Carbon Balance and Management(3)

Figure 4Saved Forest Area under different Carbon prices during the next 100 years. Incentives... Periodic payments for standing biomass, Tax... Payments for harvesting wood, Burn... felled wood is burned immediately, Sell... harvested wood is soled, Burn/Sell... share of the wood will be burned

the other part soled.

Burn/Sell: A share of the wood will be burned and theother part sold.

Costs and revenues under different carbon prices

The effectiveness of introducing a carbon price to influ-ence deforestation decisions depends largely on the levelsset for carbon prices, apart from considerations of politi-cal feasibility and implementability. Low prices have littleimpact on deforestation rates. During the 21st century car-bon tax schemes of 9 US$/tC for slash burn and 25 US$/tC for situations when removed wood enters a harvestedwood products pool (HWP) would generate some 2 to 5.7billion US$/year respectively when emissions from defor-estation are to be cut in half. For the variant of 12 US$/tC,with regionally differentiated slash burn and HWPassumptions, the average annual income for the next 100years are calculated to be around 2.7 billion US$. Thesetax revenues decrease dramatically over time mainly dueto the declining baseline deforestation rate. Tax revenuesare computed to be 6 billion US$ in 2005, 4.3 billion US$in 2025 and 0.7 billion US$ in 2100. This indicates themagnitudes and their temporal change of funds generatedfrom a deforestation tax scheme aiming at a 50% emissionreduction (figure 5 and 7).

In the alternative incentive scheme, the amount of fundsnecessary, is depending on the strategy of payments,either increasing, staying constant or decreasing over time.If incentives are paid only for those forest areas that areabout to be deforested, and with a global target of cuttingdeforestation by 50%, a minimum payment of 6 US$/tC/

Figure 5

Income under different Carbon Prices. Tax... Payments for harvesting wood, Burn... felled wood is burned immedi-ately, Sell... harvested wood is soled, Burn/Sell... share of the wood will be burned the other part soled.

5 year or 0.24 billion US$ in 2006 would be required. Thisamount rises to some 1.2 billion US$ in 2010, 4.1 billionUS$ in 2025 and 10 billion US$ in 2100 caused by theincreasing area of saved forest area. As precise informationof forests about to be deforested is absent, incentive pay-ment schemes would have to focus on regions underdeforestation pressure. Given that incentives are onlyspent on regions of 0.5° × 0.5° where they can effectivelyreduce deforestation in an amount that they will balanceout the income difference between forests and alternativeland use up the 6 US$/tC/5 year, this would come at a costof 34 billion US$/year (figure 6 and 8). It should be notedthat the tax applies only on places currently deforestedwhile the subsidy applies to larger areas depending onhow far it is in practice possible to restrict the subsidy tovulnerable areas. All figures above are intentionally free oftransaction costs. Transaction costs would inter aliainclude expenditure for protecting the forests against ille-gal logging by force and expenditures monitoring smallscale forest degregation. Governance issues such as cor-ruption and risk adjustment, depending on the countryare, however, considered in the analysis to the extent pos-sible.

Regional effects of carbon prices on deforestation

Sources of deforestation in the model are expansion ofagriculture and buildup areas as well as from unsustaina-ble timber harvesting operations impairing sufficientreforestation. Deforestation results from many pressures,both local and international. While the more direct causesare rather well established as being agricultural expansion,infrastructure extension and wood extraction, indirectdrivers of deforestation are made up of a complex web of