Presented by Himlal Baral & Romain Pirard

1. Ecosystem Services in plantations: from economic
valuations to market-based instruments
New Generation Plantations Annual Summit,
Cape Town 18-19 June
Himlal Baral & Romain Pirard

2. Economic evaluation of ecosystem goods and services
under different landscape management scenarios

3. Study landscape background
 Australian landscapes are changing due to changing demands of
society and climate change and variability
 Land use has gone through many cycles of land clearance,
investment, abandonment
 Since European settlement of Victoria in the1830s, ~66% of native
vegetation has been cleared
 Key NRM issues – declining water quality and quantity, salinity
(irrigation and dryland), deterioration of soils, declining biodiversity,
degradation of rivers and wetlands, increasing weeds and pest
infestations

4. Background – policy context
 Bold, strategic and landscape-scale
initiatives are required to reverse
the land degradation
 The Australian Government and
regional NRM agencies have
adopted a wide range of
sustainability approaches
 Range of market-based
instruments for NRM are being
operated in Australia – e.g., bush
tender, eco-tender
 Carbon farming initiative – as a
new economic opportunities for
farmers and land managers

5. Study aims
 Identify and define the plausible future land use scenarios
 Identify and assess the key ecosystem services such as, carbon
sequestration, agriculture production, water, biodiversity and timber in
heavily modified and fragmented landscape
 Assess the projected changes in ecosystem goods and services under
plausible future land use scenarios
 Analyse trade-offs and synergies

6. Study area and major land use categories
• Largely degraded from clearing of native
vegetation for agriculture as well as over
allocation of irrigation water
• Rainfall ~350 mm, 70 m asl
• Size: 30,000 ha
• High conservation value

7. Timber
Methods: key research steps
Step I
• Collate spatial and attribute data
• Land use and land cover classification
• Identify and define ES for assessment
Step II
• 3 cost based scenarios, and assumptions
• Estimation of ES flow
• Value per ha
Step III
• Develop and define 5 future land use scenarios
• Identify proposed land use change under each scenarios
• Ecosystem services under each scenario
Step IV
• Spatial assessment – tradeoffs, synergies and interactions
• Policy implications
Carbon
Water
Biodiversity

8. Plausible future land use scenarios
 Business-as-usual
• current farming and management systems continue with no significant
changes in land use and land cover in the future
 Mosaic farming landscapes
• reconfiguration of irrigated farming landscapes to more sustainable use,
such as improved farming, low rainfall forestry and biodiversity plantings
 Eco-centric or environmental plantings
• growing environmental concern and growth of new environmental
commodities such as carbon and biodiversity credits, there will be
substantial increase in environmental plantings
 Agro-centric or production oriented
• higher demand of food/livestock production due to continued population
growth in Australia and globally
 Abandoned land use
• land abandonment due to the depopulation in rural areas, and significant
uncertainly due to changing climate

9. Timber
Methods: tools and resources
Water
Bush tender payments

10. Calculation - example
NPV is the net present value ($/ha)
P is the price of carbon,
Qt is the quantity of CO2e sequestrated in year t, EC is the establishment
cost,
MC is the annual management cost, and
r is the rate of discount

11. Returns from Carbon under various scenarios
-$50 $0 $50 $100 $150 $200 $250
1%
3%
5%
7%
10%
NPV $/ha
Discountrate
Conservative
Optimistic
Central

12. Returns from carbon +environmental payments
-$50 $0 $50 $100 $150 $200 $250
1%
3%
5%
7%
10%
NPV $/ha
Discountrate
Conservative
Optimistic
Central

13. Returns from Timber Plantations
-$6,000 -$4,000 -$2,000 $0 $2,000 $4,000 $6,000 $8,000 $10,000 $12,000
1%
3%
5%
7%
10%
NPV $/ha
Discountrate
Conservative
Optimistic
Central

14. EGS trend under various scenarios
Land use scenarios
Ecosystem Services
Carbon Agri prodn Water Biodiversity Timber
Business-as-usual
 =   =
Future farming
landscapes
  =  
Eco-centric
  =  
Agro-centric
    =
Land abandonment
  ?  =
For $ value see Baral et al. 2014, Land Use Policy

15. Conclusions
 Against any realistic investment criteria returns from carbon alone
may not be commercially attractive in the study region
 Additional payments via the Victorian Government’s market based
instruments such as, bush tender makes some scenarios attractive
but they are nowhere close to current expected return from
agriculture
 Planting for timber is not commercially attractive as it delivers only
negative or very low returns under all except the most optimistic
scenario (low cost with low discount rate)

