) higher income (58%).
• Willing to stop logging if there were alternative steady higher paying jobs.
Other Illegal Forest Activities
• Also tended to engage in other illegal forest activities: land clearing for farming, woodfuel and NTFP collection inside GPNP.
Active loggers tend to come from householders with significantly lower incomes; driven by cash income needs.
*Health in Harmony survey: to pay medical bills
• 2.4% of the HH around GPNP may be actively logging, potentially representing ~250 HH’s.
12
EOS Household Survey – Logging Statistics
Survey data suggests that the current logging activity at GPNP has fallen compared to historical data.
1991,1999: Hiller et al 2004.
13
EOS Household Survey – Estimated Deforestation Rates
Deforestation from illegal timber extraction estimated at 11-24 ha, potentially understated; 50ha assumed (inclusive of land clearing for farming)
• Total Households = 250• Members/HH = 1.04• Ave team size = 6.6• #teams = 39• Trips/team = 1.7• Total trips = 67 p.a.• Timber/trip = 14 to 30 m3• Total timber = 940 – 2000 m3• Timber Yield = 50%• Growing Stock (GS) = 1900-4000 m3• GS density = 170m3/ha• Calculated area cleared = 11 – 24 ha.
Deforestation rate at GPNP appears to have fallen significantly*.
*2011: EOS-MRI household survey in Oct 2011.
Subject to verificatione.g. by satellite imaging and
analysis, land surveys.
14
Outline
• Project Objectives• Context• Study Site• Methods• Data Collection• Results & Discussions• Conclusion
15
Results & Discussion
‘Business As Usual’ (BAU) :
• Illegal Timber• Illegal Farmland• Illegal Woodfuel
‘Portfolio’ alternatives:• Carbon Credits• Ecotourism• Biodiversity Credits• Bio-prospecting• Non Timber Forest Products
Food Security implications
16
Illegal Timber Module – Overall Demand
Annual TIMBER DEMAND Potential in GPNP (m3)
Physical Layer
Local* Demand (m3)External Demand
(m3)
PopulationSize
GDP Growth Rate (%)
Indonesia Timber Consumption
Indonesia TimberExports
Ave Per Capita Consumption (m3/person)
Annual Deforestation Rate
in GPNP (ha)
Population growth rate (%)
Literature Data
Market/other Data
HH-Survey
Calculated
Sawnwood + Panels + Pulp
IndonesiaTimber Production
Log extraction rate from GPNP (%)
Growing stock density (m3/ha)
Farmland Demand (ha)
Indonesia Timber Supply
Indonesia Timber
Sub-Module
*Around GPNP
17
Timber Sub-Module – External Demand (Indonesia)
Indonesia Timber Supply (m3)
Plantation Forests
Natural Forest (legal)
Natural Forest (illegal)
Others
Planting Rate *(ha/yr)
Deforestation Rate & Forest Cover (ha)
Sawnwood
Panels
Pulp
Indonesia Timber Production (m3)
Conversion Factors
Indonesia Timber Consumption (m3)
Ave Per Capita Consumption (m3/person)
PopulationSize
GDP Growth Rate (%)
Population growth rate (%)
*7-8 years to harvest
Exports (m3)
Industrial Roundwood or ‘Logs’
Timber Products
Timber & forestry data obtained from various sources including Ministry of Forestry (Indonesia), FAO, ITTO, others
18
Global Timber Industry
Industrial Roundwood (logs)
Panels Sawnwood(veneers)
Pulp
Paper & PaperboardSecondary Products
Hardwoods vs Softwoods
WoodfuelGlobally, 1.5 billion m3 of
logs produced in 2008.
19
Illegal Logging in Indonesia
Source: A road map for the revitalization of Indonesia’s forestry industry, Ministry of Forestry (MoF) 2007. EOS estimated based on other sources.
Illegal logging volumes fell
since the peak in 2002-3.
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
0
10
20
30
40
50
60
2010
EOS estimateManurung et al 2007
EOS estimate based on recent FAO data using similar methodology.
20
Assumption - Timber Consumption Per Capita
Timber consumption per capita tends to
increase with higher levels of income.
