Analysing the Economics of Forestry Contribution to
Climate Change Mitigation
M. Nijnik
Socio-Economic Research Programme, The Macaulay Institute, Aberdeen, AB15 8QH,
Scotland, UK, email: m.nijnik@macaulay.ac.uk
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Extended abstract
In this research a programme of the establishment of forest plantations is examined as a
means for Ukraine1 to enlarge its contribution to climate stabilisation. The main objective is to
find out how forests in this country and their expansion could assist in moderating carbon
emissions, and what forestry projects’ (e.g. using of wood as a substitute for fossil fuels)
contribution to climate change mitigation could be. Do the Ukraine's forests offer a low-cost
opportunity for carbon uptake? The answer is yes, and to arrive at this general conclusion,
the potential of afforestation of bare and marginal agricultural lands had been explored. The
expansion of carbon uptake through afforestation and the economics of carbon sink in trees,
a storage policy option, have been assessed. In addition to the simulation of net benefits of
carbon sequestration in trees (in permanent tonnes, Table 1), the net returns from timber
harvesting and using of wood as a carbon sink have been estimated. The economics of
substitution wood for fossil fuel (renewable energy scenario) has been deliberated either. It
was shown that among the investigated carbon sequestration policy alternatives, a storage
scenario is the most viable carbon saving strategy, under specific conditions of Ukraine, and
with the assumptions considered in this paper.
Table 1.
Net present value benefits of carbon sequestration in trees, C storage and
alternative energy scenarios, €/ha, 4% discount rate
Polissja
Wooded Steppe
Steppe
Carpathians
Crimea
-800
-600
RE scenario
1
-400
-200
0
200
400
600
C storage, AF scenario
For more information on afforestation in Ukraine, see Nijnik, M (2002). For a broad discussion on the
economics of climate change mitigation forest policy scenarios for Ukraine, see Nijnik (2005).
The results of the research provide evidence that whilst carbon uptake estimates are
comparable in the main with those, elsewhere in the world, the costs per tonne of carbon
uptake are lower in Ukraine than in such countries, for instance, as Canada, the USA, the
Netherlands, and Finland (Nijnik, 2002). Despite a broad variety of the estimates across
different zones and current land use, the results of the cost-benefit analysis of the storage
policy scenario allow as to argue that the Ukraine's forests, particularly in the Wooded
Steppe zone, offer a low-cost opportunity for carbon sequestration and a challenging
alternative of emissions reduction. Present value carbon sequestration costs in the Wooded
Steppe zone are just 4.6 €/tonne for the storage scenario (when benefits of carbon uptake
are discounted at 0%). These costs are 9.5 €/tonne, on average for the country, which is
also a comparatively low estimate.
The afforestation programme in Ukraine can become a sound climate change mitigation
policy, because of an essential potential of newly planted forests to contribute to global
carbon uptake, and because of availability of land suitable for tree-planting and relatively low
carbon sequestration costs. Important factors that influence the results are discount rates
and time horizon considered in the models. The research outcomes also provide evidence
that under a renewable energy scenario, carbon sequestration costs are often not
compensated by the returns due to cost-inefficiency of wood production, and sometimes also
due to comparatively high land values, when the opportunity costs of maintaining forest on
land for a long period of time appear to be too high. For more useful results, the period under
investigation has to be extended beyond a 100 years time horizon. Then, a continuous
process can be shown. As effects for avoidance of C release through the replacement of
wood for fossil fuels are repeatable, social gains under the renewable energy policy in the
long run are expected to be higher than under the strategy of carbon fixation.
Overall, the results indicate that afforestation in Ukraine can offer Annex B countries a lowcost opportunity to respond to the Kyoto Protocol. The outcomes however provide evidence
that the establishment of forest plantation on CO2 emissions is not viable for this country
without new sources of investment. An elaboration of economic technique for receiving
credits from the world community for planting trees in Ukraine is therefore a challenge for the
future. It is important, that in the upcoming studies the problem of afforestation is elaborated
in view of timber, soil protection and climate change mitigation forest benefits all at once, and
that the gains from various other forest (social and environmental) values will also be
included in models.
Reference
Nijnik, M. (2002) To Sustainability in Forestry: the Ukraine’s case. Proefschrift. Wageningen
University, Wageningen, the Netherlands.
Nijnik, M. (2005) Economics of climate change mitigation forest policy scenarios for Ukraine,
Climate Policy 4 (3): 318-336.