How attractive are short-term CDM forestations in arid regions? The case of irrigated croplands in Uzbekistan

This study analyzed the financial attractiveness of Clean Development Mechanism Afforestation and Reforestation (CDM A/R) in irrigated agricultural settings. The Net Present Value (NPV) and Internal Rate of Return (IRR) of CDM A/R were estimated by analyzing the case of Khorezm region in Uzbekistan, where a mixed-species tree plantation was established on marginal cropland. The dual purposes of carbon sequestration and production of fruits, leaves as fodder, and fuelwood were studied over a seven-year rotation period. We compared the opportunity costs of land in marginal agricultural areas between this short-rotation plantation forestry and the annual cultivation of the major crops in the region, i.e., cotton, winter wheat, rice, and maize. The analyses were performed considering different levels of irrigation water availability, from 0 to 30,000m3/ha, to reflect the reality of a high variability of water supply in the region. The NPV of CDM A/R ranged between 724 and 5794USD/ha over seven years, depending on the tree species. Among the latter, Elaeagnus angustifolia L. had the highest profits due to the annually recurring cash flows generated from fruit production. Temporary Certified Emission Reductions (tCER) ranged within 399–702USD/ha after the assumed 7-year crediting period and would not suffice to cover initial investments and management costs of tree plantations. IRR peaked at 65% with E. angustifolia under the conventional afforestation and measured −10% and 61% when considering only the tCER and the CDM A/R, respectively. In contrast, other species had higher IRRs in case of the CDM A/R. The total profits from tree plantations exceeded those of both cotton and winter wheat, even with the assumption that there was an optimal irrigation supply for these crops. Rice production was overall the most profitable land use option but required water input of 26,500m3/ha/year, which is not consistently available for marginal croplands. We argue that the current global average price of 4.76 USD/tCER is insufficient to initiate forestry-based CDM projects but, in the absence of other incentives, can still motivate forestation of degraded croplands for land rehabilitation and the provisioning of non-timber products. Given the low irrigation needs of trees, 3–30% of the crop water demand, a conversion of degraded cropland to forested areas could save up to 15,300m3/ha/year at the current tCER price. Combining the monetary value of water and carbon would enlarge the scope for CDM A/R in irrigated drylands, thus enhancing the investments in marginal land rehabilitation and strengthening the resilience of rural populations to the repercussions of climate change.