Abstract:
Background: Several previous global REDD+ cost studies have been conducted, demonstrating that payments for
maintaining forest carbon stocks have significant potential to be a cost-effective mechanism for climate change
mitigation. These studies have mostly followed highly aggregated top-down approaches without estimating the
full range of REDD+ costs elements, thus underestimating the actual costs of REDD+. Based on three REDD+ pilot
projects in Tanzania, representing an area of 327,825 ha, this study explicitly adopts a bottom-up approach to data
assessment. By estimating opportunity, implementation, transaction and institutional costs of REDD+ we develop
a practical and replicable methodological framework to consistently assess REDD+ cost elements.
Results: Based on historical land use change patterns, current region-specific economic conditions and
carbon stocks, project-specific opportunity costs ranged between US$ -7.8 and 28.8 tCOxxxx for deforestation and
forest degradation drivers such as agriculture, fuel wood production, unsustainable timber extraction and
pasture expansion. The mean opportunity costs for the three projects ranged between US$ 10.1 – 12.5 tCO2.
Implementation costs comprised between 89% and 95% of total project costs (excluding opportunity costs)
ranging between US$ 4.5 - 12.2 tCO2 for a period of 30 years. Transaction costs for measurement, reporting,
verification (MRV), and other carbon market related compliance costs comprised a minor share, between
US$ 0.21 - 1.46 tCO2. Similarly, the institutional costs comprised around 1% of total REDD+ costs in a range
of US$ 0.06 – 0.11 tCO2.
Conclusions: The use of bottom-up approaches to estimate REDD+ economics by considering regional variations
in economic conditions and carbon stocks has been shown to be an appropriate approach to provide policy and
decision-makers robust economic information on REDD+. The assessment of opportunity costs is a crucial first
step to provide information on the economic baseline situation of deforestation and forest degradation agents and
on the economic incentives required to halt unsustainable land use. Since performance based REDD+ carbon
payments decrease over time (as deforestation rates drop and for each saved ha of forest payments occur once),
investments in REDD+ implementation have a crucial role in triggering sustainable land use systems by investing in
the underlying assets and the generation of sustainable revenue streams to compensate for opportunity costs of
land use change. With a potential increase in the land value due to effective REDD+ investments, expenditures in
an enabling institutional environment for REDD+ policies are crucial to avoid higher deforestation pressure on
natural forests.
