Costs and Benefits of Reducing Deforestation and Forest Degradation in Nepal
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ICIMOD Working Paper 2017/5 Costs and Benefits of Reducing Deforestation and Forest Degradation in Nepal 1 About ICIMOD The International Centre for Integrated Mountain Development, ICIMOD, is a regional knowledge development and learning centre serving the eight regional member countries of the Hindu Kush Himalayas – Afghanistan, Bangladesh, Bhutan, China, India, Myanmar, Nepal, and Pakistan – and based in Kathmandu, Nepal. Globalisation and climate change have an increasing influence on the stability of fragile mountain ecosystems and the livelihoods of mountain people. ICIMOD aims to assist mountain people to understand these changes, adapt to them, and make the most of new opportunities, while addressing upstream-downstream issues. We support regional transboundary programmes through partnership with regional partner institutions, facilitate the exchange of experience, and serve as a regional knowledge hub. We strengthen networking among regional and global centres of excellence. Overall, we are working to develop an economically and environmentally sound mountain ecosystem to improve the living standards of mountain populations and to sustain vital ecosystem services for the billions of people living downstream – now, and for the future. The South Asian Network for Development and Environmental Economics The South Asian Network for Development and Environmental Economics (SANDEE) is a regional network that brings together analysts from different countries in South Asia to address environment- development problems. SANDEE’s activities include research support, training, and information dissemination. Please see www.sandeeonline.org for further information about SANDEE. SANDEE is financially supported by the International Development Research Center (IDRC), The Swedish International Development Cooperation Agency (SIDA), the World Bank and the Norwegian Agency for Development Cooperation (NORAD). The opinions expressed in this paper are the author’s and do not necessarily represent those of SANDEE’s donors. The Working Paper series is based on research funded by SANDEE and supported with technical assistance from network members, SANDEE staff and advisors. Corresponding author: Rajesh K Rai, [email protected] ICIMOD gratefully acknowledges the support of its core donors: the Governments of Afghanistan, Australia, Austria, Bangladesh, Bhutan, China, India, Myanmar, Nepal, Norway, Pakistan, Switzerland, and the United Kingdom. 2 ICIMOD Working Paper 2017/5 Costs and Benefits of Reducing Deforestation and Forest Degradation in Nepal Contributing Authors Rajesh K Rai, Mani Nepal, Bhaskar S Karky, E Somanathan, Niroj Timalsina, Madan S Khadayat, Nabin Bhattarai International Centre for Integrated Mountain Development, Kathmandu, Nepal, February 2017 i Copyright © 2017 International Centre for Integrated Mountain Development (ICIMOD) All rights reserved, published 2017 Published by International Centre for Integrated Mountain Development GPO Box 3226, Kathmandu, Nepal ISBN 978 92 9115 450 0 (printed) 978 92 9115 451 7 (electronic) Production Team Shradha Ghale (Consultant editor) Christopher Butler (Editor) Dharma R Maharjan (Layout and design) Asha Kaji Thaku (Editorial assistant) Photo: Cover - Bhaskar Singh Karky Printed and bound in Nepal by Hill Side Press (P) Ltd., Kathmandu, Nepal Reproduction This publication may be reproduced in whole or in part and in any form for educational or non-profit purposes without special permission from the copyright holder, provided acknowledgement of the source is made. ICIMOD would appreciate receiving a copy of any publication that uses this publication as a source. No use of this publication may be made for resale or for any other commercial purpose whatsoever without prior permission in writing from ICIMOD. The views and interpretations in this publication are those of the author(s). They are not attributable to ICIMOD and do not imply the expression of any opinion concerning the legal status of any country, territory, city or area of its authorities, or concerning the delimitation of its frontiers or boundaries, or the endorsement of any product. Note This publication is available in electronic form at www.icimod.org/himaldoc Citation: Rai, R.K.; Nepal, M.; Karky, B.S.; Somanathan, E.; Timalsina, N.; Khadayat, M.S.; Bhattarai, N. (2017) Costs and benefits of reducing deforestation and forest degradation in Nepal. ICIMOD Working Paper 2017/5. Kathmandu: ICIMOD ii Contents Foreword (MoFSC) v Acknowledgements vi Acronyms and Abbreviations vii Highlights viii Executive Summary ix 1. Background 1 1.1 Introduction 1 1.2 Overview of Forest Management in Nepal 2 2. Methodology 4 2.1 Analytical Framework 4 2.2 Data 