(Bhati 2006)
Indonesia = 19 m3/1000 persons in 2010, assumed to grow to 28m3/1000 persons by 2041 if GDP rises to US$12,000 per capita.Source: FAO
28
?!
Developed Economies(e.g. US: 154, US$47,100)
45EOS Base Case
21
Indonesia Timber - Demand
Indonesia’s demand for logs could double over next 30 years
EOS timber projections output falls within projections of other models.
UN FAO 2007; and CFPS (Ministry of Forestry, Indonesia) 2008.
EOS Projections.
2x
22
Indonesian Timber - Supply
Level of illegal
logging may depend on potential
new supply from forest plantations.
Million m3
[sustainable?]
[achievable?]
EOS projections.
[competition from palm oil?]
23
Illegal Timber – Projections for GPNP
This deforestation rate (ha) will be used as the baseline projections for the carbon credit calculations.
EOS projections.
Implications: Deforestation rate at GPNP could triple over the next 30 years
144
m3 Ha
Assumes similar extraction rates
24
Log Prices
International log price have been increasing at about 4% p.a. for the last 30 years (up 3x), with two significant surges.
CAGR:
5.0% $455
4.0% $340
3.0% $250
Malaysian meranti hard logs, import price Japan, US$/m3. http://www.indexmundi.com
US$320, Feb 2013US$100
US$500
25
Timber Pricing Value Ladder and Local Price Components
International Prices for Meranti logs, Japan in Dec 2011 (Source: IndexMundi); Domestic – ITTO; Illegal Domestic prices - EOS estimate based on Obidzinski, 2003)
International P
rices
Domestic P
rices
Illegal D
omestic P
rices
050
100150200250300350400 365
200
100
US$ / m3 Illegal Domestic Price Components (%) Pricing Value Ladder
Source: Estimates based on various studies including Obidzinski (2003), Klassen, (2010), Yonariza (2007), EIA/Telapak.
Most of illegal logging proceeds goes to the financiers (‘cukong’) and ‘informal payments’ to bribe takers; only a fraction goes to the villagers (as labor wages).
Extraction Costs
26
Illegal Logging in Indonesia - a US$ 3 Billion Industry
Note: International prices - Meranti logs, Japan cif (indexmundi). Domestic prices – ITTO.
Illegal logging estimated at ~US$3 billion
in 2012.
27
Illegal Timber – NPV Results
• Base case NPV = ~ US$3.7m (over 30 years @ 20% discount rate).
US$3.7m
Other stakeholders = takers of bribesRhett A. Butler, Mongabay, 2011.
28
Illegal Timber - Summary
Demand for timber in Indonesia may double over the next 30 years; log extraction rate may triple in GPNP.
• Illegal logging in GPNP driven by local and external demand, and high profits.
• Illegal logging across Indonesia could be reduced if more plantation forests are developed.
• Local loggers around GPNP tend to come from much poorer households and get only a fraction of the proceeds; are prepared to stop if there were alternative livelihood options.
• Deforestation at GPNP ~50ha in 2011, projected to triple over next 30 years; base case NPV ~ US$3.7m.
29
Modules
‘Business As Usual’ (BAU) Activities:• Illegal Timber
• Illegal Farmland• Illegal Woodfuel
‘Portfolio’ Activities:• Carbon Credits• Ecotourism• Biodiversity Credits• Bio-prospecting• Non Timber Forest Products
Food Security implications
30
Illegal Farming in GPNP
Newly opened (illegal) land inside GPNP (2007)
Credits: Zamzani (2007)Credits: Ano Afuera (2011)
Lowland farm on the edge GPNP (2007)
31
Physical Layer
ILLEGAL VILLAGE FARMLAND DEMAND (ha)
Average HH Size (persons)
Annual HH Income (Rp/mth)
Changes in HH Income (%)Changes in HH Size (%)
Population Size
Growth Rate (%)
Calorie Needs Per HH (kCal/HH)
Food Needs Per HH - By Category (kg/HH)
Food Crops Grown (kg/HH)
Food Purchased(kg/HH)
Cash Crops Grown (kg/HH)
Land Productivity by Crop (kg/ha)
Cultivated Land Per HH (ha/HH)
Crop Mix
# or % of HH with land inside GPNP per
village
# Villages around GPNP
Crop Income (Rp/HH)
Crop Costs (Rp/ha)
Price Per Unit(Rp/kg)
Food Expenses (Rp/HH)
Inflation (% p.a.)
