Averted Slash-and-Burn-caused Deforestation under the Clean

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					  Averted Deforestation under the Clean Development
  Mechanism – A Case of Slash-and-Burn in Palawan




          A Bachelor Project in Forestry by Jacob Lindhardt Palm (S2014)

Subject Supervisor:       Niels Strange
                          Unit of Forestry

Method Supervisor:        Sri N. Sriskandarajah
                          Unit of Learning and Bioethics

Assisting Supervisor:     Jette Bredahl Jacobsen
                          Unit of Forestry

                          Department of Forest & Landscape
                                          and
                      Danish Research Institute of Food Economics
          The Royal Veterinary and Agricultural University, Denmark
                                      June 2004
                                                  Abstract
Tropical deforestation is causing a significant amount of greenhouse gas (GHG) emissions into the
atmosphere. Small-scale farmers contribute to such deforestation with low-value and unsustainable
slash-and-burn agriculture. The Clean Development Mechanism (CDM) of the Kyoto Protocol is
offering an opportunity for developed countries to approach parts of their GHG emission reduction
obligations from the Kyoto Protocol by investing in reducing greenhouse gas emissions in
developing countries. Land use, land use change and forestry are among the ways where CDM can
be used, but averted deforestation is presently not an accepted method within the Kyoto Protocol.
This paper utilizes calculations from existing literature to explore the possibilities of implementing
averted deforestation to the CDM, using the Philippine island of Palawan as a case study, with
Denmark as the proposed investing country. Taking into account some of the various advantages
that averted deforestation offers, this paper recommends that the potential possibilities of the latter
should be implemented in the Clean Development Mechanism of the Kyoto Protocol, while also
recognising the need for further research in measuring carbon reductions to ensure the credibility of
such a project.




The front page image is kindly contributed by the webmaster of Palawan Council of Sustainable Development.




                                                                                                             II
                         Resumé (Danish Version of Abstract)
Tropiske skovrydninger er kilde til et signifikant udslip af drivhusgasser ud i atmosfæren. Med
svedjebrug, som hverken er særligt økonomisk eller bæredygtigt, medvirker bønder til nogen af
disse   skovrydninger.    Kyotoprotokollens      Clean    Development      Mechanism   (den   rene
udviklingsmekanisme) eller CDM tilbyder muligheden for at udviklede lande kan opnå dele af
deres påkrævede reduktioner i udslip af drivhusgas, ved at investere i at reducere udslippene i
udviklingslandene. Jordbrug og skovbrug er blandt de områder, hvor CDM kan bruges, men at
forhindre skovrydninger er p.t. ikke under de accepterede muligheder. Med den filippinske ø,
Palawan som studieområde, og Danmark foreslået som det investerende land, undersøger dette
projekt, via beregninger fra litteraturen, mulighederne for at implementere forhindring af
skovrydninger til CDM‟s muligheder. Med syn på nogen af fordelene ved begrænsning af
skovrydninger, anbefaler dette projekt at muligheden for at forhindre skovrydninger bliver
implementeret som en mulighed under CDM. Desuden indses et behov for øgede studier i at måle
udledningsreduktioner, til det formål at sikre troværdigheden af et sådant projekt.




                                                                                               III
                                     Acknowledgements
A number of people have contributed in improving the quality of this paper.
Special thanks to the following, without whom this paper would have never reached its final form:
My main supervisor, Dr. Niels Strange, for his patience and guidance,
My method supervisor, Dr. Sri N. Sriskandarajah, for always being ready to take the time to clear
up my doubts,
Dr. Jette Bredahl Jacobsen, for always being enthusiastic in discussing Kyoto and forestry,
The staff of the library of the Royal Veterinary and Agricultural University, Denmark, for being so
helpful, consistently sending materials and answering my requests,
Dr. Leon O. Namuco, Dept. of Horticulture, UP Los Banos, the Philippines, for providing me
economic details of the horticulture of mango in the uplands of the Philippines,
Ms. Hivy Ortiz Chour, Forestry Officer, Global Forest Resources Assessment, FAO, for sending me
statistical forest materials from FAO,
Ms. Ellen Hawes, Research Coordinator, Climate Change Initiative, The Nature Conservancy, for
helping me finding relevant UNFCCC decisions,
My friend and colleague in the studies of forestry, Ms. Matilde Råhede for her comments and
opposing to improve the quality of my work,
My fiancée, Ms. Tracy Tan Suqin of Singapore, for her encouragement, help in research and proof-
reading.




                                                                                                IV
                                                       Table of Contents
ABSTRACT ....................................................................................................................................... II
RESUMÉ (DANISH VERSION OF ABSTRACT) ...................................................................... III
ACKNOWLEDGEMENTS............................................................................................................ IV
TABLE OF CONTENTS.................................................................................................................. V
ABBREVIATIONS AND ACRONYMS ....................................................................................... VI
GLOSSARY .................................................................................................................................... VII
1   INTRODUCTION ...................................................................................................................... 1
1.1   Presentation of the Problem ..................................................................................................... 1
1.2   Problem Formulation ............................................................................................................... 2
1.3   Methodology ............................................................................................................................ 3
1.4   Limitations ............................................................................................................................... 5
2    THE CLEAN DEVELOPMENT MECHANISM OF THE KYOTO PROTOCOL ........... 6
2.1   The Kyoto Protocol .................................................................................................................. 6
2.1.1 Introduction to the Protocol ..................................................................................................... 6
2.1.2 Article 25 of the Kyoto Protocol .............................................................................................. 7
2.2   Principles and Eligibility of CDM ........................................................................................... 7
2.3   Permanence of Carbon Credits ................................................................................................ 9
2.4   Averted Deforestation under CDM .......................................................................................... 9
2.5   Price Estimating Carbon Credits ............................................................................................ 12
2.6   Summary ................................................................................................................................ 16
3    PALAWAN – THE PROJECT AREA OF THE HOST COUNTRY ................................. 17
3.1    Introduction to the Philippines and Palawan.......................................................................... 17
3.2    Deforestation History of Palawan – and the Expected Continuation..................................... 20
3.2.1 History of Deforestation Until 1993 ...................................................................................... 20
3.2.2 Estimates 1993-1998 .............................................................................................................. 20
3.3    Future CO2 Emission without AD Projects – The Baseline of Palawan ................................ 22
3.4    Summary ................................................................................................................................ 26
4   PROJECT PALAWAN 2005 .................................................................................................. 26
4.1   Initialisation to the Averted Deforestation Project ................................................................ 26
4.2   Estimated Costs for Stop of Slash-and-Burn ......................................................................... 26
4.3   Summary ................................................................................................................................ 28
5    DISCUSSION AND RECOMMENDATIONS ...................................................................... 28
6    CONCLUSION......................................................................................................................... 31
7    PERSPECTIVES ..................................................................................................................... 31
8    REFERENCES ......................................................................................................................... 32
8.1    References to Websites .......................................................................................................... 36
8.1.1 Governmental and Intergovernmental Organisations ............................................................ 36
8.1.2 Non-Governmental Organisations ......................................................................................... 36
APPENDICES




                                                                                                                                                V
                               Abbreviations and Acronyms
AAU:                   Assigned Amount Unit
AD:                    Averted Deforestation (Also used in literature: Avoided Deforestation)
C:                     1 ton of emitted / sequestered C equals 3.667 tons emitted CO2
CDM:                   Clean Development Mechanism
CER:                   Certified Emission Reduction, the CDM currency, expressed in tons of CO2
CO2:                   1 ton of emitted / sequestered CO2 equals 0.27 tons C
CO2e:                  CO2 equivalent, GHG standard, calculated from various greenhouse trace
                       gases1
CoP:                   Conference of the Parties (to the Protocol)
DKK:                   Danish kronor, the currency of Denmark, ranging between US$ 0.11-0.19 in
                       the past 10 years, with a mean around US$ 0.152
ER:                    Emission Reductions (measured in tons CO2), can be achieved in the industry
                       as more efficient energy use, or by various mechanisms
ERU:                   Emission Reduction Unit
GHG:                   Greenhouse Gas
IPCC:                  Intergovernmental Panel of Climate Change
JI:                    Joint Implementation
LCER:                  Long-term Certified Emission Reduction
LULUCF:                Land Use, Land Use Change and Forestry
OD:                    Other Deforestation (beyond deforestation caused by slash-and-burn)
PgC:                   One petagram carbon (PgC) is 1015 grams or 1 gigaton carbon
PHP:                   Philippine peso, the currency of the Philippines, ranging between DKK
                       0.105-0.165 in the past 2 years3
PP2005:                Project Palawan 2005; the proposed case project in this study
TCER:                  Temporary Certified Emission Reduction
UNFCCC:                United Nations Framework Convention on Climate Change
WTA:                   Willingness To Accept (project)
WTP:                   Willingness To Pay (for project)


1
  This study writes CO2, referring to all GHGs.
2
  Source: http://finance.yahoo.com/m5?s=DKK&t=USD&a=1&c=3 (Was available on April 29, 2004, but by May 18,
the 10-year history of the US$-DKK was not available. Therefore, as per May 18, this paper is referring to
http://finance.yahoo.com/currency/convert?from=DKK&to=USD&amt=1&t=2y for the 2-year history).
3
  Source: http://finance.yahoo.com/currency/convert?from=PHP&to=DKK&amt=1&t=2y (May 18, 2004).



                                                                                                       VI
                                                      Glossary
Annex I Parties:             41 countries (UNFCCC website)4 developed countries plus EU, listed in
                             Annex I of the Kyoto Protocol. The number of members is growing
Baseline:                    Expected CO2 emission in a “business as usual” scenario
Kaingin:                     Tagalog (Philippine language) for slash-and-burn
Kaingineros:                 Tagalog for the farmers who depend on slash-and-burn
Non-Annex I Parties: Developing countries, which are parties to Kyoto and eligible of hosting CDM
The Protocol:                Referring to the Kyoto Protocol




4
    As per April 2, 2004. A list of Annex B countries is almost identical to Annex I, and the obligations and commitments
           of these are almost the same. This study will use Annex I interchangeably with Annex B, not differentiating
           the two lists.



                                                                                                                     VII
                                               1 Introduction
1.1 Presentation of the Problem
Throughout the eighties and nineties, the annual rate of tropical deforestation was approximately 14
million hectares (FAO, 1993). Besides the ecological loss, landslides and decline of sustainable
livelihood, tropical deforestation is causing considerable CO2 emissions. Fearnside (2000)
concludes that the net emission in the eighties (considering future land uses of converted forests,
etc.) reached 12 billion tons of CO2 (3.3 PgC) per year5. The Intergovernmental Panel of Climate
Change (IPCC) however, estimates the worldwide land-use change emission considerably more
conservatively with only 1.1 PgC emitted in 1990 (Nakicenovic et al., 2000). This is partly due to a
net sequestration in temperate regions, where the forest cover is increasing, causing the global net
forest reduction in 1980-1990 to no more than 9.9 million ha per year (FAO, 1993).

As tropical forests, e.g. rainforests, are converted (i.e. degraded) it causes significant CO2 emission
from burning and decomposition. The next uses of the land will effect in some carbon re-
sequestration, but for each harvest, the subsequent sequestration will be less. The re-sequestration
will not be efficient in the long term, because the soil will not be suitable for e.g. long-term
agriculture. Most of the biomass lost by slash-and-burn will never be regenerated, and consequently
the CO2 emitted in the process will not become re-sequestered (Fearnside, 2000).

The emission of CO2, an important greenhouse gas (GHG), into the atmosphere is a source of global
concern for the future, as it constitutes a serious global climate change threat (refer to Appendix A).
According to Smith et al. (2002) the tropical land-use is at least amounting 20% of the total annual
CO2 emissions. Using IPCC‟s official estimates, the worldwide land-use changes are responsible
for 1.1 PgC out of a total anthropogenic CO2 emission of 7.1 PgC, faulting 15.5% of the total net
emissions from land-use changes (Nakicenovic et al., 2000).

The international society is attempting to fight the climate change threat with the Kyoto Protocol.
This is a set of rules, which provide guidelines to most of the developed countries to decrease their
GHG emissions. Under the Clean Development Mechanism (CDM) of the Kyoto Protocol,
developed countries can meet part of their GHG emission reduction with carbon projects in
developing countries. One of the important rules for such projects to comply with CDM are that


5
  Fearnside‟s conclusion is that a net flow of 3.3 billion tons C is emitted in form of CO2 from tropical deforestation and
forest degradation. CO2 is 3.67 times heavier than C. This equals 3.3 PgC  3.667 =12.1 billion tons of CO2.



