GREENHOUSE GAS EMISSIONS CONTROLIN THE FORESTRY SECTOR

EME*EM

Todd M. Johnson and Julian Lampiettiwith Lars Blomkvist and Xu Deying

November 1994

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CHINAIssues and Options in Greenhouse Gas Emissions Control

Greenhouse Gas Emissions Controlin the Forestry Sector

SUBREPORT NUMBER 6

by

Todd M. Johnson, Environmental Economist, The World BankJulian Lampietti, Consultant, The World Bank

Lars Blomkvist, Senior Forester, SGS Silviconsultand

Xu Deying, Professor, Forest Ecology and Environment Institute,Chinese Academy of Forestry

November 1994

Supported by the Global Environment Facility

The views expressed herein are those of the authors and do not necessarilyrepresent those of the World Bank.

Copyright 1994

Additional copies of this report may be obtained from

The World BankIndustry and Energy Division

China and Mongolia DepartmentEast Asian and Pacific Regional Office

1818 H Street, NWWashington, DC 20433

OTHER SUBREPORTS IN THIS SERIES:

Estimation of Greenhouse Gas Emissions and Sinks in China, 1990, August 1994. Report 1.

Energy Demand in China: Overview Report, February 1995, forthcoming. Report 2.

Energy Efficiency in China: Technical and Sectoral Analysis, August 1994, Report 3.

Energy Efficiency in China: Case Studies and Economic Analysis, December 1994. Report 4.

Alternative Energy Supply Options to Substitute for Carbon-Intensive Fuels, December 1994.Report 5.

Greenhouse Gas Control in the Agricultural Sector, September 1994. Report 7.

Valuing the Health Effects of Air Pollution: Application to Industrial Energy EfficiencyProjects in China, October 1994. Report 8.

Potential Impacts of Climate Change on China, September 1994. Report 9.

Residential and Commercial Energy Efficiency Opportunities: Taiyuan Case Study,September 1994, Report 10.

Pre-Feasibility Study on High Efficiency Industrial Boilers, August 1994. Report 11.

FOREWORD

This report is one of eleven subreports prepared as inputs to the United NationsDevelopment Programme (UNDP) technical assistance study, China: Issues and Options inGreenhouse Gas Emissions Control, supported by the Global Environment Facility andexecuted by the Industry and Energy Division, China and Mongolia Department, of theWorld Bank. On the Chinese side, overall coordination for the project was managed by theNational Environmental Protection Agency (NEPA), while the Chinese Academy ofForestry participated in the research for this subreport.

This report considers the effect that forest management and tree planting has onChina's net carbon dioxide emissions. It assesses the potential and net costs of carbonsequestration under various planting scenarios. Missions visited China in November 1992and June 1993 for work on the scope of the study and the design of the forestry models. Amajor review meeting was held in Washington, DC in November 1993 to discuss theresults and implications of the modeling work and the overall findings and conclusions.The forestry report was drafted and edited by Todd M. Johnson and Julian Lampietti withmajor contributions on the modeling and the final conclusions provided by Lars Blomkvistand Xu Deying. The authors would like to thank the Chinese Academy of Forestry inBeijing, Hari Eswaran from the US Department of Agriculture, Stephen Boyce from DukeUniversity, and Keith Openshaw, a consultant to the World Bank, who prepared abackground report and offered significant help with the conclusions of this study.

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CURRENCY EQUIVALENTS

1 US$ = 4.7 Chinese Yuan (1990)

WEIGHTS AND MEASURES

hectare =104 M2 = 2.47 acres1 ton fuelwood (air dry) = 0.54 tce

ABBREVIATIONS AND ACRONYMS

C - carbonCO2 - carbon dioxideFGHY - fast-growing high-yield forestry plantationsGEF - Global Environment FacilityGHG - greenhouse gasIRR - internal rate of returnMAI - mean annual incrementmt - million (metric) tons

NAP - National Afforestation ProjectNEPA - National Environmental Protection Agency of ChinaNFPA - National Forest Planning AgencyNPV - net present valueOECD - Organization for Economic Cooperation and DevelopmentUNDP - United Nations Development Programme