Net Crop Income (Rp/HH)
2450kcal/ person/day
44kg/mth /person
Literature Data
Market/other Data
HH-Survey
Calculated
i.e. area planted inside GPNP
IfFood Production
<Food Needs
IfCash Crop Income
>Food Deficit Value
Yes
No
No change in
planted area
Yes
Increaseplanted area
No
Illegal Farming - Flowchart
*Impact of climate change on crop yields
32
EOS Household Survey – Farming Practices
At least 80ha being cultivated within GPNP, potentially more.
• Less than 3% of respondents admitted to having cleared land within the park, averaging 0.3ha.• Main reason cited for clearing land or planting inside GPNP was for the income to feed the family.
• Crop Mix – mainly rice, rubber, and some palm oil, vegetables.
• Value of Crops - estimated at ~Rp9 million per HH per year (US$1,000)
• Costs - planting & harvesting cost of Rp1 million.
B4. Crop MixPlanted area
(m2)
Crop Mix (as % of
area)
Ave # harvest per
year
Claimed Yield (kg)/ season
or ha
Adjusted Est. Annual Production Qty (tons)
Unit Value (Rp/kg)
Est. Total Value (Rp)
Rice - upland 152,525 16% 1.1 660 30.0 5,944 178,615,249 Rice - lowland 407,787 43% 1.4 1,411 135.4 2,559 346,397,965 Cassava 1,300 0.1% 1.5 132 2.0 500 1,001,000 Vegetables 1,220 0.1% 2.7 113 - 3,500 - Food Crops 562,832 167.4 526,014,214
Palm oil 40,070 4% 9.1 1,400 12,790,344 Rubber 338,855 36% 11.2 13,574 151,791,999 Others 512 0.1% - 1,000 - Cash Crops 378,925 20.3 690,596,557
TOTAL 941,757 100% 187.8 1,216,610,770 Number of HH's 136Average 6,925 m2 (Rp/HH/yr) 8,945,667
33
Climate Change
Temperature Scenario’s
• The IPCC 2007 AIB scenario projects a temperature change of 2.5-3.0°C in Borneo (EOS Base Case).
• In 2011, Hadley Centre projected a potential change of 6°C for Borneo by 2100.
Increased weather volatility, changes in season timings.
Apsnet.org
Up to +6°C for Borneo by 2100.
34
Rice Yields
Source: Walker et al
A temperature rise of 2-3°C would reduce grain yields by 7-25%
(Hundal and Kaur).
• With 6°C increase in temperature, yield falls by ~40% (Walker et al).
• Fertility of rice falls from 90% to 20% only after a 2 hour exposure to temperatures above 38°C (Yoshida). risk of sterility beyond this level.
35
Illegal Farming – Projected Food Production
• Potential food production deficit after 2025, but income from (high value) cash crops (e.g. palm oil) projected to offset shortfall value no increase in planted area/HH inside GPNP.
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
2041
-
100
200
300
400
500
600
700
Food Production Requirements vs Achieved
Food production achieved (tons)
Own food production requirements (tons)
Source: EOS projections. *Assumes a 25% decline in rice yields by 2100, pro-rated annually.
Production deficit
2011
2013
2015
2017
2019
2021
2023
2025
2027
2029
2031
2033
2035
2037
2039
2041
-
2,000
4,000
6,000
8,000
10,000
12,000
0
100
200
300
400
500
600
700
800
900
1000Value of Food Deficit & Cash
CropsFood deficit volume (tons) [RHS]Value of food deficit (Rp'm)Value of cash crops(Rp'm)
Rp'm Tons
36
Illegal Farming – Historical Rice Prices
Wholesale Rice Prices 30 years (US$/ton)
CAGR: 3.0%
Risk of steep rises in international price of rice in event of actual production shortfall.