                                                                                                                         1
investing countries must provide local (sustainable) livelihood not worse than without the project
(Smith et al., 2002). Further details of CDM and the Kyoto Protocol follow in chapter 2.
Averted deforestation (AD) is nevertheless not presently eligible under CDM (UNFCCC, 2002 and
Smith et al., 2002), as there are divided political as well as scientific views on the possibility
(Chomitz, 2000 and Dutschke, 2001), but it can be reconsidered in the future (UNFCCC, 2002).

Slash-and-burn agriculture is a major contributor to tropical deforestation. Poor farmers are cutting
down and burning trees, exhausting the ash-enriched soil, and then moving to a new area.
Traditionally, degraded forests could lay fallow for a reasonable period, but as population density is
growing even in rural areas, the fallow periods in Palawan are at some places down to only 1-2
years from previously 10-15 years (Shively, 1997).
Compared to e.g. logging-caused deforestation, slash-and-burn is a rather low-income and primitive
industry, which does have possible alternative projects that can be more sustainable – for example
oil palm production, which has shown to be valuable in Sumatra (Tomich et al., 1998).
The reason why the focus of this study is slash-and-burn agriculture is that it is a low-income
industry with a high level of environmental impact.

Palawan – the case site of this study - is often referred to as “the last frontier” of the Philippines6, as
the island has the highest remaining forest cover of the larger Philippine islands, but the ecosystems
are under threat, especially from deforestation (see chapter 3 below). Therefore, Palawan is also a
place where immediate action to avert deforestation has the potential to reap immense benefits.

1.2 Problem Formulation
To investigate the model of developed countries purchasing carbon credits by averting slash-and-
burn-caused deforestation, the Philippine island province of Palawan will used as a case study for a
possible AD project under the CDM of the Kyoto Protocol.

This study is handling the following main question:
Should averting deforestation in non-Annex I countries be a way for Annex I countries to
purchase carbon credits under the Clean Development Mechanism?
Included in the question is the request for arguments for and against the possibility of implementing
AD under CDM.
The Annex I Party – the investing country - of this case study is Denmark.

6
    See for example http://www.unesco.org/csi/act/ulugan/ulugan1e.htm (Mar 25, 2004).



                                                                                                         2
This work is a case study of a hypothetical carbon project in Palawan, hereafter named Project
Palawan 2005 (PP2005). The purpose of PP2005 shall be to achieve Emission Reductions (ERs) by
averting slash-and-burn-caused deforestation within the rules of CDM (see chapter 2.2).

To answer the main question of this study, the following sub questions have to be investigated:
-    What are the current rules and regulations for CDM projects under the Kyoto Protocol?
-    How much potential is there for CO2 emission from slash-and-burn farming in Palawan in a
     “business as usual” scenario?7
-    How much emission reductions are possible to achieve in a CDM project?
-    What will be the costs of implementing such a project in Palawan, which supplies a stop (or
     reduction) of slash-and-burn, while still remaining within the rules of CDM, so that the
     investing country can purchase the established carbon credits?
-    What are the cost-benefits for the stakeholders8 of implementing an AD project in Palawan?

The purpose of this study is to investigate the future possibilities of using AD as a CDM tool to
reduce the immediate global climate change threat within reasonable 9 costs from the developed
world. As “extra” benefits, such AD project will – if shown possible - improve sustainable
development and livelihood in the developing world, and protect and secure the unique biodiversity
in various tropical terrestrial ecosystems.

1.3 Methodology
This work is a literature study, which utilizes calculations from existing literature, implementing a
case (AD in Palawan) to a system (CDM).
It is investigating the possibilities and limitations of CDM for the purpose of AD, including the
willingness to pay for CDM credits (Chapter 2).
Thereafter it identifies Palawan as an object for a CDM project (Chapter 3).
To analyse the possibility of a project in Palawan, financed by Denmark and accepted by the
Philippines, a budget is laid out for the AD project (Chapter 4).
To implement an averted slash-and-burn CDM project for Palawan, the baseline10 for Palawan has
to be mapped. This is the hypothetical – or potential - future CO2 emission from slash-and-burn in

7
  This is the baseline of Palawan – see chapter 2.
8
  The stakeholders in this study are the small-scale farmers (kaingineros), the host country, the investing country, and
when it comes to carbon benefits, the international society.
9
  Here it is given that a developed country (or firm) will only implement an AD project, if its opportunity cost of carbon
emission reduction is higher than the costs of carbon credits under an AD project.
10
   See chapter 2.2 for details of baseline.



                                                                                                                         3
Palawan, provided no CDM project is implemented. Furthermore, carbon leakage 11 has to be
estimated for the situation that a total stop of slash-and-burn agriculture might cause increased
emission from other sources, e.g. fertiliser trace gases and increased deforestation from illegal
logging, increased slash-and-burn agriculture outside the project area, etc. This is for the purpose of
computing total net ER in PP2005.

Socioeconomic factors in Palawan and the Philippines have to be investigated. This is to allow the
computing of cost-benefits for the host country to accept the project, and also for estimating the
possibility of success in PP2005. Here it is given that the host country will only accept PP2005 if
the project, including all externalities, is profitable after consideration of the opportunity costs of
the second best alternative. It is also given that the project is kept within the livelihood rules of
CDM, meaning that the farmers‟ socio-economic state should not be worsened.
Similarly, cost-benefits of a project will be computed for the investing country to accept the project.
This is to establish the willingness to pay (WTP) of Denmark, for the Certified Emission Reduction
(CER) gained throughout PP2005.

To implement a CDM carbon project to the Palawan case, a number of variables have to be known:
-    Expected Emission Reductions (ER) throughout PP2005
-    Willingness To Pay (WTP) for PP2005. This is the investing country‟s cost-benefit analysis,
     including non-monetary value of the project, if any
-    Willingness To Accept (WTA) PP2005. This is the host country‟s cost-benefit analysis,
     including non-monetary value of the project
-    Cost of PP2005. This shall be an estimate of the price for finding alternatives to the slash-and-
     burn agriculture, which comply with the rules of the CDM, including additionality12 and
     sustainability (Smith et al., 2002)13. A project is only possible if the costs of PP2005 does not
     exceed WTP and if the local‟s livelihood is not negatively affected

To calculate the total baseline of Palawan, the following data is necessary:
-    Present and historical slash-and-burn deforestation rates. This includes knowledge on what in
     general happens to the deforested areas after being abandoned by the farmers

11
   Carbon leakage is the endogenous increase in carbon emissions as a result of emission reductions elsewhere.
12
   Additionality is when there is a difference between the emissions that occur in the baseline scenario, and the
emissions associated with a proposed project. Additional carbon emission reductions will become achieved carbon
credits for the investor.
13
   To comply with CDM, the alternatives must provide sustainable livelihood for the locals.



                                                                                                                    4
-      Number of kaingineros (farmers depending on kaingin)
-      Which kind of forests are cleared, and at which combustion efficiency
-      Among kaingineros, how much is each household contributing to CO2 emission per year
-      How is the expected population growth in the area, including migration, especially into kaingin
       (slash-and-burn farming)
-      Rates of deforestation caused by urbanisation and logging

In order to reach a strong conclusion, this study will seek to establish conservative estimates for all
arguments. For estimating the baseline as well as the WTP for CER, this study is using the lowest
estimates available. Similarly, high estimates will be found for establishing the price for averting
deforestation in PP2005. This is giving an overall conservative result, which is necessary for having
a strong argument for bringing averted deforestation into the methods of the Clean Development
Mechanism for the second commitment period14.

For this project the author expects to achieve experience in conducting research, as well as gaining
knowledge in climatic consequences from forest fires, forest conversions in the tropics, and the use
of CDM projects.

1.4 Limitations
To address the problem analysis within the practical limits, given the workload considerations of
this project, the project is limited by:
-      Only briefly suggesting solutions of technical and political methods in the reductions of slash-
       and-burn deforestation – other (similar) projects will be examples
-      Using other projects together with CoP decisions when proposing solutions for the
       administrative problems with countries buying emission rights by reducing the deforestation in
       selected areas, and measuring how much these countries earn rights to release CO2 in their own
       industries
-      Refraining from discussing future environmental, social and economic effects on unrestrained
       CO2 emissions – here is simply referred to the joint statement of the Royal Society (2001A)

The variables under chapter 1.3 above to implement a CDM project into the Palawan case go
beyond what can be within the workload of this project. Those will be estimates from projects in
other regions, and estimated calculations from the sources available considering this case.

14
     See chapter 2.



                                                                                                     5
The data needed to calculate total ER are either too complex to include in this study, considering
the project size, or they are even impossible to predict for the future, as too many factors can
influence the variables. Therefore, the Palawan case will only be subject to estimates, which again
will be used in arguing for the solutions of this study.

Tropical deforestation has many aspects, which will not be considered in this project, as the size of
the thesis does not permit it. Problems like the impact of how much the biological diversity is
threatened, the extent of poverty increase and the issue of the vicious cycle of global warming and
deforestation will not be discussed.

With limitations specified, this work will establish estimates of
-    Palawan‟s baseline CO2 emission scenario and the potential ER achievable
-    Denmark‟s willingness to pay for achieving the carbon credits from an AD project in Palawan
-    Costs of an AD project in Palawan
These estimates will be converted into operation under a CDM project, concluding whether or not
AD should be applicable as a mean for Annex I countries to reduce emissions, while non-Annex I
countries get to conserve their forests, without sacrificing the livelihoods of the farmers.

       2 The Clean Development Mechanism of the Kyoto Protocol
2.1 The Kyoto Protocol
2.1.1 Introduction to the Protocol
In 1997 the Kyoto Protocol was adopted to the United Nations Framework Convention on Climate
Change. It aims at reducing GHG emissions from developed countries (Annex I) by at least 5%
below 1990 level in the first commitment period of 2008-2012 (UNFCCC, 1997). The level of
reduction obligations among the countries vary considerably, with 8% to the EU countries, 0% to
New Zealand, Russia and Ukraine15, while Iceland can increase emission to 10% beyond the base-
year of 1990. Japan and USA are obligated to reduce with 6% and 7% respectively (UNFCCC,
1997, Annex B). The total carbon dioxide emissions from the Annex I parties, in the base-year of
                                                                 13,7
1990 are 13.7 billion tons (UNFCCC website)16, or                     = 2.05 PgC. For USA it was 4,957 Mt
                                                                 6,67

15
   Russia and Ukraine are, despite the 0%, expected to emit less carbon in the first commitment period, and the excess
carbon might be traded with other Parties of the Protocol, but it can also be used for developing each country (Paltsev,
2000).
16
   UNFCCC provides the base-year emissions of the Annex I Parties on: http://unfccc.int/resource/kpco2.pdf.



                                                                                                                      6
(UNFCCC website), obligating the U.S. to reduce with 0.07  4,957 Mt CO2 = 347 Mt CO2 from
1990, but this deficient is likely to increase every year, as USA‟s GHG emission tends to increase
consistently (see Appendix B).

Subsequent Conferences of the Parties (CoPs) since 1997 have been, and will be deciding upon
modalities, rules and guidelines on how to incorporate human-induced land use activities into a
country‟s emission target (UNFCCC, 1997).

For the full Kyoto Protocol, see UNFCCC (1997).

2.1.2 Article 25 of the Kyoto Protocol
The legal standing of the Protocol is that when 55 Parties of the convention, accounting for at least
55% of the total GHG emission from all Annex I countries in the base-year of 1990, have ratified
the Protocol, then the commitments will go into force 90 days later. Currently, Annex I Parties
covering 44.2% of the base-year emission have given their consent (UNFCCC website).
Ratification now from either Russia or USA alone can bring the Protocol into force, as these two
countries contributed 17.4% and 36.1% respectively of the total 1990 GHG emissions (UNFCCC
website). On the other hand, the Kyoto Protocol, as it is now, will not become legally binding if
neither Russia nor USA ratifies the Protocol, as the two countries combined cover more than 45%
of the 1990 GHG emission.

2.2 Principles and Eligibility of CDM
Forests have a special role in the Kyoto Protocol. They are both part of the problem and the part of
the solution to mitigating climate changes, as they are massive sources of GHG emissions, as well
as being major sinks of carbon, and having the ability to sequester large amounts of carbon from the
atmosphere.

As stated in the Kyoto Protocol (UNFCCC, 1997), Article 12, the Clean Development Mechanism
is opening for a market, where Annex I Parties can generate Certified Emission Reductions (CERs)
by engaging in climate change mitigation projects in non-Annex I Parties. The Annex I Party is the
investing country, and the non-Annex I Party is the host country. Under the terms of the Kyoto
Protocol, every ton of carbon absorbed from the atmosphere by forests or other carbon “sinks”,
which is verified, i.e. allowed to be counted, effectively permits a country to emit an additional ton
of carbon from burning fossil fuels.