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CONTENTS

1. FORESTS AND GLOBAL CLIMATE CHANGE .......................................... 1

2. BACKGROUND .......................................... 2

A. FORESTRY IN CHINA ......................................... 2Forest resources ......................................... 2Wood demand .......................................... 4Afforestation ......................................... 4Fast-growing high-yield (FGHY) programs .......................................... 5Management and production in Chinese forests ......................................... 5

B. ORGANIC CARBON ASSESSMENT ......................................... 7Woody biomass ........................................... 7Soil carbon .......................................... 8

3. MODELING CARBON SEQUESTRATION .......................................... 9

A. NATIONAL MODEL ........................................... 9Structure of the model .............................. 9Uncertainty and use limitations ........................... 10National model scenarios ........................... 11Results of the national model ........................... 12

B. FORESTRY PLANTATION MODELS: FINANCIAL AND ECONOMIC ANALYSIS 14Types of plantations ............................. 14Results of the financial analysis ............................. 15

4. DISCUSSION AND CONCLUSIONS ............................. 20

5. REFERENCES .............................. 22

6. APPENDIX A: NATIONAL MODEL ............................. 24

7. APPENDIX B: PLANTATION MODEL RESULTS ...................................... 25

iv

LIST OF TABLES

TABLE 1. REGIONS DEFINED .............................................................. 2TABLE 2. FORESTED AND POTENTIAL FOREST LAND IN 1988, (MILLION HA) ................... 3TABLE 3. AGE PROFILE OF CHINA'S FORESTS IN 1988, (MILLION HA) ............................ 4TABLE 4. WOODY BIOMASS (MILLION METRIC TONS, AIR DRY) .................................... 7TABLE 5. AVERAGE SOIL CARBON TO ONE METER DEPTH .......................................... 8TABLE 6. PLANTING ASSUMPTIONS (MILLION HECTARES PER YEAR) ............................. 9

TABLE 7. SENSITIVITY ANALYSIS .............................................................. 10TABLE 8. MEAN ANNUAL INCREMENT (CUBIC METERS PER YEAR) .......... ................... 1 1TABLE 9. CUMULATIVE AREA PLANTED UNDER THREE SCENARIOS (MILLION HECTARES) ... 11

TABLE 10. RANGE OF ESTIMATES FOR TOTAL SEQUESTERED CARBON (MILLION TONS) ....... 12TABLE 11. STEMWOOD HARVESTED BY END PRODUCT (MILLION CUBIC METERS) ...... ....... 12TABLE 12. STANDING STOCK BY AGE CLASS (MILLION CUBIC METERS) ......................... 13TABLE 13. ANNUAL CARBON BALANCE (MILLION TONS) ................... ...................... 13TABLE 14. PLANTATION SCENARIOS ('000 HECTARES PER YEAR) ............................... 15TABLE 15. INTENSIVE PLANTATIONS: FINANCIAL ANALYSIS AND SEQUESTRATION COSTS.. 16TABLE 16. EXTENSIVE PLANTATIONS: FINANCIAL ANALYSIS AND SEQUESTRATION COSTS. 17TABLE 17. FUELWOOD PRODUCTION FROM FUELWOOD AND .................................... 17TABLE 18. CARBON SEQUESTRATION BY PLANTATIONS, 1990-2020 (MILLION TONS C) ..... 18

LIST OF FIGURES

FIGURE 1. CHINA'S FIVE REGIONS ............................................................... 2FIGURE 2. FORESTED AND POTENTIAL FOREST LAND AS A PERCENT OF TOTAL LAND AREA . . .3FIGURE 3. SOIL CARBON LEVELS .............................................................. 8

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EXECUTIVE SUMMARY

i. Through afforestation projects, the planting of timber and fuelwood plantations, andimproved management of open forests, it is possible to store carbon in trees and soil andthus reduce net GHG emissions in China. Carbon sequestration is maximized by plantinghigh-yield and fast-growing species on good land, under good growing conditions, and byapplying scientific management. If part of the production of fuelwood can be substitutedfor coal, for instance, in direct substitution or in power generation, the contribution of theforestry sector in China to net CO2 emission reduction would be even larger.

