Claiming a Bird in Hand: Economic Potential of Plantation in Nepal under Clean Development Mechanism

Abstract

The paper explores the avenues for carbon trading from existing and potential afforestation and reforestation (A/R) activities in Nepal. As the proposal for A/R projects under Clean Development Mechanism (CDM) is a relatively new idea for Nepal, the paper revisits some preliminary concepts of CDM under this category. It reviews the relevant literature on CDM in the context of Nepal. Different categories of land viz. private land, leasehold forests, community forests, government-managed forests, and community wastelands have been identified potential while claiming carbon dollars for A/R projects under CDM. A preliminary estimation of plantation areas shows that A/R projects in Nepal have enormous potential in claiming for carbon dollars under CDM. Taking six metric tons per hectare as the average annual carbon sequestration and price of carbon as US $ 10-20 per ton into account, gross annual income ranging from $0.4 million to $0.8 million can be earned from plantation after 2000. Pursuant to huge economic potential of carbon sequestration projects, significant efforts are required to realize the potential benefits. The paper recommends establishing broker institutions to mediate carbon trading in Nepal at global markets in order to reduce transaction costs. Effective advocacy is needed for the inclusion of avoided deforestation projects such as protected area systems and community forests to maximize benefits from carbon trading under CDM.

Key words: clean development mechanism, afforestation and reforestation activities, carbon, plantation  

Full text is available at the ForestAction website

Journal of Forest and Livelihood 6(1) February 2007 pp.18-27