The economics of Tropical deforestation: Reduction of emissions from deforestation and forest degradation
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School of Business | Master's thesis
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AbstractCarbon dioxide emissions and other greenhouse gas emissions from land use change are contributing approximately fifth of all greenhouse gas emissions. The carbon dioxide is released to atmosphere from reduced amount of biomass in land areas. The underlying cause of this deforestation is agricultural expansion. Increased crop production for food and biofuels as well as increasing cattle-raising requires larger land area for their production. This land area is converted from forest area. Ecosystem managers', the ones who make the decision of land use, do not necessarily take into account the externalities caused by released emissions from land use change. One of the goals of this study is to determine how the ecosystem managers' decision making process is formulated and how it can be influenced so that the pattern of land use change is reduced and as a result carbon dioxide emissions from deforestation could be reduced. Simultaneously the drivers and characteristics of deforestation are reviewed to get insight of the ecosystem managers' options. The economics of conservation goods will be studied as the preservation of forest areas are not expected to follow the patterns of normal goods. Another goal is to study a forest preservation program REDD+ (Reduction of Emissions from Deforestation and Degradation) which has been initiated by United Nations and the World Bank. In this study the focus is mainly in the greenhouse gas emissions from deforestation. The emissions will be examined through a framework where there is three alternatives to land use: Agricultural food production, biofuel crop production and forest preservation. The land use decisions for the ecosystem managers occurs under fixed amount of land and ecosystem managers choose to maximize their value from the land use. The research is conducted by going through contemporary literature and publications. The REDD+ program is reviewed through a framework prepared for payments for environmental services and the efficiency of the program is also examined through the framework for three alternative land uses. One of the findings in this study is that population growth and other factors that increase the demand of food and/or biofuel creates pressure on forest area. Additionally subsidies and/or mandates for food production and biofuel production that are not focused on improving the efficiency of the production will put additional pressure on forest areas. REDD+ program's benefits are estimated to exceed the costs of the program making it potentially a successful emission control program. But the program still faces many unanswered questions that must be solved before larger launch of the program is possible. The complexity of the program's details raises questions on achievability of global consensus on rules of REDD+. REDD+ could also cause disturbances in food and biofuel supply and prices. Sustainable forest management could be achieved through well-establish and efficient market for forest products, as has happened in Finland, where the forest stock volume has increased even though the logging has increased as well. And as a result the carbon sink in Finland has increased.
Deforestation, Conservation goods, REDD+, Reduction of emissions, Climate change, Payments for environmental services