Financial analysis of carbon sequestration of man-made mangrove forests in Bohol, Philippines

Issue Date

10-2013

Abstract

Payments for environmental services such as carbon sequestration propose a win-win solution to mitigate climate change, protect mangroves, and address poverty in the rural coasts. Recognizing the economic benefits that local communities can derive from investing into a carbon sequestration project, a cost and benefit study was done in a mangrove plantation site in northern Bohol, Philippines. Twelve sample plots were established to estimate and project the carbon stocks. Three carbon prices in the international market were used to determine the net incremental benefits at different ages (15, 20, and 40 years old) of mangrove plantations, namely, 10, 15, and 20 USD t-1. Correspondingly, the net present values (NPV) of plantations at different ages and prices were computed. Additionally, the internal rates of return (IRR) were also computed for each price of carbon. It is estimated that the community would receive negative NPVs if mangrove plantation establishment would solely be intended for a carbon market at USD 10 t-1 and at i = 0.08. The NPV starts to become positive at USD 15 t-1 at year 20 up to year 50, and the corresponding computed NPV would be USD 167.16 at year 20 and USD 467.14 at age 50. At a carbon price of USD 20 per ton, all NPVs are positive. Overall, this indicated that the feasibility of establishing mangrove plantation for carbon market alone is very sensitive to carbon price. At prices below USD 15 t-1 , the plantation project would not be feasible. If the interest rate would increase to 16 percent, the project would become feasible only at price USD 20 t-1. Consequently, the IRR obtained were 5%, 14% and 50% for per ton prices of USD 10, 15 and 20, respectively. At prevailing market interest rates of 8%, the project would not be feasible when carbon is priced at USD 10.0 t-1.

Source or Periodical Title

Ecosystem & Development Journal: A Journal on Tropical Forests and Natural Resources

ISSN

2012-3612

Volume

4

Issue

1

Page

14-22 +

Document Type

Article

Physical Description

maps; figures; graphs ; tables

Language

English

En – AGROVOC descriptors

MANGROVES; ECONOMIC VALUE; CARBON STOCK ASSESSMENTS; CARBON SEQUESTRATIONS; PHILIPPINES

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