ii. Two models are developed to study carbon sequestration in China's forests: (a) anational model to predict the forest carbon balance, and (b) a plantation model to provideinformation on the financial costs and benefits of forest management schemes. Both modelsare simulated for 30 years, starting in 1990.

iii. The analysis of tree planting in China shows that a moderately successful large-scale afforestation program could sequester a cumulative total of 2.2 to 4.6 billion tons ofcarbon in woody biomass and soil over a thirty year period, or an average of 116 milliontons carbon (mtC) per year. Under a highly successful scenario, the amount of carbonsequestered in the year 2020 would be 221 mtC. For comparison, China's GHG emissionsin 1990 from all sources are estimated at 800 mtC. To achieve this level of carbonsequestration from the forestry sector, China would need to increase forested land by 4-5million hectares per year between now and the year 2020, extend the use of fast-growinghigh-yield plantations, and broadly disseminate advanced silviculture techniques. Thislevel of planting would increase the percentage of forested land in China from about 13percent in 1990 to more than 20 percent by the year 2020. Although fuelwood plantationsdo not sequester much carbon on a net basis, they can make a contribution to GHGreduction by substituting regenerable biomass for fossil fuels.

iv. A net cost analysis of carbon sequestration from forestry development finds that thefollowing types of plantations in China are financially and economically attractive on a life-cycle basis even if GHG benefits are not considered: (i) intensively-managed fast-growinghigh-yield (FGHY) timber plantations on good land in most parts of China, (ii)extensively-managed timber plantations in South and Southwest China, (iii) improved openforest management regimes in South China, and (iv) intensively-managed FGHY fuelwoodplantations in South and Southwest China.

v. Afforestation and forestry management practices that have the potential formaximizing carbon sequestration at the lowest net cost should be the focus of governmentsupport. While State Forest Farms must play a major role in afforestation work in China,private sector involvement and funds will be needed. Policies to encourage both publicand private investment in the forestry sector are needed in China, including improvementsin rural capital markets, further price reform, clarification of legal rights, and liberalization

vi

of foreign trade and investment policies. Technical assistance or technology transfer canalso be important to further expand China's fast-growing high-yield plantation program,and to improve silviculture techniques, the efficiency of wood harvesting and milling,nursery management, and forestry research and extension.

1. FORESTS AND GLOBAL CLIMATE CHANGE

1.1 Increasing atmospheric concentrations of carbon dioxide, methane, nitrous oxide,and chloroflurocarbons cause changes in the earth's surface temperature. Carbon dioxide isthe largest contributor to this change. Forests are prominent in the global carbon cycle andin the exchange of carbon between terrestrial ecosystems and the atmosphere (Tans et al.1990 and Dale et al. 1991). Forest vegetation and forest soil account for 60 percent of theorganic carbon stored on the Earth's land surface (Schlesinger and Waring, 1985). Thepotential for using forestry to sequester atmospheric carbon has been extensivelyinvestigated (Dixon et al. 1991, and Moulton and Richards 1990), including work onChina by one of the authors (Xu 1993, 1993a).

1.2 Forests are both a sink and a source of carbon. Trees take up carbon from theatmosphere to build their structure and maintain their physiological processes and theystore carbon in their woody biomass and release carbon through respiration anddecomposition. Forest soils absorb carbon from decomposing biomass; they store carbon inorganic matter, and they discharge it through respiration. Young forests rapidly accumulatecarbon in stemwood and soil. Mature forests are generally in equilibrium, with carbonuptake equaling carbon release. The pool of carbon held in forests can be maintained byreducing deforestation and it can be raised by improving forest management and increasingafforestation.

1.3 The storing of carbon in woody biomass and soils -- carbon sequestration-- can be acost-effective means of reducing net GHG emissions in developing countries. 1 The key tolow-cost carbon sequestration in developing countries is to take advantage of the financialand social benefits from forestry development. Under the right conditions, multi-useafforestation projects, the planting of timber and fuelwood plantations, and themanagement of open forests in China can yield positive financial returns, meaning that thecost of carbon sequestration from these projects is low.