                                                                                                    7
CDM projects have to be based on voluntary agreements by both parties, and have to improve the
standard of living, as one purpose (beyond ERs) is to provide sustainable development in the host
country.
A project must ensure that all carbon benefits achieved within the project boundaries are not
negated by actions on or off site caused by the project. A sound strategy must be in place for
monitoring and mitigating any carbon leakage that could be attributed to the project.
The carbon benefits have to be additional to what would have occurred without the project;
including outside the boundaries of the project.

The following regulations were decided on CDM at CoP7 in Marrakesh, 2001 (UNFCCC, 2002):
-    The eligibility of land use, land-use change and forestry project activities under CDM is limited
     to afforestation and reforestation. This excludes AD as a possibility in the first commitment
     period, 2008-2012
-    For the first commitment period, the total of additions to a Party‟s assigned CER resulting from
     CDM shall not exceed 5% of base-year emissions of that Party
-    The treatment of land use, land-use change and forestry (LULUCF) project activities under
     CDM in future commitment periods shall be decided as part of the negotiations in the second
     commitment period (this is opening for negotiations for AD in future commitment periods)
Furthermore, criteria for baselines of the Protocol‟s article 6 were lined out. Basically, up to an ER
project, e.g. under CDM, there must be warranted a level of carbon emission, i.e. the baseline,
provided there is “business as usual”. Throughout the project, an executive board 17 shall monitor
the purchased ERs.

In the long term, the idea is that the society must make technological innovations towards industrial
GHG emission reductions. The overall purpose of the LULUCF carbon projects is that we “buy
time” in order to avoid global warming and its consequences, until the technology has improved
energy efficiency to the extent of neutralizing the global warming threat (Royal Society, 2001B).

Despite the fact that the possibility of implementing AD under CDM will at the earliest arise by the
end of the first commitment period (2008-2012), this case study is basing its calculations on the
carbon project, PP2005 starting by 2005.

17
  An executive board responsible to the Conference of the Parties to the UNFCCC will supervise CDM projects
(UNFCCC website).




                                                                                                         8
The amount of CO2 that can be sequestered by CDM projects and other land-use projects is small in
comparison to the globally increasing emissions of GHG. It is clear that the ultimate solutions to the
global warming threat are found in various technological innovations (Royal Society, 2001B).

While CDM projects are having a developed country as investing country, and a developing country
as host country, there is also a Joint Implementation (JI), a mechanism in which both parties are
Annex I countries.

2.3 Permanence of Carbon Credits
At CoP9 in Milan, December 2003, some uncertainties concerning the permanence of achieved
carbon credits were resolved. Two kinds of credits are allowed: Long-term and Temporary Certified
Emission Reductions, referred to as LCER and TCER respectively. TCERs expire at the end of the
subsequent commitment period following the one for which the CER was issued, but can be
renewed if the carbon sink is preserved. LCERs are similar, but these expire after 20 or 30 years,
also to renewal up to 60 years. After 60 years of successful verification and certification, both
LCERs and TCERs will be replaced with permanent CERs. CDM credits are subjected to
verification and certification of continued storage of carbon every 5 years (UNFCCC, 2004).
The reason for the flexibility in permanence is that sequestered carbon (e.g. biomass in an
afforestation project) or protected carbon (e.g. from an AD project) is not necessarily secured by the
end of a project or a commitment period, and this way there is incentive from the investing country
to ensure long term sustainability (Dutschke, 2001).
The economic reason for a country to invest in TCER – which the country then have to buy again,
or purchase elsewhere – is that the general beliefs are that industrial carbon emission reductions will
decrease in price, as technological innovations improve (Royal Society, 2001B). On the other hand,
the price of traded CER and other carbon credits is expected to rise in the first commitment period,
as a result of increased demand (Kristoffersen, 2002). Furthermore, it seems morally obvious that a
country immediately after a short project cannot be certain that a carbon sink is secured. Until then,
the investing country shall not claim that credit on a permanent basis.

2.4 Averted Deforestation under CDM
The inclusion of project-based mechanisms in climate change policy has spawned a host of
technical, political, social, moral/ethical and economic issues on the validity of avoided
deforestation in the Kyoto Protocol‟s CDM, taking into consideration that these issues do overlap.
The positions of the various state actors and non-state actors on the issue lie on a wide spectrum.




                                                                                                     9
This section seeks to discuss the various takes on the issue as well as the different positions that the
various nations and NGOs hold.

Within the land-use, land-use change and forestry sector, there is widespread criticism relating to
the environmental integrity of carbon dioxide sequestration or avoided GHG emissions through
averted deforestation activities, which has led to the exclusion of such activities from the CDM of
the Kyoto Protocol for the first commitment period. Among the most challenging technical issues
are the “methodologies for baseline establishment and identification and monitoring of leakage”
(Aukland et al., 2003, p. 124). Chomitz (2000) provides a comprehensive list of arguments and
counter-arguments on the technical issues on this topic, which helps provide starting points on the
issue: can baselines be set for forest carbon projects and can leakage be quantified or neutralized for
forest carbon projects? From the opposition‟s viewpoint, emission reductions from forest carbon are
likely not „real and additional‟ and crediting these offsets will lead to increased world GHG
emissions because, firstly, countries will claim credit for standing forests, and therefore emit the
equivalent amount of GHG in their industries etc. Secondly, there is no way of measuring emission
reductions, so projects will make unverifiable claims for offsets. Thirdly, forests are not really
protected because deforestation is merely diverted. These „leakage‟ effects are pervasive and hard to
measure. The problem with uncertainty in measuring baselines and verifying additionality is an
issue, which is frequently emphasised on (e.g. Houghton et al., 1996 and Royal Society, 2001A).
Indeed, the European Community‟s position is that “avoided deforestation is presented as an
activity that is very positive from a biodiversity perspective” but “from a climate perspective,
however, the impact is highly uncertain due to large difficulties to ensure additionality and to avoid
leakage” (UNFCCC, 2001, p. 11). However, the counter-arguments are that if additional tests are
properly applied, countries would not be able to claim credit for the protection of unthreatened
standing forests, as well as the existence of well-established statistical methods for measuring actual
carbon stocks in standing forests18, and that effective averted deforestation projects would not
merely fence off forests but actually include actions that address the root causes of deforestation,
neutralizing leakage.

This section explores the differing postures within and across these groups, particularly the stance
of the EU, Brazil and NGOs. Although this issue has been debated on the bases of science and
18
   Chomitz notes that techniques exist for identifying areas in high risk of deforestation over the short to medium run,
allowing the calculation of ERs over this period whereas techniques for predicting year-by-year emissions for
deforestation prevention projects are less well developed.



                                                                                                                     10
morals/ethics, it is better understood by the “hidden agendas”19 that these groups hold. On the
surface, the European Union‟s opposition is grounded upon the ecological validation that “carbon
in forests is inherently at risk of emission to the atmosphere, and that the only acceptable form of
mitigation should, therefore, be reduction of fossil-fuel emissions „at source‟” (Fearnside, 2001,
p.171). This is contentious as there seems, according to Fearnside, to be an underlying economic
motive from the point of view of European governments which do not want to be disadvantaged in
the competitive international market and who have an incentive in forcing the U.S. in increasing its
energy prices when the latter cannot buy carbon credits from abroad in huge amounts (Fearnside,
2001). While the Brazilian opposition is another mystery because of the program‟s potential gains
to the country, its posture is best explained by the reason that it wants to protect its territorial
sovereignty because a potential “internationalization” of the Amazon with the pretext of
environmental protection will impede its autonomy in decision-making (Fearnside, 2001)20. This,
however, should no longer be an issue, as with the CoP9 decisions from December 2003, host
countries can decide on short-term contracts with the investing countries (see chapter 2.3 above).
Peru as well as the Association of Small Island States (AOSIS) represented by the Island of Tuvulu,
have also opposed the inclusion of forests (Fearnside, 2001).

The various NGOs vary in their attitudes towards the inclusion of AD in the CDM, which can be
quite puzzling assuming that they prioritize environmental protection over other factors. Major
environmental NGOs headquartered in the U.S., such as Conservation International (CI),
Environmental Defense Fund (EDF), the Natural Resources Defense Fund (EDF), the Natural
Resources Defense Council (NRDC) and The Nature Conservancy (TNC) favour the inclusion. On
the other hand, the climate sectors on the European head offices of four major environmental NGOs
such as Greenpeace International, Worldwide Fund for Nature (WWF) International, Birdlife
International and Friends of the Earth (FOE) International sits on the opposition, alongside with
their U.S. branches or affiliates, and even the Indigenous Peoples‟ Forum on Climate Change, led
by groups from Southeast Asia. To Fearnside, it seems that these groups target to use the Kyoto



19
   Fearnside seems to be drawing upon a stakeholder analysis in finding out why AD under CDM has been supported or
opposed by various actors.
20
   Fearnside also seeks to point out, that “the opposition of the Ministry of Foreign Relations to including forests in the
CDM is not shared by the governors of the Amazonian states, nor by most of Brazil‟s scientific community. It is also not
shared by the Minister of the Environment, who, in Cochabamba, Bolivia in June 1999 signed a joint statement of
ministers of the environment in Latin American countries supporting inclusion of forests in the CDM” (Fearnside, 2001,
p.174).



                                                                                                                       11
Protocol to “force the U.S. to drastically reduce its consumption” and therein condemning its
consumption lifestyle and associated cultural domination (Fearnside, 2001, p.177).
The NGOs themselves, however, do not quite express their stand in such a dramatic way.
Greenpeace for instance, emphasizes on the same uncertainty in the measurement of ER, as does the
European Community. But Greenpeace also refers to CDM as a loophole to actually increase
homebound GHG emission for the developed countries21. Furthermore, Greenpeace states that the
CERs that give the right to increase the industrial GHG emissions are never secured, and the carbon
sinks can be lost the very moment that the credit has been verified (Greenpeace, 2000).

The umbrella group of the Annex I Parties Australia, New Zealand and particularly the U.S.,
Canada and Japan have supported the inclusion of forests, because they stand to “gain financially by
buying credit to satisfy Kyoto commitments” (Fearnside, 2001, p.174). IPCC supports this financial
argument in Appendix B, by showing a clear connection between the development of Gross
Domestic Product and GHG emissions respectively, where especially the USA and Russia show
fluctuations that follow for them both22.
Among the non-Annex I Parties, Bolivia, Costa Rica, Columbia and Mexico all favour the inclusion
of AD under CDM (Fearnside, 2001).
For a table of the various stakeholders‟ position on the issue, see Appendix C.

2.5 Price Estimating Carbon Credits
Denmark‟s use of CDM projects to reach its Kyoto target is restricted to 5% of the 1990 emission,
which was 52.1 Mt CO2 (UNFCCC website)23. This puts a limit for Denmark of annually 2.6 Mt
CO2 as the maximum amount of credits that Denmark can achieve from CDM projects. Globally the
emissions from the Annex I Parties were 13.73 Gt CO2, but only 8.77 Gt without the U.S. This
makes a maximum demand for CDM credits on 439 Mt CER if USA remains reluctant to ratify the
Protocol, or 687 Mt if it ratifies.
It is estimated that Denmark will have an annual CO2 emission, which is 15 Mt too large in the first
commitment period (Kristoffersen, 2002). This means that Denmark must annually purchase its
deficiency of 15 Mt ER in one form or another, and maximum 2.6 Mt in the form of CER. As the
principles of CDM are to reach Kyoto targets in a way that improves the conditions in the Third

21
   Greenpeace‟s stand on the loophole is not a strong argument, as CDM is precisely meant for the Annex I countries to
escape the homebound GHG emission reductions.
22
   Appendix B shows also that the oil crisis triggered some technological improvements on more efficient use of energy
for USA and Japan, while U.S.S.R./Russia did not improve its energy technology, as it did not suffer in the oil crisis.
23
   1990 emissions are scheduled at http://unfccc.int/resource/kpco2.pdf.



                                                                                                                    12
World, i.e. promotes and improves the sustainable livelihood, one could believe that Denmark has a
non-monetary value in using CDM projects. However, Denmark‟s Willingness To Pay (WTP) for
CER is no higher than for any other ER credits, as Denmark will seek to purchase the most cost
efficient ERs (Jensen, 2004 and Clausen, 2004).