16. Conclusions
 Business-as-Usual and Abandoned Land Use are not a sustainable
solutions the for future as they lead to a decline in ecosystem
services
 Abandoned Land Use potentially threatens native biodiversity and
produces ecosystem dis-services due to potential growth of weeds
and pest animals
 Although Agro-centric is commercially attractive but produces poor
environmental outcome, there is also a growing uncertainty due to
declining rural populations, volatile commodity market, and climate
variability
 Mosaic Farming Landscapes and Eco-centric produces better
environmental outcomes. However, Eco-centric is not commercially
attractive due to harsh environmental condition and associated low
carbon and timber productivity
 Supplemental payments are required to reverse the declining
environmental situation and restore fragmented natural capital

17. Acknowledgements
 Contributors
• Dr. S Kasel, Melbourne School of Land and Environment
• Prof. RJ Keenan, Melbourne School of Land and Environment
• Prof. NE Stork, Griffith University
• Dr. SK Sharma, Carbon Planet
 Data and support
• Kilter Pty Ltd
• Bureau of Rural Sciences
• North Central Catchment Management Authority
• Victorian Department of Sustainability and Environment
• Dr. R Benyon, CSIRO/ Uni of Melb
 Financial support
• University of Melbourne
• CRC For Forestry
Himlal Baral © University of Melbourne 2012

18. Another economic approach to plantations:
Market-based instruments for ES

19. THE ‘DISCOVERY’ OF A NEW GALAXY

20. With assumed strengths…
Economic signals more effective and flexible
Better resource allocation and efficiency
Filling the funding gap for ES provision

21. … but also lots of confusion
Inconsistent use of terms
Mis-information of policy-makers
An impediment to policy evaluation

22. 1. Direct markets (e.g. NTFPs for conservation)
2. Tradable permits (e.g. transferable development rights, carbon
markets)
3. Regulatory price changes (e.g. eco-taxes or subsidies)
4. Voluntary price signals (e.g. FSC certification)
5. Coasean-type agreements (some PES, conservation concessions)
A rough guide to the literature jungle

23. Broad range of analytical approaches:
0%
10%
20%
30%
40%
50%
Local case-
study (ex-post)
Case-study on
national
mechanism
(ex-post)
Theory &
discourse
Comparative
analysis
Advocacy Linkage market
and
biodiversity
Modelling or
simulation (ex-
ante analysis)

24. Broad range of evaluation criteria:
0% 10% 20% 30% 40% 50% 60%
Efficiency
Environmental effectiveness
Equity
Feasibility
Food security
Freedom of choice
Legitimacy
Participation
Pro-poor
Welfare
Governance
Development

25. Payments for Ecosystem Services
2.3%
7%
4.7%
34.9%
20.9%
0%
30.2%
0%
10%
20%
30%
40%

26. Do PES improve governance of reforestation?
Two Indonesian cases

27. General implications of relying on PES
Establishment of multi-stakeholder agencies as intermediary bodies
between funder and planters to manage funds / distribute incentives
Specific contracts assign objectives to planters with conditional
payments

28. Results from case studies
Evaluation procedures for the internal governance of farmer groups are
necessary
Multi-stakeholder bodies do not guarantee equal power in decision making
The effectiveness is affected by political purposes
… but is this specific to ‘PES’?

29. Converging results from previous researches
Governance needs to complement economic tools to achieve outcomes
- Impacts of P&P expansion depend on corporate governance and political will;
- Impacts of plantations on forest conservation depend on public support policies;
- Economic valuations in response to demand by policy makers;
- MBIs require proper regulatory frameworks.

30. CIFOR Planted forests initiative
- Stakeholders’ perceptions and expectations;
- Labor issues;
- Conflict mediation;
- Community forestry / company-community partnerships;
- Mapping of planted forests.

31. Further reading
Pirard R., de Buren, and R. Lapeyre, 2014, Do PES improve governance of forest
restoration?, Forests, 5 (3), pp. 404-24.
Pirard, R., 2012, Payments for Environmental Services (PES) in the public policy
landscape: “Mandatory” spices in the Indonesian recipe, Forest Policy and Economics,
18, pp. 23-29.
Pirard, R., 2012, Market-based instruments for biodiversity and ecosystem services: A
lexicon, Environmental Science & Policy, 19-20, pp. 59-68.