1 Net GHG emissions is the sum of all emission sources minus the amount of carbon that can becaptured and stored in plant biomass or soils.

2

2. BACKGROUND

A. FORESTRY IN CHINA

2.1 In China, "forest land" often refers to administrative control of the land and canrefer to land with trees and land without trees but available for planting. Forest land istherefore best separated into two categories: (a) forested land, and (b) potential forest land.Forested land has at least 30 percent crown cover, but includes forest fallow. Potentialforest land contains degraded forest with less than 30 percent crown cover, and all landsdesignated for forestry purposes by the government.

2.2 China's forests can be separated into five regions (Figure 1). The followingdiscussion uses these regional definitions. The largest of these regions is the Northwest,followed by the North, South, Northeast, and Southwest.

Figure 1. China's five regions

NE Nj .Region Provinces_Jn , '1. North Hebei, Shanxi, Anhui,

r t- N w - \ ,' Henan, Shandong, Innert-1 NW . '' '; --' /--t-¢ > Mongolia

NW 3. Northeast Liaoning, Jilin,

Heilongjiang2. Northwest Xinjiang, Tibet, Gansu,

,->Sa s Qinghai, Ningxia, Shaanxi~ -r:, ' /5. South Jiangxi, Jiangsu, Zhejiang,

ki W bn Fujian, Hubei, Hunan,SW o 500 4O . Guangdong, Guangxi

4.Southwest Guizhou, Sichuan, YunnanSource: Chinese Academy of Forestry,1993

Forest resources

2.3 China is deficient in forest resources. China currently has about 131 millionhectares of forested land, up from around 119 million hectares in 1988 (Table 2). Still,forests account for only 13.6 percent of the land area of China. In per capita terms, forestresources amount to only 0. 11 hectares per capita, less than one-sixth the world average.Standing volume of wood is about 11 billion cubic meters (mi3 ), equivalent to about 9.5 m3

per capita, far below the world average of 66 m3 per capita. Natural forests account forabout three-quarters of the forested area in China and 95 percent of the standing wood

3

volume. Most natural forests are located in the Northeast provinces of Jilin, Liaoning, andInner Mongolia, and in the Southwest provinces of Sichuan and Yunnan (Table 2). TheNorth, Northwest, and Southwest all have less than 9 percent forest cover (Figure 2a).Excellent potential forest land is located in the South, Southwest, and Northeast. Thegovernment has identified the comparative advantage offered by the South's tropicalclimate, targeting it as the principal potential forest region (Figure 2b). By the late 1980s,the stock of mature and over-mature forests amounted to about 2.6 billion m3 , of whichonly about half was commercial. Evidence from many sources indicates that the stock ofnatural commercial forests is rapidly being depleted. The computer model constructed forthis study, described in detail below, shows that the resources of mature forest would bedepleted within ten years at current exploitation rates.

Table 2. Forested and potential forest land in 1988, (million ha)gegions Total North Northeast Northwest South Southwest-Area 950 95 195 284 145 231Forested land 119 6 36 16 41 20Potential forest land 130 14 26 19 39 31Source: Xu, 1993

Figure 2. Forested and Potential forest land as a percent of total land area

a. Forested land, 1988 '' b. Potential forest land, 1988 1 I

Percentoflandarea

20-290%

10.19

I 5.9%km

0 500 1000

2.4 A forest census for China from 1984 to 1988 found a declining forest area,diminishing growing stocks, and a poorer quality of timber.2 A repercussion ofdeforestation is that 73 percent of China' s timberlands are under 40 years old (Table 3).The declining stock of near mature and mature trees signals an impending shortage of largediameter timber. This problem is particularly acute in the South, where only 14 percent ofthe trees are over 40 years old.

2 Chinese Ministry of Forestry.

4

Wood demand

2.5 China is the third largest consumer of forest products in the world, and the demandfor wood products has been expanding with the development of the economy. Currentwood consumption is in the range of 300 million m3 per year, about half of which isindustrial roundwood, one-third is fuelwood, and the remainder is used for ruralconstruction. In 1992, China imported $1.2 billion worth of wood products, comprising4.8 million m3 of logs, 1.0 million m3 of lumber, 1.2 million m3 of plywood, andmiscellaneous other wood products (World Bank, 1994). Important non-timber forestproducts include significant quantities of furs and skins, fruits, resins, fungi, wild honey,medicines, aphrodisiacs, oils, sandalwood, bamboo, and rattan ware. During the 1980s,the consumption of forest resources exceeded the annual increase in growing stock by some20 million m3 (World Bank, 1994).