In the following there is referred to different ways of achieving the right to pollute CO 2 into the
atmosphere. Generally, whichever method is used, the idea is that a country (or a company)
purchases a right to emit CO2 by avoiding an emission, or sequestering carbon into a sink. Trading
emission quotas amongst developed countries is a way of avoiding an emission in the buying
country, which gets the right to pollute the quota it buys, deducting the same amount from the
selling country. These quotas are called Assigned Amount Unit (AAU). The credits achieved from
JI and CDM projects are called Emission Reduction Unit (ERU) and Certified Emission Reduction
(CER) respectively (UNFCCC website). Together they are referred to as ER credits.
AAU, ERU and CER are all purchased for the same purpose – to mitigate GHG emissions – and
this way achieving the right to pollute further in the homebound industries. ER in the industry,
however, are not achieved rights to pollute, but are direct improvements in order to reach the Kyoto
obligations.

There are considerable differences in the estimates of future price developments for the various
ways of reaching the Kyoto obligations. ERs achieved by direct national reduction with windmills
would cost an estimated DKK 204-243 per ton ER, while quotas for electricity production (i.e. a
stop of export) would cost around DKK 28 per ton ER. These estimates are for the first commitment
period, and at a discount rate of 6% (Kristoffersen, 2002). However, Kristoffersen suggests that
Denmark focuses a large part of its efforts to reach its Kyoto target in projects in developing
countries. The main objective for this is the amount of global environmental benefits achievable for
the investments.24

Estimating the future price development for trading CO2 quotas (AAUs), as well as for purchasing
CER and ERU has turned out to be connected to a high level of uncertainty. Copenhagen
Economics expect the equilibrium price on the international market to be DKK 20-80 per ton CO2
during the first commitment period (Jensen et al., 2003).

24
  The Environmental Assessment Institute (Institut for Miljøvurdering, EAI) is an independent institution under the
Danish Ministry of Environment. It refers to Kristoffersen‟s report (2002) without any reservations. Therefore this study
will accept Kristoffersen‟s estimates for Denmark‟s WTP for ERs.



                                                                                                                     13
Amongst the important factors on the future price is Russia‟s path on the Kyoto Protocol. If Russia
ratifies the Kyoto Protocol, and decides to trade a large part of its excess “hot air” 25, then the quota
supply of available ER credits on the market will be high, and the price will lie on approximately
DKK 20 per ton. If Russia decides to spend the excess “hot air” on its own industrial development,
and at the same time the potential CDM/JI market turns out to be rather low, then the price can go
up to the DKK 80 per ton ER credit. Copenhagen Economics estimate that with a market price of
above DKK 15 per ton ER, there will open a market for CDM projects with more possible projects
as the price of ER credits rises (Jensen et al., 2003). With a price less than 15 kronor per ER credit,
there will be rather limited CDM projects available, and Russia will have almost monopoly on “hot
air” trading, as the other countries with “hot air” available do at all not have the potential to satisfy
the demand. When Russia raises the price of its AAU, more CDM/JI projects become available, and
the supply will therefore go up. With this in mind, Russia can modify the price upwards until it gets
competition from the CDM/JI market.
Along the same line, if USA decides to get back on former U.S. president Clinton‟s track, and
ratifies the Kyoto Protocol, then the higher demand for ER credits will cause a substantial price
increment to DKK 120-180 per ton ER credit (Jensen et al., 2003).

The World Bank‟s Prototype Carbon Fund (PCF) is a fund under the World Bank, with the overall
purpose of reducing the global warming threat. PCF emphasises on establishing a “market for
project-based greenhouse gas emission reductions within the framework of the Kyoto Protocol and
to contribute to sustainable development” (PCF website). PCF has run ER projects in different
developing countries. The costs per ton ER varied from US$ 3-6, but because of expenses from
administration, research, etc., the price of the CER, which are sold to Annex I countries, vary
between US$ 4-8 (DKK 21-73) (Rosenzweig et al., 2002).

It is given that with an increasing supply of available CDM projects, price equilibrium will establish
where demand and supply meet. As the price of ER credits rises, another limiting factor gets
increased influence: Increasing costs of the credits motivates countries to invest in technological
innovations to create industrial ERs. This will again put a limit on the price increment.
Natsource (2002) has made a large stakeholder analysis covering most of the Annex I Parties. Here,
the conclusion is that it‟s most likely that the price per ER credit will be around US$5 in 2005,
increasing to around US$11 in 2010, the middle of the first commitment period.

25
     General term for traded CO2 quotas.



                                                                                                      14
Estimates for carbon projects and trade with “hot air” in developing countries, Eastern Europe and
Russia have been done by Copenhagen Economics. With a median on 41 DKK/ton, the price
estimate per ton AAU ranges from 16 DKK/ton to 78 DKK/ton (Jensen et al., 2003).
However, as Kristoffersen (2002) claims, quota on the electricity production can decrease the GHG
provide ERs to the price of 28 DKK/ton CO2 at a discount rate of 6%; therefore it is unlikely that
Denmark will accept any prices higher than this. These quotas have a potential to create ERs of 13
Mt CO2/year. The last 2 Mt of the Danish Kyoto deficient can be reached via CDM/JI projects, or
credit trading as examples26.

Figure 1 shows an outline of the CDM market with the cheapest expected prices. Notice that the
demand cannot go beyond the 687 and 439 Mt, which is the maximum worldwide demand with and
without the U.S. to ratify the Protocol. Notice also how the CDM market opens as the price go
above DKK 10 per ton CER.

                                        Worldwide Yearly Demand and Supply of CDM Credits
                                                          Conservative Draft
                               45

                               40
     Price per ton CER (DKK)




                               35

                               30

                               25

                               20

                               15

                               10

                                5

                                0
                                    0             200               400                600                  800

                                                              CER (Mt CO2)

                                                        Demand with USA        Demand w/o USA     Supply
Figure 1: Conservative demand and supply curve for the global CDM market, with and without ratification of
the U.S. to the Kyoto Protocol. Drafted from the information in the current section.

The experiences above make it reasonable that the international market of emission reductions is
rather dynamic, relative to national policies, especially in larger countries. However, it is rational to

26
  There are a few methods, which are cost effective to the society and actually create ERs. One example is financial
support to afforestation in Denmark, which gives the Danish society an income of 42 DKK/ton ER (including non-
monetary, recreational value). The reason why these cannot solve the GHG problem is that there is only a little potential
for these projects. E.g., afforestation in Denmark has the potential of only 0.025 Mt CO2/year (Kristoffersen, 2002).



                                                                                                                     15
also believe that the price will not slip under 2003DKK 16 per ER credit, except for CDM projects
which turn out to be extraordinary efficient. In fact, Denmark has started a JI project with Rumania
in May 2004, where Denmark purchases carbon credits to a price between 36 and 40 Danish kronor
per ER credit (Ministry of Environment webpage)27.

2.6 Summary
The Clean Development Mechanism (CDM) was established under the 1997 Kyoto Protocol as a
way of promoting sustainable development while minimizing the costs of limiting greenhouse gas
emissions.
Industrialised countries can under CDM of the Protocol meet part of their GHG emission reduction
with carbon projects in developing countries. Important rules for such projects to comply with
CDM are among others that investing countries must provide local (sustainable) livelihood not
worse than without the project (Smith et al., 2002). Such projects will provide the investing partner
with the carbon credits that are additional to the baseline of the project area.
Subject to the CoP7 decisions, AD is currently not eligible under the CDM, but the possibility is
subject to negotiations in future CoPs.
Various NGOs and the European Community opposed to the inclusion of avoided deforestation,
using uncertainty in verifying the actual additionality (the gained credits), and insecurity with
established or protected sinks. Developed countries outside EU favoured the inclusion, as it gives a
cheaper opportunity to reach the Kyoto obligations.
The international market for ER credits is sensitive to various factors, making predictions rather
uncertain. Denmark‟s WTP for carbon credits is at least 2003-DKK 16 per ton of CO2 mitigation.
This means that if a CDM project can create credits under this price, Denmark will definitely invest.
However, it is likely that Denmark also will accept higher prices, as the 16-kronor price is set very
modest.


This study finds it relevant to investigate the possibility of AD, because the eligible CDM methods
(afforestation and reforestation) are as a trigger to this work expected to be more expensive per
achieved CER than the preventative AD, which obviously is also a stronger ecological method.




27
     Press release on http://www.mim.dk/nyheder/presse/Dep/030504_Joint_Implementation-projekt.htm.



                                                                                                      16
               3 Palawan – The Project Area of the Host Country
3.1 Introduction to the Philippines and Palawan
The Philippines signed the Kyoto Protocol as a non-Annex I Party back in 1998, and ratified by
November 20, 2003 (UNFCCC website)28.

In the period 1890-1990 the Philippine population has roughly grown with a factor ten. In that same
period the forest cover has dropped from 70% to 20.5%, with an accelerated loss in the last part of
that period (WWF, 1998). In 1997 the population was 73.4 million people, and the growth rate was
2.3%. Projected estimates are that by 2025 the population will be 113.5 millions29. There is a strong
connection between population density and deforestation rate (Eder, 1990 and WWF, 1998), which
is pictured in Figure 2.




Figure 2: Connection between deforestation and population, Philippines 1935-1989 (Elauria et al., 2003, p. 533).

With 180,000 hectares lost every year, the Philippines is the country with the highest rate of
deforestation (WWF, 1998)30. The Philippines‟ total land area is 299,404 km 2 (29.9 million ha).
Palawan Province consists of a 425 km (NE to SW) long island and 1767 minor islands, with a total
area of 14,896 km 2 (~1.5 million ha)31, situated in the South China Sea, as a Western frontier of the

28
   That the Philippines has ratified, means that the parliament (or senate) has accepted and confirmed the Protocol to
become law, after the states leader earlier signed it on behalf of the Philippines.
29
   Population and Development Database, at:
http://www.alsagerschool.co.uk/subjects/sub_content/geography/Gpop/HTMLENH/country/ph.htm (April 29, 2004).
30
   Other estimates range from 100,000-300,000 ha (Eder, 1990).
31
   Online atlas at http://home.online.no/~erfalch/country.htm (April 29, 2004).



                                                                                                                   17
Philippines. Palawan is with 1.2 million km 2 (PCSD website)32 the fifth largest of the Philippine
islands. Figure 3 shows a map of the study site.




Figure 3: Map of the Palawan Province of the Philippines (PCSD website).

In the years 1948-1960 the population of Palawan Province went from 106,000 to 163,000
inhabitants, reaching 372,000 in 1980 (Eder, 1990) to more than twice that size with 750,000 people
in 151,000 households in 2004 (McNally et al., 2004 and McNally, 2004)33. Palawan had an annual
population growth rate of 3.67% in 1990-1995 and 3.60% per 200034. From 1970-80, migration
caused 46.3% of the population change, and for 1980-90 the number was 47% (WWF, 1998). The
population of 750,000 and the growth rate development has been put into Appendix D, where it is
also seen that the growth curve started declining around 1988. Palawan‟s population growth is
considerably higher than the average of the Philippines. Lots of migrants in search of livelihood
come from the rest of the Philippines, where the natural resources are now exhausted, and they will

32
   Overview paper at http://www.co-management.org/download/research/rr4/part1.pdf (April 29, 2004).
33
   McNally‟s paper (McNally et al., 2004) says 600.000 people per 2004, but he will change this number to 750.000 in
the final paper.
34
   Press release: http://www.census.gov.ph/data/pressrelease/2002/pr0290tx.html.



                                                                                                                 18
live on substance farming in the uplands, and fishing (WWF, 1998). In 1998 there were more than
36.000 small-scale farmers in Palawan (WWF, 1998).Upland rice is one of the most important
upland crops in Palawan. Already in 1960 there were more than 16,000 hectares of upland rice in
Palawan (IRRI, 1975).
Slash-and-burn cultivation is prohibited in Philippines according to the Forest Act no. 1148 of
1904, and the Revised Forestry Code (Presidential Decree no. 705 of 1975), including indigenous
swidden practices (e.g. the Puerto Princesa municipal government's ban). In section 38 of
Presidential Decree no. 705, revised forestry code35, swidden farming (kaingin) is defined as a
threat to the forest, along with “illegal entry, unlawful occupation, kaingin, fire, insect infestation,
theft, and other forms of forest destruction” while in Section 79, „Unlawful Occupation or
Destruction of Forest Lands and Grazing Lands‟, anybody who „makes kaingin for his own private
use or for others‟ will be fined and/or jailed.36 For long time, indigenous swidden cultivators have
been classified as squatters on public land regardless of their length of occupancy over their
territory (Novellino, 1998). One of the recognitions of indigenous rights came with Republic Act
no. 8371, also known as the Indigenous People's Rights Act (IPRA), which was signed in 1997, and
incorporated into the Social Reform Agenda proposed by former President Fidel Ramos. The IPRA
was enacted with the primary objective of recognizing, protecting and promoting the rights of
indigenous cultural communities. Chapter 3 of the IPRA states the rights to ancestral domains,
including the right to develop lands and natural resources37, while chapter 4 provides indigenous
peoples with the rights to self-governance and empowerment. Therefore it seems that the ban on
shifting cultivation contravenes these, and above all, chapter 4, section 17 of Republic Act no. 8371
stating that the indigenous people of the forests shall have the rights to determine and decide their
own priorities for development affecting their lives, beliefs, institutions, spiritual well-being, and
the lands they own, occupy or use.

