1. Economic valuation of energy-wood plantations in Northern-Madagascar
7th International Scientific Conference on Energy and Climate Change 2014
Kostis Palamas building, 10/10/2014

2. Economic valuation of energy-wood plantations in Northern-Madagascar
Contents
Introduction
Cost-benefit analysis
Results
Discussion
Conclusions
References
10/10/ Gauger, Gernot
Economic valuation of energy-wood plantations in Northern-Madagascar

3. Economic valuation of energy-wood plantations in Northern-Madagascar
1. Introduction
Increased pressure on natural resources and increasing demand for energy in developing countries
In Madagascar: 85% of energy resources from fuel-wood and charcoal
Demand exceeds natural growth
Non-sustainable, illegal use of natural forests leads to degradation, segmentation and finally deforestation
10/10/ Gauger, Gernot
Economic valuation of energy-wood plantations in Northern-Madagascar

4. Economic valuation of energy-wood plantations in Northern-Madagascar
1. Introduction
Picture 1: Eucalyptus trees1
Picture 3: Charcoal pile3
Picture 4: Workshop meeting4
Picture 2: Timber2
Gesellschaft für Internationale Zusammenarbeit (GIZ) and Malagasy “Ministère de l’Energie et des Mines” (MEM) started the project nowadays know as “Charbon vert” – “green charcoal” in 1996
Approach: Afforesting degraded land with fast growing eucalyptus and ameliorated charcoal production
Local farmers included: gaining tenure rights, capacity building, gender issues
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Economic valuation of energy-wood plantations in Northern-Madagascar

5. Economic valuation of energy-wood plantations in Northern-Madagascar
1. Introduction
Region: DIANA (Northern Madagascar)
Afforested degraded land: 6700ha
Involved people: households
Precipitation: mm/year in average Antsiranana (Diego)5
Map 27
Map 16
10/10/ Gauger, Gernot
Economic valuation of energy-wood plantations in Northern-Madagascar

6. 2. Cost-benefit analysis
Tool for making resource management decisions,
project comparison, project valuation
Pro’s
Results are straight forward and easy to understand
Potentially discovers unknown variables
Con’s
Indirect benefits may be difficult to monetize
Variables might be biased
Important variables might be undetected
10/10/ Gauger, Gernot
Economic valuation of energy-wood plantations in Northern-Madagascar

7. 2. Cost-benefit analysis
Used approaches8: - Market price-based
- Cost-based
Market price-based: Values for costs and benefits are raised and used
Cost-based: Avoided cost method calculated for CO₂ emission
10/10/ Gauger, Gernot
Economic valuation of energy-wood plantations in Northern-Madagascar

8. 2. Cost-benefit analysis
Divided into four Scenarios:
Scenario 1: “Economic viability of the whole project”
All costs and benefits are analyzed
Scenario 2: “Economic viability for the farmers”
Particular costs carried from the farmers and benefits
10/10/ Gauger, Gernot
Economic valuation of energy-wood plantations in Northern-Madagascar

9. 2. Cost-benefit analysis
Scenario 3: “Economic viability for the farmers pt. 2”
With particular costs under different pricing conditions for the products
Scenario 4: “With project” versus “without project”
Assessing the avoided cost towards the data from Scenario 1
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Economic valuation of energy-wood plantations in Northern-Madagascar

10. Economic valuation of energy-wood plantations in Northern-Madagascar
3. Results – Input data
Costs
Cost segmentation
Planting
Quantity
Cost (Ariary)
Charbon Vert
Farmer
Technical support
lump sum/ha
54.450
100% 0%
Maintenance
30.000
Plant production
59.100
Site preparation
98% 2% n 20
Transport
n/ha
10.000
Diverse material needed
42.030
85%
15%
Conversion of raw material
Charcoal production
bag(12kg)
250
Charcoal transport
492
Pole wood production
100
Pole wood transport
300
Annual Fixed Costs
Diverse
Costs
Year 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16
Planting
44.000
40.000
10.000
26.335
Harvest
Total
Benefits
Charcoal
Pole wood
Cash flow
Net Benefit
Input data: Own editing9
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Economic valuation of energy-wood plantations in Northern-Madagascar

11. Economic valuation of energy-wood plantations in Northern-Madagascar
3. Results
Scenario 1: Total net present value(NPV)(i=8%)= € Total NPV (i=10%) = € Internal rate of Return (IRR) = 13% Scenario 2: Total NPV (i=8%) = € Total NPV (i=10%) = € IRR = 53%
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Economic valuation of energy-wood plantations in Northern-Madagascar