Table 3. Age )rofile of China's forests in 1988, (million ha and re&*onal percent)Regions Country North Northeast Northwest South SouthwestYoung (1-20 years) 47 32% 35% 32% 50% 32%Middle-age (21-40 years) 40 37% 35% 37% 35% 24%Near-mature (41-60 years) 11 13% 9% 13% 7% 12%Mature (61-80 years) 14 12% 16% 12% 5% 19%Over mature (8 1-1I00 years) 6 6 % 5 % 6 % 2 % 13%Source: Xu, 1993

Afforestation

2.6 Because of the shortage of forest resources in China, and the growing gap betweenthe supply and demand for wood products, China has instituted the largest afforestationprogram in the world. Between 1984-1988, China planted an average of 3.25 millionhectares per year, with the net increase in forested land amounting to around 0.65 millionhectares per year. In 1989 and 1990, the area of planting exceeded 5 million hectares peryear, with the net increase surpassing 2 million hectares per year. Besides timber andfuelwood plantation forests, China has also initiated a large-scale protective afforestationprogram in North China and has designated some 3 million hectares of open forests,3

mostly on steep slopes, to be closed for forest development. If China continues to increaseits forested area at the rate of the past five years, by the end of the century the area of thecountry covered by forests would exceed 15 percent.

2.7 Environmental benefits of afforestation. Non-market goods and servicesproduced by forests are watershed values and ecological processes. Watershed valuesinclude erosion control, flood reduction, and regulation of stream flows. One of the most

3 Open forests are defined as forests with 30 percent or less of forest canopy.

5

acute economic damages caused by excessive deforestation is reservoir siltation. Ecologicalprocesses include the fixing and cycling of nutrients, soil formation, and the cleansing ofair and water. Global non-market benefits from Chinese forests include carbon -sequestration and biodiversity habitat.

Fast-growing high-yield (FGHY) programs

2.8 In the past, Chinese plantation forests have had low survival rates and lowproductivity largely due to poor management and the use of low quality lands. Since themid-1980s a new fast-growing high-yield (FGHY) afforestation program has been initiatedin China. This program relies on (i) planting on good quality sites, (ii) improved geneticmaterials and seedling preparation, and (iii) detailed silviculture prescriptions for planting,tending and harvesting. Tree species are selected which can meet minimum growth ratesunder given soil and climatic conditions. Among the most common FGHY species inChina are larch (Larix kaempferi), Chinese fir (Cunninghamia), poplar (Populustomentosa), pine (Pinus massoniana, Pinus elliotii, Pinus taeda), eucalyptus (Eucalyptusspp.), and paulownia (Pawlonia). More than one-quarter of the plantations established inChina since 1985 have been FGHY plantations.

2.9 Barriers to large-scale FGHY forestry development. While there are more than200 million hectares of land theoretically available in China for forestry development,there are other competing claims for these lands, including agriculture, animal husbandry,and urban and industrial development. Secondly, much of the land available for forestdevelopment in China is of poor quality and inappropriate for intensive forestryplantations. Some types of forestry development, including fuelwood plantations and openforest management, are typically financially viable only in southern China, whereas, muchof the total land available for forestry development is in the North and Northwest.

Management and production in Chinese forests

2.10 Forests in China are managed by state forest farms, collectives, and individuals.Although the majority of land is controlled by state forest farms, much of this land iscontracted to collectives and individual households, who provide labor and inputs. Thequality of management by collectives and individuals is generally low, since they have hadlimited access to advanced silviculture techniques and since most face financial constraints.In the 1980s roughly one-quarter of total forested land was transferred from the state tohouseholds as part of the household responsibility system. While land tenure relationswere improved, household forest farms continue to be characterized by low productivityand minimal adoption of improved silviculture techniques.