35
   Revising Presidential Decree No. 389, otherwise known as the Forestry Reform Code of the Philippines. Sourced
from Chan Robles Virtual Law Library, Philippine Environmental Laws Online, found on
http://www.chanrobles.com/pd705.htm (May 12, 2004).
36
   Ibid.
37
   „Subject to Section 56 hereof, right to develop, control and use lands and territories traditionally occupied, owned,
or used; to manage and conserve natural resources within the territories and uphold the responsibilities for future
generations; to benefit and share the profits from allocation and utilization of the natural resources found therein; the
right to negotiate the terms and conditions for the exploration of natural resources in the areas for the purpose of
ensuring ecological, environmental protection and the conservation measures, pursuant to national and customary laws;
the right to an informed and intelligent participation in the formulation and implementation of any project, government
or private, that will affect or impact upon the ancestral domains and to receive just and fair compensation for any
damages which they sustain as a result of the project; and the right to effective measures by the government to prevent
any interfere with, alienation and encroachment upon these rights‟. Emphasis in italics is author‟s own. Sourced from
http://www.chanrobles.com/republicactno8371.htm.



                                                                                                                      19
3.2 Deforestation History of Palawan – and the Expected Continuation
3.2.1 History of Deforestation Until 1993
While the rest of the Philippines was deforested at a very rapid rate since colonization started,
Palawan got to keep most of its forest cover until recently. A major factor contributing to the delay
of big-scale commercial logging is the topography of Palawan Island; 75% of the land area has
slopes over 18%, which discouraged logging until the rest of the Philippines had exhausted their
resources to a more severe level (WWF, 1998).

Mainland Palawan‟s forest cover has decreased from 92% in 1964 to 68% in 1979, and again to
54% in 1988 (Eder, 1990 and WWF, 1998). This gives some estimates of deforestation rates:
                                                                          24%
1964-79: 92% - 68% = 24% deforestation. The average yearly rate is               = 1.60% of total land
                                                                        15 years
area. The average yearly deforestation rate in the period 1964-79 was 1.60% of 1.2 million ha =
19,200 ha/year. Same method gives a deforestation of 1.56% of the total land cover, equalling
18,700 ha/year for 1979-88. This decrease in deforestation is possibly a description of how the
commercial logging companies‟ access to forests declines with the loss of forest cover.
The population growth curve (see Appendix D) changed character around 1988, but the population
is still increasing - just less drastically. Therefore it is likely that the slash-and-burn-caused
deforestation is still increasing.

Republic Act No. 7611, known as the “Strategic Environmental Plan for Palawan Act” or just SEP,
which was implemented in 1992, constituted a total ban on commercial logging in Palawan (SEP,
1992). No data on the total forest cover after 1988 is available. Therefore, for a short period of time,
the best way of estimating the development would be continuing the trend from 1964-88. With
1.5% deforestation (18,000 ha/year) in the years 1988-1993, the total forest cover in 1992 would be
48%, which has been put into Appendix E as part of the baseline estimates, which are described
later.

3.2.2 Estimates 1993-1998
Kaingin is happening at the upland farms, whose owners are also struggling the most to make their
living (Shively, 1997, WWF, 1998 and Shively et al., 1999). The average clearing for all upland
farms combined was roughly 0.16 ha/year in Shively‟s studies, which cover 98 lowland farms and
104 upland farms in 1996. Shively presents his work in Palawan as representative of the Philippines
as a whole (Shively et al., 2004) indicating that his study area is also reasonable for the Palawan



                                                                                                     20
upland situation. This shows – with 36,000 agriculturalists in Palawan (See chapter 3.1) – that there
were approximately 18,535 upland farms in Palawan in 199838.
Sources (WWF, 1998 and Shively et al., 1999) indicate that most migrants put pressure on the
upland forests as new-coming kaingineros. So a conservative estimate of the growth rate of upland
kaingineros would be 3.67% p.a. by 1992, and decreasing to 3.60 in 2000 (see chapter 3.1). This
trend for the growth rate of kainginero households has been inserterted in the table in Appendix E.
Calculating backwards from 18,535 upland farmers in 1998 with the growth rate of approximately
3.64% p.a. estimates the level of kaingineros by 1992 to be 18,535  1.0364 6 = 14,956 households.
In Appendix E the growth rate factor shows to be declining with 0.0000875 each year, as the trend
was in 1992-200039. For a longer period, however, the growth factor is expected to be declining
more rapidly, as when the forest cover is under a certain state, Palawan can simply not sustain the
high amount of kaingineros. The trend in Appendix E shows that the amount of kaingin farms in
1995 was 16,655, increasing with 606 farms to 17,261 households in 1996.

Average upland farm size in Palawan is estimated 2.9 hectares for the year 1996, while the average
clearing for fallow was 0.16 ha per farm (Shively et al., 1999)40. These estimates calculate a slash-
and-burn caused deforestation in the uplands in 1996 of 17,261 farms  0.16 ha/farm + 606 new
farms  2.9 ha/new farm = 4,519 ha41. Following the trend (see Appendix E) it is estimated that
4,363 ha were cleared for upland agriculture in 1995.

According to Asian Development Bank (2001), the rate of deforestation from 1992-98 was 14,300
ha/year in Palawan. This is spread out among slash-and-burn farming, urbanisation, illegal logging,
and mangroves being illegally converted into fish ponds (WWF, 1998). This study will calculate
with the average of 14,300 in the year 1995, saying the excess 1995 deforestation beyond slash-and-
burn constitutes 14,300 ha – 4,363 ha = 9,937 ha. In Appendix E, the 9,937 hectares of Other
Deforestation (OD) is measured up with the population of Palawan, which in 1995 was
approximately 545,112 people. The reason for this is that there seems to be a clear connection
between population density and deforestation (Eder, 1990 and WWF, 1998).



38                                                                              36000 *104
     Expanding the number of upland farmers, using the same proportion s give               18535 farmers.
                                                                                 104  98
39   3.67%  3.60%
                    0.0000875
       2000  1992
40
     Shively suggests the results from his study to be the Palawan trend.
41
     The number is 4,517 in Appendix E, as the numbers there are exact.



                                                                                                              21
                                   9,937 ha
For Palawan the OD was                           = 0.0182 ha/citizen in 1995. This is set as the trend for
                                545,112 citizens
OD in Appendix E.
As the loss of forest cover becomes more severe, the population growth of kaingineros will
decrease, and at some stage reach a turning point where there is so little forest cover that the amount
of farmers will start decreasing every year (the growth rate turns negative), as they will search for
other means of livelihood. Likewise, it is obvious that the massive rate of OD per citizen will
decrease as the available forests decline – but for small periods of time, it makes sense to use the
trend above.

3.3 Future CO2 Emission without AD Projects – The Baseline of Palawan
This study will take the lower values when estimating baselines, as arguments towards AD should
be valid even when approached to sceptics of AD under CDM.

Not all area cleared by farmers constitutes destruction of primary forest. Shively et al. (1999)
suggests that for a study site of Palawan with adjacent lowland and upland, about 30% of area
cleared in 1996 was virgin forest, 46% was degraded forest and scrubland, and 24% was grassland.
Those estimates give an indication of how much nutrition is needed in cleared land, in order to grow
the average amount of crops for the upland small-scale farmers of Palawan. Shively points out that
his study site is covering an area showing the general trend of Palawan. These proportions of annual
clearings cannot stay the same year after year, as the virgin forest cover will decline, while the
fallow and grassland cover increases. As the land the farmer clears is less nutritious year by year,
the farmer will have to increase the area he has to clear in order to sustain his household. Figure 4
provides a similar example from slash-and-burn in Africa, showing the increasing fallow area and
decreasing virgin forest (or forest which has been abandoned very long ago).

The virgin forests in Palawan are tropical and subtropical moist broadleaf forests with dipterocarp
species to be predominant (WWF website)42. In Sabah (a Malaysian state of Borneo, the closest
larger area to Palawan) the carbon density of primary dipterocarp forests is 213 t C/ha, including
belowground (Pinard et al., 2000). Other sources (Nakicenovic et al., 2000 and Lasco, 2002) give
estimates of carbon density in this type of forest, ranging from 175 – 351 t C/ha43.


42
   The link http://www.worldwildlife.org/wildworld/profiles/terrestrial/im/im0143_full.html gives a detailed description
of Palawan‟s ecosystem.
43
   With 17% root biomass, which is recommended by Pinard et al. (1996)



                                                                                                                     22
Nonetheless, IPCC recommends that for projects in this kind of forest the baseline of 138 t C/ha
should be used (Houghton et al., 1996), when searching for the more conservative estimates. The
lower values of scrubland and grassland are 15 and 5 t C/ha respectively (Lasco, 2002).




Figure 4: Simulated forest age-class structures by the impact of shifting cultivation incorporating with historic
and projected rural population growth in the central African moist forest region (Zhang et al., 2002, p. 207).

Fearnside‟s (2000) estimates of combustion efficiency (a time-averaged measure, including future
use)44 in Brazil are 38.8% for virgin forest and long-fallow, 53.8% for slash-and-burn, and 93.4%
for grassland. Using Brazil combustion efficiency and the lower carbon estimates for the Palawan
biomass, a conservative estimate for the 1996 net carbon emission would be:
0.388  138 t C/ha + 0.538  15 t C/ha + 0.934  5 t C/ha = 66.28 t C/ha.



44
  Fearnside has included future growth of crops and fallow in his calculations. To increase certainty in a given project,
here for Palawan, individual combustion efficiency should be calculated.



                                                                                                                       23
To calculate the combustion efficiency for Palawan however, would require a comprehensive
analysis of the crops grown in the kainginero farms of Palawan, their respective carbon densities,
and the lengths of cropping and fallow periods. This study estimates the combustion efficiency from
upland rice, emphasising that the crop is not the most important factor of combustion efficiency,
instead the length of fallow and cropping periods are. This is demonstrated in Figure 5, where the
values of carbon density during cropping is close to 5 t C/ha both before and after harvest, and the
density in the fallow is increasing with the annual mean of 5.3 t C/ha. It is clear that the exact
carbon densities of the various pastures before and after harvest are less important than the rotation
and especially fallow periods. These values are combined from IRRI (1975), Fischer et al. (2001)
and Lasco (2002). In Appendix F the net carbon emission for Palawan is calculated to 73.03 t C/ha
for the year 1996. The GHG equivalent is 3.667  73.03 t CO2/ha = 267.80 t CO2/ha. The reason to
choose upland rice for these calculations is that together with corn it comprises 45% of the grown
crops in the uplands of Palawan (Coxhead et al., 2001).


                    Time-averaged carbon density of upland rice, including fallow
                               (rotation with 3 year crop, 6 year fallow)
                                           Average: 13.1 t C/ha

                    40
                    35
   Carbon density




                    30
                    25
       (t C/ha)




                    20
                    15
                    10
                     5
                     0
                         0             5                 10               15                 20
                                               Years from clearing

Figure 5: Simplified model of carbon density in a kaingin system of Palawan (Calculated from IRRI, 1975,
Fischer et al., 2001 and Lasco, 2002).

For the year 1996, the net emission from land clearing for fallow was for each household:
0.16 ha  267.80 t CO2 = 42.85 t CO2.
The new-coming farmers cleared each the size of an average 1996 farm, namely 2.9 ha. Measured
in carbon, each farmer would by entering the market emit 2.9 ha  267.80 t CO2/ha = 776.62 t CO2.