IndexMundi
Perceived shortage only, no actual shortage in rice production volumes
37
Illegal Farming - Summary
Farming within GPNP by poor families, lack of land; risk of food production deficit in future; cultivated area likely to increase. • Those engaged in illegal farming within GPNP (<3% of HH, >80ha)
tend to be illegal loggers; farmers have relatively small plots (0.6ha), significantly below province average (1.9ha).
• Potential rice yield reduction of 25% by 2100 due to climate change.
• Potential food production deficit after 2025, but income from cash crops expected to neutralize risk of further land clearing.
• Cultivated area could increase from 80ha to 108ha over 30 years.• Base case NPV of ~US$2.3m
38
Modules
‘Business As Usual’ (BAU) Activities:• Illegal Timber• Illegal Farmland
• Illegal Woodfuel ‘Portfolio’ Activities:• Carbon Credits• Ecotourism• Biodiversity Credits• Bio-prospecting• Non Timber Forest Products
39
Annual Illegal WOODFUEL
EXTRACTION (m3)
Non-Woodfuel HH Kerosene(MJ/litre)
Others(MJ/kWH)
Cooking Energy Needs per HH (MJ/HH/day)
Price Per Energy Unit by Source
(Rp/unit)
Population Growth Rate (%)
Changes in HH Size (%)
Population Size around GPNP
Changes in HH Income (%)
Inflation (%)
BAU: Illegal Woodfuel Extraction
Average HH Size (Persons / HH)
Literature Data
Market Data
HH-Survey Results
Calculated
Cooking Energy Needs per Person (18MJ/Person/day)
Woodfuel HH
Avg. HH Income (Rp/mth)
Woodfuel(15MJ/kg)
# HH around GPNP
Physical Layer
Collected
Food-Income Distribution
(food expenses~ cooking energy needs
Purchased
Cooking Energy Purchases (Rp/HH)
Kg to m3 conversion
EnergySource
(Energy/unit)
Quantity Required
(units)
Within GPNP(kg/HH)
Outside GPNP(kg/HH)
# & % of HH with illegal woodfuel collection
43 kg/HH/mth
40
Illegal Woodfuel (WF) – Conclusion
Credits: Allianz. Source: EOS 2011 Household Survey conducted by MRI, Indonesia.
Estimated woodfuel volume collected annually potentially equivalent to 2ha …
… but not likely to result in actual deforestation, according to experts*.
NPV = ~ $2m (based on charcoal market prices as proxy)
*Due to re-growth of forest, dead limbs used.
41
Modules
‘Business As Usual’ (BAU) Activities:• Illegal Timber• Illegal Farmland• Illegal Woodfuel
‘Portfolio’ Activities:
• Carbon Credits• Ecotourism• Biodiversity Credits• Bio-prospecting• Non Timber Forest Products
42
Carbon Credit Market
• Mandatory (or “Cap and Trade”), and the voluntary systems.• The main market of the EU Emissions Trading Scheme traded volume was at 5.5 billion tons
CO2 in 2010, (accounts for 80% of global transacted volume).
• Reducing Emissions from Deforestation and Degradation (REDD) – voluntary.• 20 million tons CO2 in 2010
Prices (Mandatory)BlueNext CER Spot Prices (EUR)
Trading Volume(Forestry)
Previous high of ~EUR35 in mid 2008
43
Baseline Deforestation rate (ha p.a.)
Projected/Actual Deforestation Rate* (ha p.a.)
Reduction in deforestation* (ha/yr)
Above ground growing stock removed (tonnes/yr)
Growing stock density (m3/ha)
CO2 content (tonnes/m3)
Credits to ‘buffer’ account
CO2 available for carbon credits to project (tonnes)
Verified CO2 emissions reductions (tonnes)
Gross Revenue for
carbon credit project ($)
Carbon credit prices ($/tonne)
30%
~174 m3/ha
1.84 tonnes/m3
Carbon content (tonnes/m3)
0.47x
3.67x
Literature Data
Market Data
HH-Survey Results
Calculated
*Resulting directly from the Emission Reduction Activities of the carbon credit project.