12. Economic valuation of energy-wood plantations in Northern-Madagascar
3. Results
Scenario 3: Total NPV (i=8%) = €
Total NPV (i=10%) = €
IRR = 45%
Scenario 4: Total NPV (i=8%) = €
Total NPV (i=10%) = €
IRR = 37%
Average trading price: 2/ /2014 = 5,89€/tCO₂10
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Economic valuation of energy-wood plantations in Northern-Madagascar

13. Economic valuation of energy-wood plantations in Northern-Madagascar
3. Results
Data overview: Own development
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Economic valuation of energy-wood plantations in Northern-Madagascar

14. Economic valuation of energy-wood plantations in Northern-Madagascar
3. Results
GDP per capita (GDPPC) for Madagascar 2013: 354€11
Average annual surplus; Scenario 2: 90€ (per capita: farmer)
Average annual surplus; Scenario 3: 58€ (per capita: farmer)
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Economic valuation of energy-wood plantations in Northern-Madagascar

15. Economic valuation of energy-wood plantations in Northern-Madagascar
4. Discussion
NPV(i=8%) = €
4,4
NPV(i=8%) = € !
Significant improvement
NPV(i=10%) = €
6,4
NPV(i=10%) = €
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Economic valuation of energy-wood plantations in Northern-Madagascar

16. Economic valuation of energy-wood plantations in Northern-Madagascar
4. Discussion
Adding avoided cost: creates strong argument for the project!
Annual farmer surplus: 25% of GDPPC for Scenario 2
16% of GDPPC for Scenario 3
decent extra income to farmers!
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Economic valuation of energy-wood plantations in Northern-Madagascar

17. Economic valuation of energy-wood plantations in Northern-Madagascar
5. Conclusions
Pro’s
Con’s
Project is recommendable from economic point of view
Eucalyptus plantations may have negative environmental effects12
Potential yield decrease would lead to limited profitability
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Economic valuation of energy-wood plantations in Northern-Madagascar

18. Economic valuation of energy-wood plantations in Northern-Madagascar
5. Conclusions
Reduced pressure on unique biodiversity13
Valuable under given aspects !
Further monitoring necessary
Given conditions have to be analyzed carefully from case to case
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Economic valuation of energy-wood plantations in Northern-Madagascar

19. Economic valuation of energy-wood plantations in Northern-Madagascar
6. References
Picture 1: Internet: ucalyptus.JPG/220px-A_SSO_of_Eucalyptus.JPG
Picture 2: ESMAP, Sustainable Production of Commercial Woodfuel: Lessons and Guidance from Two Strategies; page 15, 2010
Picture 3: Internet: G/600px-Meule_casamancaise.jpeg.JPG
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Economic valuation of energy-wood plantations in Northern-Madagascar

20. Economic valuation of energy-wood plantations in Northern-Madagascar
6. References
Picture 4: ESMAP, Sustainable Production of Commercial Woodfuel: Lessons and Guidance from Two Strategies; page 15, 2010
Rainfall/ Precipitation in Antsiranana, Madagascar, Internet:
Map 1: Internet:
Map 2: Internet: content/uploads/2014/02/Madagascar-Diana-and-Sava-edt.jpg
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Economic valuation of energy-wood plantations in Northern-Madagascar

21. Economic valuation of energy-wood plantations in Northern-Madagascar
6. References
Pascual, U. et al.: The economics of valuing ecosystem services and biodiversity, The Economics of Ecosystems and Biodiversity (TEEB), 2010
Lopez, P. et al.: Le reboisement villageois individuel, 2007
Average trading price: 2/ /2014 per tCO2, Internet:
International Monetary Fund, World Economic Outlook Database, 2014
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Economic valuation of energy-wood plantations in Northern-Madagascar

22. Economic valuation of energy-wood plantations in Northern-Madagascar
6. References
Poore, M., Fries, C.: The ecological effects of eucalyptus, FAO Paper, 1985
Rejmánek, M., Richardson, D.: Encyclopedia of Biological Invasions, 2011
10/10/ Gauger, Gernot
Economic valuation of energy-wood plantations in Northern-Madagascar

23. Thank you for the attention!
10/10/ Gauger, Gernot
Economic valuation of energy-wood plantations in Northern-Madagascar