A bottom-up approach to estimating cost elements of REDD+ pilot projects in Tanzania

Based on historical land use change patterns, current region-specific economic conditions and carbon stocks, project-specific opportunity costs ranged between US$ -7.8 and 28.8 tCOxxxx for deforestation and forest degradation drivers such as agriculture, fuel wood production, unsustainable timber extraction and pasture expansion. The mean opportunity costs for the three projects ranged between US$ 10.1 – 12.5 tCO2. Implementation costs comprised between 89% and 95% of total project costs (excluding opportunity costs) ranging between US$ 4.5 - 12.2 tCO2 for a period of 30 years. Transaction costs for measurement, reporting, verification (MRV), and other carbon market related compliance costs comprised a minor share, between US$ 0.21 - 1.46 tCO2. Similarly, the institutional costs comprised around 1% of total REDD+ costs in a range of US$ 0.06 – 0.11 tCO2.The use of bottom-up approaches to estimate REDD+ economics by considering regional variations in economic conditions and carbon stocks has been shown to be an appropriate approach to provide policy and decision-makers robust economic information on REDD+. The assessment of opportunity costs is a crucial first step to provide information on the economic baseline situation of deforestation and forest degradation agents and on the economic incentives required to halt unsustainable land use. Since performance based REDD+ carbon payments decrease over time (as deforestation rates drop and for each saved ha of forest payments occur once), investments in REDD+ implementation have a crucial role in triggering sustainable land use systems by investing in the underlying assets and the generation of sustainable revenue streams to compensate for opportunity costs of land use change. With a potential increase in the land value due to effective REDD+ investments, expenditures in an enabling institutional environment for REDD+ policies are crucial to avoid higher deforestation pressure on natural forests.In the process of developi