6 3. Benefits and Costs of Reducing Deforestation 12 3.1 Benefits of Reducing Deforestation 12 3.2 Cost of Reducing Deforestation 13 3.3 Net Benefits of Reducing Deforestation 14 3.4 Sensitivity Analysis 15 4. Benefits and Costs of Reducing Forest Degradation 17 5. Conclusion and Policy Recommendations 18 5.1 Conclusion 18 5.2 Suggested Policy Options 18 References 20 Annexes Annex 1: Description of meetings and consultations 23 Annex 2: Model for CPA estimations, their R2and R2 of validation of segmented image 23 Annex 3: Forest carbon stock and change carbon stock in forest management regimes 24 Annex 4: Annual forest products harvested per household 24 Annex 5: Average annual contribution of forest users to forest management 25 Annex 6: Costs and benefits of cultivating major cereal crops 25 Annex 7: Net annual benefits of reducing deforestation NPR/ha (USD/ha) 26 Annex 8: Costs of reducing deforestation NPR/ha (USD/ha) 26 Annex 9: Annual costs and benefits of reducing deforestation at 5% discount rate (NPR/ha) 27 Annex 10: Annual costs and benefits of reducing deforestation of degraded area at 8% discount rate (NPR/ha) 27 iii List of Tables Table 1: Costs and Benefits of reducing deforestation NPR/ha/year (USD/ha/year) xi Table 2: Distribution of National Forests in Nepal 2 Table 3: Description of study sites 7 Table 4: Description of sub-watershed and forest patches 8 Table 5: Sample Characteristics (standard deviation in parentheses, which are not followed by %) 9 Table 6: Average growing stock, and average stock and annual change of above ground carbon 10 Table 7: Details of costs and benefits of annual forest products harvest NPR/ha (USD/ha in parentheses) 12 Table 8: Annual costs of forest management in NPR/ha (USD/ha) 13 Table 9: Expected value and harvesting cost of forest products from clear cut NPR/ha (USD/ha) 14 Table 10: Net annual benefits from agriculture NPR/ha (USD/Ha) 14 Table 11: Annual benefits and costs of reducing deforestation in NPR per ha (USD in parentheses) 15 Table 12: Benefits and costs of deforestation in different scenarios 16 Table 13: Annual costs and benefits of reducing forest degradation in NPR (USD in parentheses) 17 iv Foreword (MoFSC) This study, supported by UN Environment under the UN-REDD Technical Assistance was commissioned at a time when the Government of Nepal is preparing for REDD readiness phase. By the end of 2016, Nepal will be in a position to complete its Emission Reduction Project Document. Nepal has also ratified the Paris Agreement under the United Nations Framework Convention on Climate Change and has submitted its Nationally Determined Contribution (NDC) for emission reductions. At this juncture, we are developing and customizing strategies and actions for climate mitigation measure. Climate change is one of the greatest threats in our contemporary world, and governments around the world cannot predict what impact it will have on future economy. In this context, this study is important for the Nepali government, as it estimates and indicates the costs that will be required for reducing deforestation and forest degradation in Nepal. The findings and cost estimates of this study for implementing REDD+ in Nepal provide some valuable insights for planning REDD+ interventions. For instance, the annual costs of reducing deforestation in Nepal is between USD 654/ha to USD 3,663/ha, and the associated opportunity cost of carbon sequestration ranges from USD 1.11 to USD 3.56 per tCO2. This figure will be useful when negotiations begin for developing a carbon purchase agreement and for estimating the financial contribution of the forestry sector to the national GDP. I would like to thank the REDD Implementation Centre for commissioning this study and SANDEE and ICIMOD for designing and undertaking the research jointly. This study has been widely reviewed by experts working on REDD+ associated with different institutions including the Ministry of Forests and Soil Conservation, UN Environment, ICIMOD and the wider SANDEE network. I would like to extend my sincere gratitude to all the researchers, officials, experts, and reviewers who have contributed to this study. Krishna Chandra Poudel, PhD Secretary Ministry of Forests and Soil Conservation v Acknowledgements This study was supported by the UN Environment under UN-REDD Technical Assistance Programme to Government of Nepal. We are thankful to the following reviewers: Dr Mohan Prasad Poudel, Mr Sagar Kumar Rimal, Dr Narendra Chand from Ministry of Forest and Soil Conservation, Mr Anukram Adhikary from Forest Action Nepal and Thomas Enters, Keiko Nomura and Ivo Mulder from UN Environment. vi Acronyms and Abbreviations AAH Annual Allowable Harvest AGB Above Ground Biomass CBS Central Bureau of Statistics CF Community forest CFM Collaborative Forest Management C Carbon CFT Cubic