Historical Deforestation rate (ha p.a.)
Emission Reduction Activities
Demand for Timber
Forestry Dept Monitoring
Credits available for sale by Project company
Third party
Physical Layer
Carbon Credit Program
• Carbon standards, methodologies.
44
Carbon Credits – Assumptions & Projections
Carbon credit project possible only in the optimistic scenario
2003
2005
2007
2009
2011
2013
2015
2017
2019
2021
2023
2025
2027
2029
2031
2033
2035
2037
2039
2041
-
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
50 144 59.8453898792936
GPNP Baseline & Projected Deforestation Rate
Baseline
Scenario Projections
Ha
EOS Projections
• Deforestation rates are projected need to be lower that the baseline (reference levels).
• Carbon credit prices are significantly higher.
• Multiple challenges to overcome
45
Carbon Credits – Conclusion
• Currently not viable from project developer/investor perspective; • Needs international treaty, and stronger prices.
Credits: Arbre Billets
?• Low NPV of US$0.6m comprising:
(a) $1.1 m to local community*, (b) -$0.5m to investor/project developer/government.
46
Modules
‘Business As Usual’ (BAU) Activities:• Illegal Timber• Illegal Farmland• Illegal Woodfuel
‘Portfolio’ Activities:• Carbon Credits
• Ecotourism• Biodiversity Credits• Bio-prospecting• Non Timber Forest Products
47
Ecotourism Industry
• There were 7.7 million visitors to Indonesia in 2011.
• Spent an average of US$143/day over 8 days.
• 80% headed to Bali.• Less than 8,000 to
West Kalimantan.
About 90,000 foreigners visited its 50+ national parks in 2009, where the top 5 sites accounted for 70 % of visitors.
48
Input Sought from Leading OperatorsBorneo Adventure - Malaysia’s most established inbound tour operators, which offers a range of over 100 tours of Borneo.• Local community• Carrying capacity• Attractions
Ecotourism in GPNP
• Low Traffic. In 2011, a total of 219 persons visited GPNP including foreigners who numbered 119 , spent an average of $138/person over 2 days.
• Monopoly at GPNP by Nasalis Tour & Travel, limited marketing.
• Options:(a) Increase marketing for existing
facilities, (b) Develop higher priced mid-range
accommodation, (c) Develop more attractions.(d) Partner with larger player.
Credits: Edmund Hoh
Low traffic, basic facilities, monopoly.
49
Literature Data
Market/other Data
HH-Survey
Calculated
TOTAL DEMAND(total stay-days)
# of arrivals in GPNP annually
# of arrivalsWest Kalimantan
# of arrivalsIndonesia
Growth rate tourist arrivals(%)
Average Stay Days Per Person
Capacity
# of lodges
No of operators
# Rooms/lodge
Occupancy rate (%)
# Room Days Available
Global Economic Growth (%)
Visitors to National Parks
BAU Existing Ecolodge
‘Enhanced’ Mid Range Ecolodge
[growth rate in visitors to
GPNP]
Portfolio: Ecotourism in GPNP
50
Ecolodges – a study by IFC
Average
Number of rooms 11 - 35
Occupancy rates 30 – 67%
Daily Room Rates - economical - mid range - luxury
($/day) % of Total (#)< $60 73%
$61 – 200 18%> $200 7%
Annual revenue > $100,000 to $3 million
No of staff per room 2
Operating costs - personnel - marketing & sales
22%6-10%
Start-up costs $500,000 - $1 million
Ave cost per room $58,000
Source: International Finance Corporation, ‘Ecolodges: Exploring opportunities for sustainable businesses’, 2004.
Key Success Factors• No more than 1 hour from a local
airport, reasonable connection to international gateway.
• Capable entrepreneurs, with sufficient capital, good business plan.
• Cost < $60,000 per room.• Well trained local staff with foreign
language skills, <2 staff per room.• Long term community programs.• Word of mouth, does not depend on
advertising.• Part of a multi-lodge model, with
additional products and services.