                                                                                                     24
As stated in section 3.2.2, the average clearing from kaingineros will increase as the land is more
exhausted before clearing, but we hereby have the average annual clearing in t CO2 instead of ha.
Even though the level of CO2 from land clearing does not equal the nutrition level in the cleared
land exactly, those estimates are the best available for how much farmers have to clear in order to
sustain their households. This study will equal the emissions per farm from 1996 with the trend for
Palawan‟s baseline from kaingin.
The 1996 overall, kaingin-caused CO2 emission in Palawan is hereby calculated:
From clearing from the new kaingineros in Palawan:
606 new farms  776.62 t CO2/new farm =                             470,633 t CO2
From new clearing for fallow: 17,267 farms  42.85 t CO2/farm = 739,891 t CO2
In all from kaingin, 1996:                                          1,210,524 t CO2

Appendix E provides the estimates for emissions from 1992-2004, and the expected baseline for
2005-2019. For example, slash-and-burn in Palawan will cause emissions of 1.648 Mt CO2 in 2005,
and 2.631 Mt CO2 in 2019. For the average emission from OD, the estimate is found using the
38.8% combustion efficiency from general deforestation in the Brazil Amazon (Fearnside, 2000)
and the carbon density of 138 t C/ha, giving 0.388  138 t C/ha = 39.75 t C/ha, equalling 145.75 t
CO2/ha. This is inserted in the spreadsheet of Appendix E.
It is important to emphasize the inaccuracy of the relative hectare amounts of clearing and forest
cover in Appendix E, as these are only symbols of the 1996-rate. Only the shown CO2 emissions are
considered having acceptable estimates of the baseline.
Appendix G provides the baseline of Palawan to be 2.77 Mt CO2 per year on average for the next 30
years.

Fearnside (2000) states that the loss of soil carbon is small by comparison with aboveground
biomass, but not unimportant. However, in the moist forest zone of Cameroon the soil matter
contents were not significantly affected by land use (Kotto-Same et al., 1997). Therefore, as this
study aims for a conservative estimate, the possible losses from soil carbon are not included.

The measuring of carbon emissions from deforestation is extremely sensitive to the method used,
and for the purpose of CDM, the methods have to be approved by IPCC (Watson et al., 2000).




                                                                                                    25
3.4 Summary
It is clear that this chapter is not significantly correct in its conclusions. It experiences lack of
updated information on recent deforestation rates. More recent sources than 1998 are short of
scientific credibility, as e.g. correspondence have been mails with postulates, unsupported by
surveys, etc. A strong contender to the lack of certainty in estimating the baseline is that the
different sources have different or even undefined definitions of forest cover, as not all sources are
meant for Kyoto connections.
The baseline of Palawan‟s kaingin is at least 1.6 Mt in 2005, but averaging 2.77 Mt CO2 per year in
the coming 30 years.

                                  4 Project Palawan 2005
4.1 Initialisation to the Averted Deforestation Project
The purpose of PP2005 is to halt the upland land clearing, which is done in order to switch the
exhausted soils to more nutritious soils for new periods of crops. Agroforestry is a sustainable
possibility, as fruit trees can produce a harvest every year without new plantings needed. As a
bonus, the carbon density is higher than that of the usually grown, short-term crops (specified under
chapter 3.3 above). Another carbon bonus will be that the land that is now fallow will become sinks
as they regenerate forest. This study will estimate benefits from farmers changing their traditional
crops to sustainable fruit trees on the land that they currently have in use.

4.2 Estimated Costs for Stop of Slash-and-Burn
Shively (1999) showed that the income of upland farmers growing mango (Mangifera indica) is
significantly higher than those who do not. This is despite the fact that they only have an average of
about 10 trees per household. The reasons behind not all small-scale farmers grow mango as a main
crop are among others that they cannot afford the long term investments, and that there is insecurity
in their rights to keep small orchards, as mentioned in chapter 3.1 above. However, the Philippines
have a monetary value in farmers converting from the unsustainable, agricultural crops into for
example mango production, especially when the conversion happens in the uplands. Table 1 shows
how the global production of mango has recently been increasing. Furthermore, there are
indications that the Philippines‟ agricultural sector expects an increasing importance of mango
production in the future (PCARRD webpage).




                                                                                                   26
Table 1: Global production of mango in the years 1996-2002.
                      Production of Mango
     Year      1996-98     1999     2000     2001              2002*
              (Average)               1000 tons
     Mango      21946     22997 23979 24457                    24639
Source: FAO webpage45                                      *Provisional

Appendix H tables out statistics about mango production and prices in the Philippines and Palawan
in general. This is comprised in Appendix I as a spread sheet on how an investment in mango will
pay back. There it is clear that with an interest rate of 1-10%, the investment is paying back in 15-
22 years. The net present value (NPV) of 1 ha of mango is ranging from DKK 25,000 with the
interest rate of 10% and 1 peso equalling 0.105 Danish kronor, to DKK 1.8 million at the interest
rate of 1% and 1 peso equalling 0.165 Danish kronor. In 1995, average upland households‟ income
was 9,850 peso (DKK 1,034-1,625). For comparison between traditional kaingin and mango, Table
2 gives a simple overview of the value with low and high conversion to Danish kronor.

Table 2: Net Present Value (NPV) of establishment of 1 ha mango, compared with NPV of an average upland
household of Palawan.
                                 Interest rate, r =        1%        2%        3%        5%       7%     10%
 Mango plantation NPV (PHP)                            10,873,692 4,667,695 2,667,748 1,168,713 601,139 245,258
   NPV (DKK), low           1 PHP=0.105 DKK            1,141,738  490,108 280,114 12,2715       63,120 25,752
   NPV (DKK), high          1 PHP=0.165 DKK            1,794,159  770,170 440,178 192,838       99,188 40,468
  Traditional upland farm NPV     Income=9,850
              (PHP)                    P/year           985,000   492,500 328,333 197,000 140,714 98,500
   NPV (DKK), low           1 PHP=0.105 DKK             103,425    51,713    34,475    20,685   14,775 10,343
   NPV (DKK), high          1 PHP=0.165 DKK             162,525    81,263    54,175    32,505   23,218 16,253
Sources: Shively (1999) and Appendix I of the current paper.

An investing country, which can pay the investment, can accept an internal rate of return (IRR) of
0% given that it can purchase the carbon credits gained in the operation this way. The farmer can
accept the conversion if he has security on his right to remain on the converted land in the future.
Referring to Republic Act no. 8371 (see chapter 3.1 above), the government would have advantage
in entitling the small-scale farmers to planting 1 ha of mango orchard (or another sustainable crop)
and to keep that land as long as he stays within that area and refrains from kaingin. With an IRR of
0%, the investing country‟s gain from the investment will be an emission reduction (ER) as each
farm converting kaingin to agroforestry will stop clearing the land, which according to section 3.3
and Appendix E constitutes 42.85 tons of CO2 per household per year. In these calculations, the cost
per CER will be zero, and the indigenous people as well as the Philippine government will have
economic advantage of the conversions.

45
  Statistics from FAO, available at http://www.fao.org/es/ESC/en/20953/21038/highlight_26407en.html (May 14,
2004).



                                                                                                               27
In quantity of the CER, the limiting factors for the potentials of the AD investment are the 5% of
the 1990 GHG emission of the investing country and the baseline of the targeted area (minus
leakage). For the cases of this paper (Denmark and Palawan), those values are 2.6 Mt and 2.77 Mt
(not including possible leakage) respectively, according to chapters 2 and 3. As a note to this, the
2.6 Mt ER that Denmark has the right to purchase from CDM will be reduced, as other CDM
projects are already in its starting phase, but the ERs from these are not yet known (Clausen, 2004).
An exact way to measure the environmental gain is to start with the 42.85 tons ER for each
household which is helped to stop kaingin, then add the additional sink from the higher carbon
density in the alternative crops, and deduct the leakage if the former kaingineros increase their use
of fuel and fertilisers, containing trace gases.

Having estimated the value for conversion into mango as a proposed alternative crop, PP2005
should be designed to include a number of alternatives, as the project ought not to influence the
market price of the various selected crops.

4.3 Summary
With an investment in mango production there is potential for an investing country to purchase
carbon emission reductions for a very low cost, or even make a profit next to the certified emission
reduction (CER). For large scale emission reduction in the PP2005, more alternatives to slash-and-
burn need to be investigated.

                         5 Discussion and Recommendations
This paper is arguing that averted deforestation could be a reasonable path in facing parts of the
immediate demands of the Kyoto Protocol. It does not investigate the ecological advantages of AD,
as compared to the present eligible methods under CDM which are afforestation and reforestation,
but it seems only obvious that AD is conserving biodiversity, like it contributes to abating poverty
when conducted under the rules of CDM. The arguments in this paper are instead focused on the
feasibility of emission reductions from AD and its economic viability.

The wide area of this study requires a large amount of research in many different topics. Lack of
scientific papers has made it necessary to accept that not all sources are published papers.
Governmental and inter-governmental websites have been used widely, partly to find certain data,
partly to understand views on certain problems. Some scientists have conducted comprehensive
research, but have not published all their findings in scientific papers. These unpublished findings
are then sometimes made available on the Internet. An example of this is Dr. Shively, who has been



                                                                                                  28
collecting data from Palawan in four different periods. Some of his findings are published in
scientific journals (1997, 1999 and Shively et al., 2004), while some have been presented at a
conference (Shively et al., 1999). WWF has produced an academic paper (1998), and placed it on
the Internet, without having it published in any journal. The latter two works and a few similar
sources have been accepted by the author, for the purpose of this paper. The author also accepts
papers presented by IPCC as credible, as IPCC is recognised as the most reliable source on global
warming.

Chapter 1.3 covers the background of using conservative estimates in the price of ER credits and
Palawan baseline in chapters 2 and 3 respectively, as to give strong arguments to the thesis that
averted deforestation is a possibility under CDM. Chapter 3 is meant as a case for responding the
problem formulation of this study. For an actual project between an Annex I country and a non-
Annex I country, it is necessary to conduct scientific on-ground analysis to calculate the more exact
potential for GHG emission, as well as to make multiple comparisons to estimate leakage. In the
calculations of the baseline in chapter 3, only the land clearings are accounted for. To justify this, it
is expected that these clearings are a far more substantial impact to the environment than the use of
fuel and other CO2 emitting procedures in the work of the kaingineros.

The sources for the costs of establishing one hectare of mango are combined from an organisation
under the Philippine government, which is promoting mango production. Dr. Namuco is an expert
in Philippine mango production, who provided a cash-flow chart on production of mango, including
the initialising years until the gross income stabilises. This has been combined with the statistics on
production efficiency in Palawan, which is significantly lower in Palawan than the average of the
Philippines. However, the accuracy of chapter 4 would be enhanced by a comprehensive research.
The question on the ownership of the land and the rights of indigenous people to use the land needs
further research as well. Only does it seem clear that the Philippines as well as the small-scale
farmers will have advantage in conversions from slash-and-burn to agroforestry.
In order to sustain each household during the first years of mango production, the farmers will need
to borrow an amount similar to the average gross income (9,850 peso/year). The calculations are not
included in Appendix I, but such a loan will only delay the paying back of the mango investment
with a maximum of 1 year, as the income is increasing rapidly in the years 9-14 of the investment.
It is obvious that the entire population of Palawan‟s kaingineros cannot convert to mango
production without the market price dropping considerably. Therefore other agroforestry crops are



                                                                                                      29
needed. Rubber and palm oil are among the crops, which are investigated as possible substitutes for
slash-and-burn, but this study recommends further research in other possible crops, conventional as
well as innovative for the uplands of the tropics.
As the locals export agroforestry crops, e.g. mango, they will need an amount of rice into the
system. Critics might argue that the leakage from this is neutralising the carbon gain in Palawan.
The counter-argument is that rice produced in lowlands is sustainable, and irrigated lowlands will
enhance production (Shively et al., 2004). A weakness of the findings of chapter 4.2 is indeed that
the probable need for investments in irrigating lowland rice fields for substituting upland rice is not
explored.

Considering the date of various data, as they differ from 1995-2003, the inflation-caused differences
of values have not been adjusted for. Therefore, it is recognised that the differences in NPV in
Table 2 (chapter 4.2) are somehow smaller. Still, the author finds it likely that the price of a
conversion to sustainable agroforestry can remain a cost-effective path to creating certified emission
reductions compared to other ways to reach the Kyoto targets. As it is today, all large-scale methods
towards emission reductions, which are eligible under CDM, are more costly than the DKK 16 per
ton of greenhouse gas emission.

