The costs of REDD+ are made up of four main elements: Opportunity Costs, Implementation Costs, Transaction Costs and Institutional Costs. All four of these cost elements must be considered if we are to estimate the combined costs of REDD+ pilot activities. In 2011-2012, LTS International, in collaboration with UNIQUE, conducted the first ever REDD+ costing analysis at a national level.The country of study was Tanzania and the study was carried out for the UN-REDD programme.
The REDD+ cost curve is a useful and flexible tool well suited to the Tanzanian context where REDD+ projects continue to be designed and real data continues to become available. The cost curves allow project developers to determine the carbon price that would be required to meet the opportunity cost of selected land use practices, and the total amount of emission reduction that could be obtained for each land-use type. The tool allows for forecasting the impact of policy changes, such as improved forest law enforcement or agricultural subsidy programmes, on the total REDD+ costs within any given project. The tool also allows for national cost curves to be generated from individual project data inputs over time.
The LTS study concluded that the anticipated revenues from REDD+ cannot be expected to cover all REDD+ costs for projects aiming to address deforestation drivers such as agricultural expansion or charcoal production. As such, REDD+ initiatives need to be closely integrated with other sectoral investment plans (such as agriculture and energy) to ensure harmonisation of plans, and to offset implementation costs.
Current REDD-readiness planning in Tanzania is being undertaken in anticipation of a future REDD+ compliance market. While REDD+ revenues may be significant initially, they are certain to decline as deforestation rates drop. It will be important to channel a significant share of revenues into raising the value and productivity of both forests and surrounding landscapes to provide alternative and sustainable revenue streams in the future. This is illustrated in the figure below.
Figure 1: REDD+ Revenue Streams and Increasing Opportunity Costs
In August 2012, the work done in this project was presented in the paper “A bottom-up approach to estimating cost elements of REDD+ pilot projects in Tanzania“, published in the journal Carbon Balance and Management.
In October 2012, LTS’ Estimating Cost Elements of REDD+ report was included in the UN-REDD Newsletter (Issue #33).