A cost benefit analysis of climate compensation through different types of forestry in Uganda

University essay from SLU/Dept. of Economics

Abstract: Global warming is becoming an increasing issue on the agenda for the world’s policy makers. One way of solving the issues is to reduce the emissions; another is to compensate for them through equally climate positive projects, such as planting trees to sequester carbon. We want to know more about the level of sustainability of climate compensation through tree planting. We perform a cost- benefit analysis to put monetary values on two different aspects of the compensation; the social and the economical. Three different scenarios of land use for climate compensation on 10 hectares in South West Uganda are considered in the analysis. The first scenario is baseline, where the land is left as today, the second scenario is monoculture forestry, where trees are planted on the land, and the third is agroforestry where the planted trees are intercropped with maize. We evaluate the costs and benefits connected to each scenario, and our results show the highest Net Present Value is reached for monoculture forestry. However, the results are not robust, since they are very dependent on what price of carbon equivalents that is used, and what rate of discount. Our sensitivity analysis shows that agroforestry may be equally favourable, depending on what perspective is applied.

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