Performance and impact varies widely, 10% growth expected, consumer demand for certification not demonstrated, considered a risky market.
Survey of 15 enterprises, comprising 73 ecolodges located worldwide.
51
Ecotourism - Key Assumptions/Projections
GPNP can potentially support a 3-room mid-priced ecolodge, (potentially at expense of existing ecolodge).
Range of occupancyrate for most ecolodges
EOS Projections
Carrying Capacity
52
Ecotourism in GPNP - Conclusion
Breakeven is after 2 years, and base case NPV is estimated at S$0.7 million with a new mid-priced ‘enhanced’ ecolodge.• Investor’s base case IRR of 15% not that compelling.• Marketing effort require, competition from the 50 other national parks.
At discount rate of 10%
53
Modules
‘Business As Usual’ (BAU) Activities:• Illegal Timber• Illegal Farmland• Illegal Woodfuel
‘Portfolio’ Activities:• Carbon Credits• Ecotourism
• Biodiversity Credits• Bio-prospecting• Non Timber Forest Products
Biodiversity Credits - Approach
54Source: http://wwffm.org/wp-content/uploads/2012/06/journal.pone_.0038437.g001.png
The mitigation hierarchy is widely regarded as a best practice approach to manage biodiversity risk.
• Efforts should first be made to prevent or avoid impacts to biodiversity.
• This should be followed by minimizing (reducing)
• Followed by restoration (repair, reinstate) and finally
• Those externalities which cannot be restored must be offset.
1. Avoid2. Minimize3. Restore4. Mitigate/Offset
Biodiversity Programs Globally
55
Region Program Legislation Methodology
US (1) Wetlands Compensatory Mitigation(2) Conservation Banking(3) FWS’ Conservation Banking Guidance
Yes Yes
EU (1) Birds and Habitats Directives(2) European Liability Directive
Yes Yes
Australia (1) Habitat Hectares Method (Victoria)(2) The Biodiversity Banking and Offsets Scheme
Yes Yes
Brazil Forest Regulation and National System of Conservation Units Yes Yes
World Bank Operational Policy 4.04: Natural Habitats No No
IFC Performance Std. 6: Biodiversity Conservation and Sustainable Natural Resource Management
No No
EBRD Performance Requirement 6: Biodiversity Conservation and Sustainable Management of Living Resources
No No
Malaysia Malua Biobank No No
56Source: http://maluabank.com/MaluaBrochure.pdf
Malaysia - Malua ‘Biobank’, Sabah.
• Who: Sabah Government-owned company license to the Malua Forest Reserve; ceased all logging operations end 2007.
• What: US$10 million fund to rehabilitate the Malua Forest Reserve , sell Biodiversity Conservation Certificates.
• Status: few sold to-date; seeking new investors and strategies. Voluntary
basis.
57
Biodiversity Credits - Conclusion
• Success in developed markets due to supporting legislation.• Credits are not “transportable” i.e. they are location specific.• Deemed not viable in Indonesia, lack of a regulated market.• Insufficient studies on GPNP in terms of impact on
biodiversity; additionality clause makes the park not eligible under current methodology.
Therefore, unlikely to be viable in the case of GPNP (hence no NPV calculated for biodiversity credits).
58
Modules
‘Business As Usual’ (BAU) Activities:• Illegal Timber• Illegal Farmland• Illegal Woodfuel
‘Portfolio’ Activities:• Carbon Credits• Ecotourism• Biodiversity Credits
• Bio-prospecting• Non Timber Forest Products
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Bio-prospecting
Bio-prospecting is the systemic search for genes, compounds, designs and organisms that might have a potential economic use and might lead to a product being developed.
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(Laird’2002)
Cosmetics and Personal CareBotanical MedicinesPharmaceutical Industry
• Annual sales derived from Traditional Knowledge using genetic resource estimated at around US$100 billion.
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Regulations - International
• Convention on Biological Diversity (CBD)– conservation of biological diversity the sustainable use of its components and the fair
and equitable sharing of the benefits arising out of the utilization of genetic resources
• UN Convention on Law of the Sea (UNCLOS)– contains provisions relating to the seabed, the high seas, marine scientific research, and
protection of the marine environment which may be relevant to bioprospecting activities.
