THE FEASIBILITY OF CARBON TRADING IN CURBING RUBBER-BASED DEFORESTATION IN CAMBODIA: DYNAMIC SOCIO-ECONOMIC SIMULATION MODEL

Abstract

Species extinction, accelerated greenhouse gas emission, and plethora of other socio-ecological catastrophes are, in part, caused by tropical deforestation and forest degradation. Unsurprisingly, efforts on local and global scales have been proposed to curb deforestation, from command-and-control policy regulation to finance-based approaches. This thesis, serves as an empirical study to understand the economic plausibility of carbon trading scheme (e.g. REDD+) to curtail rubber-based deforestation in Cambodia. After consulting past literature, a theoretical framework is formulated to outline the model’s variables. Contextualization to Cambodia’s socio-economic and political geography is done to make the model more nuanced. Two scenarios are hypothesized; the first defines a situation of forest conservation while the second, of rubber development. Profitability from these two scenarios are evaluated in present term across a 25-year period. The economic attractiveness of forest conservation is derived from monetary compensation yielded from carbon trading scheme, with the resulting credits traded in either voluntary or compliance carbon markets. Lastly, sensitivity analysis is done to identify key variables that assert great uncertainty to the model’s outcome. Analysis reveals that rubber plantation in Cambodia is extremely lucrative, generating profits between $6,664 to $7,692 per hectare as compared to that of forest conservation projects, valued at $795 - $1,377 per hectare in voluntary carbon markets and $2,011 - $4,490 per hectare in some compliance carbon markets. Only carbon market as regulated by the European Union Emission Trading Scheme (EU ETS) yields profit that exceeds that of rubber development, at $11,791 per hectare. This study also recommends a price of carbon credit to be at least between $13.13 and $15.12 per tCO2e to make forest conservation in Cambodia as attractive as rubber development.