Paying the forest for electricity: a modelling framework to market forest conservation as payment for ecosystem services benefiting hydropower generation

• Published in: Environmental conservation 2011-12, Vol.38 (4), p.473-484
• Main Authors: ARIAS, MAURICIO E., COCHRANE, THOMAS A., LAWRENCE, KEITH S., KILLEEN, TIMOTHY J., FARRELL, TRACY A.
• Format: Article
• Language: English
• Subjects: climate; Conservation; cost estimates; Dams; dams (hydrology); Drought; Ecosystem services; Ecosystems; Electricity; Environmental economics; Environmental protection; Erosion; Forest conservation; Forest management; Forest protection; Forests; Hydroelectric plants; Hydroelectric power; Land use; land use change; longevity; markets; Modelling; Net present value; payment for ecosystem services; Payments; power generation; reservoir sedimentation; Sediment yield; Sedimentation; Sediments; Soil erosion; Soil erosion control; sustainable hydropower; water power; watershed management; Watersheds
• ISSN: 0376-8929; 1469-4387; 1469-4387
• DOI: 10.1017/S0376892911000464

The operation and longevity of hydropower dams are often negatively impacted by sedimentation. Forest conservation can reduce soil erosion, and therefore efforts to maintain upstream forest cover within a watershed contribute to the economic life span of a hydropower facility. The cost of forest conservation can be viewed as an investment in hydropower and be financed via a payment for ecosystem services (PES) scheme. A novel modelling framework is used to estimate payments for forest conservation consisting of: (1) land-use change projection; (2) watershed erosion modelling; (3) reservoir sedimentation estimation; (4) power generation loss calculation; and (5) PES scheme design. The framework was applied to a proposed dam in Cambodia (Pursat 1). The estimated net present value of forest conservation was US$ 4.7 million when using average annual climate values over 100 years, or US$ 6.4 million when considering droughts every eight years. This can be remunerated with annual payments of US$ 4.26 ha−1 or US$ 5.78 ha−1, respectively, covering forest protection costs estimated at US$ 0.9 ha−1 yr−1. The application of this type of PES represents a rational option that allows for conservation and development of hydropower watersheds susceptible to erosion and sedimentation.