• Trade-Related Aspects of Intellectual Property Rights Agreement– inter alia, minimum standards for the protection of patents in all fields of technology
including the use of biological and genetic resources in Biotechnology
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Regulations - Indonesia (1/2)
Indonesia is signatory to the Nagoya Protocol on fair and equitable sharing of benefits arising from use of genetic resources, but there are no regulations at the national level to ensure that it is implemented.
• Convention on Biological Diversity– Signatory to the Convention– Ratify the Nagoya Protocol on Access to Genetic Resources and the Fair and Equitable Sharing of Benefits
Arising from their Utilization
• Trade-Related Aspects of Intellectual Property Rights Agreement– Law No.29/2000 on Plant Variety Protection– regulation No. 13/2004 on the denomination, registration, and utilization of initial variety to develop
essentially derived variety
• International Treaty on Plant Genetic Resources for Food and Agriculture– international agreement aimed at guaranteeing food security through the conservation, exchange
and sustainable use of the world's plant genetic resources for food and agriculture– Implemented through Law No. 4/2006
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Regulations - Indonesia (2/2)
• Cultural Practices Law - 12/1992– Regulates access to genetic resources
• Conservation of Biodiversity and Ecosystems Law – 5/1990– Based on conservation and potential use of biodiversity and ecosystems in a balanced
and compatible manner to support community prosperity and quality of life– Regulates protection of life support systems and conservation and sustainable use of
biodiversity
• Ministerial Decree No. 1X/2001 on Agrarian Reform and Natural Resources Management
– Implement policies on agrarian reform and management of natural resources according to principles of sustainable development
– Recognizes and protects the rights of traditional communities in management of natural resources in Indonesia
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Case Study: INBio-Merck Agreement, Costa Rica
• Type of Genetic Resource– Plants, insects and environmental samples across all national parks in Costa Rica
• Stakeholders– National Institute of Biodiversity of Costa Rica (INBio): a non-profit association
established under Costa Rican Law– Merck and Co Inc.: one of the largest pharmaceutical companies in the world based out
of USA
• The Agreement– Merck provided INBio with a research fund of US$ 1million over two years, plus
laboratory equipment and materials worth $130,000.– Royalty rate not disclosed, 27 patents filed till 2004
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Potential Revenue to Local Communities
Item Range Comments/Reference
Sample Collection fee (US$) 50-200 Figures indented to cover actual costs (packaging, transport etc.)
Hit rate 1:6,000 – 1:30,000
Probability of developing one commercially viable product; averages 1 in 12,000
Development Period (yrs) 10 – 12 Average duration to develop a marketable commercial product
Product revenues (US$) 100m -1bn Total worldwide sales over the lifespan of the product.
Royalty payment (%) 1-5 % of gross revenues payable
Two potential sources of revenue to local communities: (1) Sample collection fee, and/or (2) Royalties from success development of a
commercial product.
Stakeholders• Local Communities• Host Governments• Companies • International Donor Agencies• Brokers• NGO’s
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Bio Prospecting : Conclusion
• Low revenues from sample collection (while upfront).• Royalty payments are uncertain, as it may take over 10 years
to develop a product.• No recent successful cases of bioprospecting in Indonesia.• GPNP has a confirmed database of 500 plant species, but
deemed low given the above ‘hit’rate of one in 12,000.
Therefore, no NPV is attributed to bioprospecting.
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Modules
‘Business As Usual’ (BAU) Activities:• Illegal Timber• Illegal Farmland• Illegal Woodfuel
‘Portfolio’ Activities:• Carbon Credits• Ecotourism• Biodiversity Credits• Bio-prospecting
• Non Timber Forest Products
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NTFP in Indonesia
Examples:• Rattan and bamboo• Rubber sap• Gaharu (resin wood)• Honey• Plants, flowers, fruits• Animals (pets, meat)
including birdsnest
• Used for own consumption or for sale.
• Rattan used to be a major export for Indonesia.