Averted deforestation is a tool, which, for the benefit of future generations should be eligible under
CDM as soon as possible. As the environment has to be secured for the coming generations, it is
important that all credits are monitored and verified with the most conservative methods:
-   Baselines and additionalities have to be measured with the lowest estimates, positive leakages
    with the highest estimates, always giving the benefit of the doubt to the environment
-    Durability of any CER should only persist as long as the verified sinks are intact. Should the
    sinks disappear, i.e. from burning or logging, then the investing country should lose its credits
    as leakage in its national carbon accounting. The investing country is responsible for
    encouraging the host country to keep the sinks protected. The background for this argument is
    that the investing country must create sustainable emission reductions

In order to reap maximum benefits from AD under CDM, research is needed in a number of areas.
The areas of immediate concern are in the measurement of additionality (baseline emission minus
the emission from a given project), and in the identification (or genetically manipulating) of future
crops to convert to, for the slash-and-burn farmers, whom, with the help from the developing




                                                                                                    30
countries can change their role of being part of the problem, to being part of the solution to the
global warming threat.
A problem which is likely to arise is an increased migration into the project area of a CDM project,
caused by the improved living standards and greater possibilities as more uncleared land will be
available. Without any steps taken, this might become the limiting factor for the success of a
possible CDM project. It is difficult to measure the impact on the socio-economy and environment,
and it is difficult to measure if the latter is caused indirectly by the project or not. This is not only a
possible problem for averted deforestation, but also a problem for the current eligible CDM
methods. However, a viewpoint can be that the environmental impact caused by migration is not
actual leakage, but will just appear elsewhere, if the CDM project does not taken place. Yet, clear
rules on this are recommended for the future of CDM.

                                          6 Conclusion
Research in literature, focusing on the Palawan case, shows that there is potential for major GHG
emission reductions in averting deforestation in Non-Annex I countries of the developing world.
This potential can be approached by Annex I countries investing in improving the agricultural
methods used by small-scale farmers, towards sustainable methods, e.g. by converting slash-and-
burn into agroforestry. To motivate investors, future Conferences of the Parties to the Kyoto
Protocol need to agree on adding Averted Deforestation into the eligible LULUCF projects under
CDM. With today‟s technology, AD will be cost-efficient, compared to other methods with large
potential of reducing emission.

                                         7 Perspectives
As a follow up on this paper, research on the political will to tolerate Palawanese kaingineros
converting into agroforestry would be an aid for the future CoP to decide on AD under CDM.

There are ongoing debates relating to the global economy about climate change and the Kyoto
Protocol, poverty in the Third World, and other major issues confronting the world today, with
differing perspectives regarding the priority of these problems. Some scientists argue that the Kyoto
Protocol alone is not enough to prevent global warming, while others argue that investments in the
near future should be given priority to other areas rather than global warming, while the world
should instead act against global warming in perhaps 2050 or even 2100, when the consequences
are more severe. Nonetheless, whichever recommendations evolve from scientists, as of today, the
Kyoto obligations are not subject to immediate changes.



                                                                                                        31
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     (http://www.globalcarbonproject.org/PRODUCTS/Table_of_contents_land_use%20(Canadell
     _Zhou_Noble2003)/Lasco_yc0055.pdf as of May 27, 2004).

McNally, J.W.; Poggie, J. and Rice, M. (2004): Demographic Trajectories, Migration and
   Environmental Impacts - Palawan Province, the Philippines as a Micro-Demographic
   Laboratory. Paper submitted to the 2004 Meetings of the Population Association of America,
   Session 801: Land Use, Land Cover Change, and Demographic Processes. Unpublished.
   (http://paa2004.princeton.edu/download.asp?submissionId=42191 as of May 27, 2004).




                                                                                                 33
McNally, J.W. (2004): Personal correspondence via email with Dr. James W. McNally (author of
   McNally et al., 2004), University of Michigan, on March 19, 2004. E-mail:
   jmcnally@icpsr.umich.edu.

Nakicenovic, N.; Alcamo, J.; Davis, G.; de Vries, B.; Fenhann, J.; Gaffin, S.; Gregory, K.; Grübler,
     A.; Tae, Y.J.; Kram, T.; La Rovere, E.L.; Michaelis, L.; Mori, S.; Morita, T.; Pepper, W.;
     Pitcher, H.; Price, L.; Riahi, K.; Roerhl, A.; Rogner, H.H.; Sankowski, A.; Schlesinger, M.;
     Shukla, P.; Smith, S.; Swart, R.; van Rooijen, S.; Victor, N. and Dadi, Z. (2000): IPCC
     Special Report on Emissions Scenarios. Intergovernmental Panel of Climate Change.
     (http://www.grida.no/climate/ipcc/emission/index.htm as of May 26, 2004).

Namuco, L.O. (2004) Personal correspondence via email with Dr. Leon O. Namuco, Department of
    Horticulture/College of Agriculture (CA), University of the Philippines Los Baños on May 14,
    2004. Dr. Namuco‟s expertise is in the field of breeding and production of mango. E-mail:
    lasn@ics.uplb.edu.ph.

Natsource (2002): Assessment of Private Sector Anticipatory Response to Greenhouse Gas Market
     Development. Natsource Strategic Services Greenhouse Gas Risk Analysis, Conducted for
     Environment Canada Final Analysis, July 2002, Natsource LLC with GCSI.
     (http://www.getf.org/file/toolmanager/CustomO16C45F40025.pdf as of May 26, 2004).

Novellino, D. (1998): Sacrificing People for the Trees: The cultural cost of forest conservation on
    Palawan Island (Philippines). Indigenous Affairs, no.4, pp.4-14.

Paltsev, S.V. (2000): The Kyoto Protocol: “Hot air” for Russia? Department of Economics,
      University of Colorado, Working Paper No. 00-9.
      (http://debreu.colorado.edu/projects/sergey_hotair.pdf as of April 18, 2004).

Pinard, M.A. and Putz, F.E. (1996): Retaining forest biomass by reducing logging damage.
     Biotropica, vol. 28, no. 3, pp. 278-295.

Pinard M.A. and Cropper W.P. (2000): Simulated effects of logging on carbon storage in
     dipterocarp forest. Journal of Applied Ecology, vol. 37, no. 2, pp. 267-283.

Rosenzweig, R.; Varileck, M. and Janssen, J. (2002): The Emerging International Greenhouse Gas
    Market. Report prepared for Pew Center on Global Climate Change.
    (http://www.pewclimate.org/docUploads/trading%2Epdf as of May 27, 2004).

Royal Society (2001A): The Science of Climate Change. Joint statement from group of academies
     of science, initiated by Royal Society.
     (http://www.royalsoc.ac.uk/files/statfiles/document-138.pdf as of May 27, 2004).

Royal Society (2001B): The role of land carbon sinks in mitigating global climate change. Policy
     document 10/01.
     (http://www.royalsoc.ac.uk/files/statfiles/document-150.pdf as of May 27, 2004).

SEP (Strategic Environmental Plan for Palawan Act) (1992): Republic Act No. 7611
      (http://www.pcsd.ph/sep_law/ra7611.pdf as of May 27, 2004).



                                                                                                 34
Shively, G. (1997): Poverty, technology, and wildlife hunting in Palawan. Environmental
     Conservation, vol. 24, no. 1, pp. 57-63.

Shively, G. and Martinez, E. (1999): Can agricultural intensification stop deforestation? Irrigation,
     employment, and room for cautious optimism in southern Palawan, the Philippines. Prepared
     for the CIFOR workshop “Technical change in agriculture and deforestation”, CATIE,
     Turrialba, Costa Rica, 11-13 March 1999. Unpublished.
     (http://www.agecon.purdue.edu/staff/shively/philippines/cifor.pdf as of May 27, 2004).

Shively, G (1999): Prices and tree planting on hillside farms in Palawan. World Development, vol.
     27, no. 6, pp. 937-949.

Shively, G. and Pagiola, S. (2004): Agricultural intensification, local labor markets, and
     deforestation in the Philippines. Environment and Development Economics, vol. 9, no. 2, pp.
     241-266.

Smith, J. and Scherr, S. J. (2002): Forest Carbon and Local Livelihoods: Assessment of
     Opportunities and Policy Recommendations. CIFOR Occasional paper 37. Center for
     International Forestry Research, Bogor. pp. 1-25 (section I-V).

Tomich, T.P.; Noordwijk, M.; Vosti, S.A. and Witcover, J. (1998): Agricultural Development with
    Rainforest Conservation: Methods for Seeking Best Bet Alternatives to Slash-and-Burn, with
    Applications to Brazil and Indonesia. Agricultural Economics, vol. 19, no. 1-2, pp. 159-174.

UNFCCC (United Nations Framework Convention on Climate Change) (1997): The Kyoto Protocol
   to the United Nations Framework Convention on Climate Change.
   (http://unfccc.int/resource/docs/convkp/kpeng.pdf as of May 27, 2004).

UNFCCC (United Nations Framework Convention on Climate Change) (2001): Subsidiary Body
   for Scientific and Technological Advice. Fourteenth session, Bonn, 16-27 July 2001, Item 6 of
   the provisional agenda, Submissions from Parties.
   (http://unfccc.int/resource/docs/2001/sbsta/misc03.pdf as of May 27, 2004).

UNFCCC (United Nations Framework Convention on Climate Change) (2002): Report of the
      Conference of the Parties on its Seventh Session, held at Marrakesh from 29 October to 10
      November 2001. (CoP7: Addendum Part two: Action Taken by the Conference of the Parties,
      Volume II).
(http://unfccc.int/resource/docs/cop7/13a02.pdf as of May 27, 2004).

UNFCCC (United Nations Framework Convention on Climate Change) (2004): Report of the
   Conference of the Parties on its Ninth Session, held at Milan from 1 to 12 December 2003.
   (CoP9: Addendum Part two: Action Taken by the Conference of the Parties at its Ninth
   Session, Volume II).
   (http://unfccc.int/resource/docs/cop9/06a02.pdf as of May 27, 2004).




                                                                                                  35
Watson, R.T.; Noble, I.R.; Bolin, B.; Ravindranath, N.H.; Verardo, D.J.; David, J. and Dokken, D.J.
    (2000): IPCC Special Report on Land Use, Land-Use Change and Forestry.
    Intergovernmental Panel of Climate Change.
    (http://www.grida.no/climate/ipcc/land_use/index.htm as of May 27, 2004).

WWF (World Wildlife Fund) (1998): Socioeconomic Root Causes of Biodiversity Loss in the
   Philippines. Unpublished.
   (http://www.panda.org/downloads/policy/phil.pdf as of May 27, 2004).

Zhang, Q.; Justice, C.O. and Desanker, V.P. (2002): Impacts of simulated shifting cultivation on
    deforestation and the carbon stocks of the forests of central Africa. Agriculture, Ecosystems
    and Environment, vol. 90, no. 2, pp. 203–209.

8.1 References to Websites
8.1.1 Governmental and Intergovernmental Organisations
FAO (Food and Agriculture Organization of the United Nations): http://www.fao.org/

MIN (Mango Information Network, the Philippines): http://www.min.pcarrd.dost.gov.ph/

Ministry of Environment, Denmark (Miljøministeriet): http://www.mim.dk/

PCARRD (Philippines Council for Agriculture, Forestry and Natural Resources Research and
Development): http://www.pcarrd.dost.gov.ph/

PCSD (Palawan Council for Sustainable Development): http://www.pcsd.ph/

PCF (Prototype Carbon Fund): http://carbonfinance.org/pcf/router.cfm?Page=Home

UNFCCC (United Nations Framework Convention on Climate Change): http://unfccc.int/

8.1.2 Non-Governmental Organisations
WWF (World Wildlife Fund): http://www.worldwildlife.org/




                                                                                                36
Appendix A
Joint statement from a group of sixteen national academies of science from all parts of the world, endorsing IPCC
as the most reliable source of information on climate change and its causes. Emphasising on global warming
consequences from GHG emission, it recognises the Kyoto Protocol as being a first important step towards
stabilising atmospheric concentrations of GHG. Furthermore, it calls for immediate action from the society in
order to reduce global GHG emission.
(Royal Society, 2001A).
Appendix B




Source: Intergovernmental Panel of Climate Change (IPCC).
(http://www.ipcc.ch/present/graphics/2001syr/large/03.17.jpg as of May 27, 2004).
Appendix C
Various stakeholders‟ position on the use of different LULUCF projects under CDM