• Gaharu is highly prized internationally.
• More sustainable methods for wild honey being promoted.
Historical exploitation of NTFP has led to almost complete depletion of these resources [Sellato].
www.flickr.com Durian collectors in Gunung Palung, 2009.
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NTFP Collection in GPNP - Household Survey Results (1/2)
In 2011, less than 2% of the population entered GPNP to collect NTFPs.
• Key items were fruits, gaharu (resin wood) and traditional medicinal plants.
• Collectors tended to be also engaged in (illegal) logging.
Gaharu (resin wood)
Ignasnoreng.blogspot.com
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NTFP Collection in GPNP - Household Survey Results (2/2)
The highest value NTFP collected was gaharu (resin impregnated wood).
NTFPTotal Qty Collected Rp/unit
Total Value (Rp) Total Qty Total Value (Rp)
Total Value (US$)
Gaharu 3 30,000,000 90,000,000 56 1,681,035,930 186,782 Fruits 104 3,558 370,000 1,943 6,910,925 768 Honey 3 50,000 150,000 56 2,801,727 311 Obat traditional 7 11,429 80,000 131 1,494,254 166 Rattan 25 1,200 30,000 467 560,345 62 Others 30 2,000 60,000 560 1,120,691 125 Total 172 30,068,186 90,690,000 3,213 1,693,923,872 188,214 # of HH 10 187
EOS Household Survey Est. for whole population
*Unit price of Rp30m or US$3,150 (figure provided by respondents) are only for the highest quality. Actual market values could be as low as a few dollars for the lowest quality.
• Historical exploitation led to almost complete depletion e.g. extraction of gaharu in GPNP let to almost 98% of trees being ‘liquidated’ (Paoli et al 2001).
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NTFP - Conclusion
Sustainable NTFP will have to be cultivated outside GPNP - some potential, but a number of issues remain; values (if any) are speculative and considered unlikely to be significant.
• Any collection of flora and fauna within GPNP is illegal, hence any ‘sustainable’ collection of NTFP has to be from cultivation of such products outside the park.
• Efforts to cultivate the Aquilaria trees (gaharu) have not been successful.• Limited value of other NTFP collected from GPNP.• Some preliminary development of other NTFP (palm sugar, honey) but no
evidence of significant success yet.
Therefore, no NPV projections/values were projected.
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• Project Overview• Modules• Key Challenges & Issues
• Summary of Key Results• Conclusions• Appendix
Contents
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Results – NPV Summary
Conservation based activities offer some value but lower
Excludes non-monetary ‘value’
from other forest uses.
$8m <$2m
US$ values over 30 years
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Results – NPV Summary
Local communities do not benefit much from illegal logging
US$ values over 30 years
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Outline
• Project Objectives• Context• Study Site• Methods• Data Collection• Results & Discussions• Conclusion
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Food Security Implications
• Potential climate change effects may reduce rice yields and due to higher temperature, and/or changes in weather/seasons.
• Possible food reduction or food deficit (rice) in 15-20 years, and resulting significantly higher rice prices.
• Farming plots are also becoming smaller, harder for households to produce enough, especially for the poor.
• Impact may be mitigated by: planting cash crops, more farming land, higher yielding genetic planting material/technology, reorganization of farming practices (economies of scale), or migration/urbanization (for higher incomes).
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Overall Conclusion
Current BAU activities provide significant value; and apart from ecotourism, the other portfolio options show limited value.
• Alternative jobs/livelihood options needed
• Park surveillance and monitoring needed.
• Commercial plantation forests as alternative
• Global legal framework for environmental conservation.
Continued conservation efforts are likely to remain critical in minimizing future deforestation rates.
Thank You!
Contact:
Earth Observatory of Singapore (EOS)Andreas Schaffer, Sustainability Director (Principal Investigator)Edmund Hoh, Project LeaderAnkit Joshi, Researcher
c/o Nanyang Technological University 50 Nanyang Avenue, Block N2-01a-03, Singapore 639798.
Tel: (65) 6592-7709Email: [email protected]
[email protected] [email protected]: www.earthobservatory.sg