(Fearnside, 2001).
Appendix D
Palawan‟s population trend in the past 100 years




(McNally et al., 2004).
Appendix E
Baseline of slash-and-burn in Palawan, in a “business as usual” scenario, 1992-2014
Area of Palawan (ha): 1489600       Average uphill farm size (ha):    2.9      Average uphill annual clearing (ha):       0.16         Average OD net emission
    Emission, per new-coming       Annual emission per kainginero household (t CO2):         42.85       Other Deforestation (OD)       (t CO2/ha):         145.75
   farmer (t CO2):       776.62     Cleared                Cleared OD per capita (ha):      0.0182       (Urbanisation and illegal Kaingin        OD       Overall
                          Farm        by       Cleared for slash- Palawan's virgin           Total          deforestation beyond    caused     forest use forest use
        Kaingineros     growth    new-comers for fallow and-burn       forest cover      deforestation     kaingin) Population emission emission emission
Year (households)        factor      (ha)         (ha)       (ha)     (%)       (ha)          (ha)           (ha)       Palawan    (Mt CO2) (Mt CO2) (Mt CO2)
1992       14956        1.03670      1535        2393        3928   48.0% 715008            12849            8921        489378      1.052       1.300      2.352
1993       15504        1.03661      1588        2481        4069   47.1% 701691            13317            9248        507338      1.090       1.348      2.438
1994       16070        1.03653      1642        2571        4213   46.2% 687891            13800            9587        525913      1.128       1.397      2.526
1995       16655        1.03644      1698        2665        4363   45.2% 673591            14300            9937        545122      1.168       1.448      2.617
1996       17261        1.03635      1756        2762        4517   44.2% 658774            14817           10299        564985      1.210       1.501      2.711
1997       17887        1.03626      1815        2862        4677   43.2% 643424            15351           10674        585522      1.253       1.556      2.808
1998       18534        1.03618      1876        2965        4842   42.1% 627521            15902           11061        606754      1.297       1.612      2.909
1999       19203        1.03609      1940        3072        5012   41.0% 611049            16473           11461        628704      1.342       1.670      3.013
2000       19894        1.03600      2005        3183        5188   39.9% 593987            17062           11874        651392      1.389       1.731      3.120
2001       20608        1.03591      2072        3297        5369   38.7% 576316            17671           12302        674842      1.438       1.793      3.231
2002       21347        1.03583      2141        3415        5557   37.5% 558016            18300           12744        699077      1.488       1.857      3.345
2003       22110        1.03574      2212        3538        5750   36.2% 539066            18950           13200        724122      1.540       1.924      3.464
2004       22898        1.03565      2286        3664        5949   34.9% 519444            19621           13672        750000      1.593       1.993      3.586
2005       23712        1.03556      2361        3794        6155   33.5% 499130            20315           14159        776738      1.648       2.064      3.712
2006       24553        1.03548      2439        3929        6368   32.1% 478099            21031           14663        804360      1.705       2.137      3.842
2007       25422        1.03539      2520        4068        6587   30.6% 456329            21770           15183        832895      1.764       2.213      3.977
2008       26319        1.03530      2602        4211        6814   29.1% 433795            22534           15720        862369      1.825       2.291      4.116
2009       27246        1.03521      2688        4359        7047   27.6% 410473            23322           16275        892811      1.887       2.372      4.259
2010       28203        1.03513      2775        4513        7288   25.9% 386337            24136           16848        924249      1.952       2.456      4.407
2011       29191        1.03504      2866        4671        7536   24.3% 361361            24976           17440        956713      2.018       2.542      4.560
2012       30212        1.03495      2959        4834        7793   22.5% 335517            25844           18051        990234      2.087       2.631      4.718
2013       31265        1.03486      3054        5002        8057   20.7% 308778            26739           18682       1024842      2.158       2.723      4.881
2014       32352        1.03478      3153        5176        8329   18.9% 281116            27663           19333       1060571      2.231       2.818      5.048
2015       33474        1.03469      3254        5356        8610   17.0% 252500            28616           20006       1097452      2.306       2.916      5.222
2016       34633        1.03460      3359        5541        8900   15.0% 222900            29600           20699       1135520      2.384       3.017      5.400
2017       35828        1.03451      3466        5732        9199   12.9% 192286            30614           21416       1174809      2.463       3.121      5.585
2018       37061        1.03443      3577        5930        9507   10.8% 160625            31661           22155       1215355      2.546       3.229      5.775
2019       38334        1.03434      3691        6133        9824    8.6% 127883            32741           22917       1257193      2.631       3.340      5.971
Sourced from chapter 3.
Appendix F
Estimating the carbon loss from kaingin in Palawan

    Year     Carbon
    after    density
  clearing   (t C/ha)
      0         4.3
      1         5.3
    1.01        4.3
      2         5.3
   2.01        4.3
     3         5.3
   3.01        4.3
     4         9.6
     5        14.9
     6        20.2
     7        25.5
     8        30.8
     9        36.1
   9.01        4.3
    10         5.3
  10.01        4.3             Potential carbon sinks if land is not cleared for cultivation (t C/ha):
    11         5.3             Year            Virgin forest      6-year old fallow 1-year old grassland
  11.01        4.3              1                   138                  36.1                      6
    12         5.3              2                   138                  41.4                    11.3
  12.01        4.3              3                   138                  46.7                    16.6
    13         9.6              4                   138                  52.0                    21.9
    14        14.9              5                   138                  57.3                    27.2
    15        20.2              6                   138                  62.6                    32.5
    16        25.5              7                   138                  67.9                    37.8
    17        30.8              8                   138                  73.2                    43.1
    18        36.1              9                   138                  78.5                    48.4
  18.01        4.3
    19         5.3
  19.01        4.3
   19.5       4.65
 Average:    13.09




                          Loss (primary):         124.91          (=138-13.09)
                           Loss (fallow):         65.41           (=78.5-13.09)
                           Loss (grass):          35.31           (=48.4-13.09)
                        Total weighed loss:       76.03         (=124.91*30%+65.41*46%+35.31*24%)

(IRRI, 1975, Shively et al., 1999, Fischer et al., 2001 and Lasco, 2002).
Appendix G
Trend for kaingin-caused emission:
Emission (Mt CO2) =                  2  1029 e0.0333year
                                                            2  10 29 e 0.0333t
                                                      2005
                                                      2034                              83.219 Mt
Average annual emission, 2005-2034:                                                 =             = 2.774 Mt CO2/year
                                                             30 years                    30 years

                   12
                                                       Baseline, Palawan

                   10
                                                                0,0333x
                               Kaingin trend: y = 2E-29e
 Annual emission




                   8
    (Mt CO2)




                   6

                   4

                   2

                   0
                   1990       1995       2000     2005              2010            2015          2020      2025      2030     2035
                                                                           Year
                            Kaingin-caused emission                               Overall emission from deforestation
                            Emission from Other Deforestation                     Expon. (Kaingin-caused emission)



                          Accumulated CO2 emission from kaingin in Palawan, 2005-2034

                   90
                   80
                   70
                   60
       Mt CO2




                   50
                   40
                   30
                   20
                   10
                    0
                    2000       2005        2010        2015                2020            2025          2030      2035      2040
                                                                           Year



                                                   Kaingin  OD                           In all
Emission 2005-2034 (Mt CO2):                       83,219 105,974                       189,193
Average per year (Mt CO2):                          2,774  3,532                         6,306

Drafted from information in chapter 3.
Appendix H
Statistics on mango production in the Philippines. The currency is Philippine peso (PHP)

              Source: Namuco, 2004                                Source: MIN webpage
           Price of mango: PHP20/kg                         Palawan       Price     Harvest
            Gross      Operating Yearly net                  Year     (2001-P/kg)   (kg/ha)
 Year    return (P)     cost (P)   Return (P)                1990         18.69         -
  1            0         16315      -16315                   1991         13.06         -
  2            0         9110        -9110                   1992         10.54       6753
  3            0         9110        -9110                   1993         13.77       5564
  4          2500        16630      -14130                   1994         17.85       5828
  5          5000        21743      -16743                   1995         13.94       4096
  6         10000        33645      -23645                   1996         14.32       4575
  7         20000        33645      -13645                   1997         13.15       4283
  8         30000        33645       -3645                   1998         17.69       3337
  9         40000        38280        1720                   1999         22.89       2999
  10        50000        38280       11720                   2000           -         3060
  11       100000        38280       61720                   2001         12.34       3152
  12       150000        47585      102415                  Average       15.29       4365
  13       200000        47585      152415
  14       300000        64200      235800                   Average, Philippines     7000
  15       400000        64200      335800                   Palawan yield factor,
 Total    1307500       512253      795247                 compared with Namuco:     0.623529




                                             Calculated from
                                            Namuco and MIN
                                                     Yield/ha (kg)
                                     Year        Namuco      Palawan
                                      4             125          78
                                      5             250         156
                                      6             500         312
                                      7            1000         624
                                      8            1500         935
                                      9            2000        1247
                                      10           2500        1559
                                      11           5000        3118
                                      12           7500        4676
                                      13          10000        6235
                                      14          15000        9353
                                      15          20000       12471
Appendix I
Cash flow chart for planting 1 ha of mango in Palawan at different interest rates. The currency is Philippine peso (PHP)
        Harvest         Gross       Operating     Yearly net                                    Balance (PHP)
 Year    (kg/ha)    return (PHP)    cost (PHP)   return (PHP)    r=     1%   r=     2%   r=     3%     r=     5%   r=     7%   r=    10%
  0          0            0           16315         -16315         -16315      -16315      -16315        -16315      -16315      -16315
  1          0            0            9110          -9110         -32793      -32956      -33119        -33446      -33772      -34262
  2          0            0            9110          -9110         -42231      -42725      -43223        -44228      -45246      -46798
  3         78           1192         16630         -15438         -51763      -52690      -53630        -55549      -57523      -60587
  4        156           2384         21743         -19359         -67719      -69182      -70677        -73765      -76988      -82084
  5        312           4768         33645         -28877         -87755      -89924      -92156        -96812     -101736     -109651
  6        624           9537         33645         -24108        -117509     -120599     -123797       -130529     -137734     -149493
  7        935          14305         33645         -19340        -142793     -147120     -151619       -161164     -171484     -188551
  8       1247          19073         38280         -19207        -163561     -169402     -175508       -188562     -202828     -226746
  9       1559          23841         38280         -14439        -184403     -191997     -199980       -217197     -236233     -268628
  10      3118          47683         38280           9403        -200686     -210276     -220418       -242496     -267208     -309929
  11      4676          71524         47585          23939        -193290     -205078     -217628       -245218     -276509     -331519
  12      6235          95366         47585          47781        -171283     -185240     -200217       -233539     -271925     -340731
  13      9353         143049         64200          78849        -125215     -141164     -158443       -197435     -243179     -327024
  14      12471        190732         64200         126532         -47619      -65139      -84347       -128458     -181353     -280877
  15      12471        190732         64200         126532          78437       60090       39654         -8349      -67516     -182433
  16      12471        190732         64200         126532         205753      187824      167375        117765       54290      -74145
  17      12471        190732         64200         126532         334342      318112      298928        250185      184622       44973
  18      12471        190732         64200         126532         464217      451006      434428        389226      324077      176001
  19      12471        190732         64200         126532         595391      586558      573992        535219      473294      320133
  20      12471        190732         64200         126532         727877      724821      717744        688511      632956      478678
  21      12471        190732         64200         126532         861687      865849      865808        849469      803795      653078
  22      12471        190732         64200         126532         996836     1009697     1018314       1018474      986592      844918
  23      12471        190732         64200         126532       1133336      1156423     1175395       1195929     1182185     1055941
  24      12471        190732         64200         126532       1271201      1306083     1337189       1382258     1391470     1288067
  25      12471        190732         64200         126532       1410445      1458737     1503836       1577902     1615405     1543405
  26      12471        190732         64200         126532       1551081      1614443     1675483       1783329     1855015     1824277
  27      12471        190732         64200         126532       1693124      1773264     1852279       1999027     2111398     2133237
  28      12471        190732         64200         126532       1836587      1935261     2034379       2225510     2385727     2473092
  29      12471        190732         64200         126532       1981484      2100498     2221942       2463317     2679260     2846933
               NPV (Year 0) (PHP)                               10,873,692   4,667,695   2,667,748     1,168,713    601,139     245,258
    Low NPV (Year 0) (DKK)             1 PHP=0.105 DKK           1,141,738    490,108     280,114       122,715      63,120      25,752
    High NPV (Year 0) (DKK)            1 PHP=0.165 DKK           1,794,159    770,170     440,178       192,838      99,188      40,468
                                                                              14
                                                                              Yearly Net Return 126532
Net Present Value is calculated by the following formula: NPV =                                       (1  r ) 15 , as the yearly net return, p, is
                                                                         i 1      (1  r ) i      r
                                     th
stabilising at 126,532 peso at the 15 year. Calculated from the data in Appendix H (Palawan average yield and price).