2.11 Production forests. China's production forest consists of both natural and man-made stands. There are about 7 billion cubic meters of mature natural timber stands inChina. The stocking density of timber stands is low due to over-exploitation. Averagegrowing stock is 70-75 cubic meters per hectare, which is far below the 90-100 cubicmeters per hectare typical of European forests. Natural forest includes conifers (70

6

percent), deciduous species (20 percent), and a mix of the two. Spruce (Picea spp.), larch,and fir dominate the conifer stands. Common deciduous species include oak (Quercus spp.)and birch (Betula spp.).

2.12 Plantation forests. Plantations account for approximately 25 percent of China'sforest land. The government encourages plantations to help meet fuelwood, timber, andpulpwood demand. Plantation growing stock is also low, averaging between 10 and 30cubic meters per hectare. Preferred species for intensively managed plantations includelarch, poplar, paulownia and pine in the northern regions, and fir, pine, and eucalyptus inthe southern regions. Extensively managed plantation species include birch, spruce, andoak in the northern regions and oak, pine, and fir in the southern regions.

2.13 Planned harvesting. China's production statistics distinguish four harvestingcategories: (a) in-the-plan, (b) outside-the-plan, (c) fuelwood, and (d) illegal. Plannedharvesting is the responsibility of the state forest bureaus. These bureaus harvest a quotabased on the National Forest Planning Agency (NFPA) production schedule. The NFPAplans future production with a formula that includes the volume of timber harvested in-the-plan and outside-the-plan in previous years, estimated fuelwood consumption, and thechange in Gross National Product.

2.14 Outside-the-plan, illegal, and fuelwood harvesting. There is considerableuncertainty in the volumes of outside-the-plan harvesting, illegal felling, and fuelwoodcollection. Government officials acknowledge that outside-the-plan harvesting isconsiderably higher than planned production, particularly for fuelwood. A 1989 survey ofrural energy use in China estimated that fuelwood consumption was about 140 mtce, or 50higher than the officially reported annual fuelwood harvest. Of the total fuelwood, onlyabout 10 percent is produced by dedicated fuelwood plantations with the remainder comingfrom other plantations and from non-forest trees.

2.15 Protection forests. Forests designated for environmental purposes are separatedinto two categories in China: (a) protection forest, and (b) forest preserves. Protectionforests cover approximately 8 million hectares (World Resources Institute, 1992), and playan important role in land reclamation, erosion control, desert stabilization and otherenvironmental benefits. According to some experts, the survival rate of protection forestshas been less than 50 percent because they are heavily pruned for firewood (Richardson,1990). China's forest preserves cover another 8 million hectares and provide habitat tomany unique and endangered species. The forest preserves serve four purposes: (a)conservation, (b) scientific research, (c) production, and (d) tourism.

2.16 Wood processing. Processing occurs at big state mills and small stand-alone mills.The state mills are part of integrated wood industries that include the state forest bureaus.Stand-alone mills are usually associated with village forest farms and specializedhouseholds. State mill utilization of stemwood in China is low, averaging only about 70percent. By contrast, in well-developed milling operations in other countries, 90 percent ofstemwood can be utilized. The difference comes from using the slash and milling wastes to

7

make artificial board, as fuel for mill operation, or for electricity generation. Wastage inChinese mills comes from leaving logs exposed in yards and heaping rather than stackingsawnwood. Few mills in China have drying kilns and there is rarely any secondarytreatment of wood products. Hardwoods and softwoods are often processed with the samesaws, speeds, and settings, leading to poor product quality. Volume recovery is reportedlyas low as 55 percent (Richardson, 1990). Furthennore, most of the mills were not designedwith a view to handling their waste. Since the late 1980s, increasing prices for woodproducts has helped to improve the recovery rate of state processing mills. In comparisonto the state sector, stand-alone mills tend to be more efficient, recovering 70-75 percent ofvolume (Richardson, 1990). Village based mills are adept at cutting low-grade logs toservice local industries. They are also located in areas where their waste is readilydisposable.

B. ORGANIC CARBON ASSESSMENT

Woody biomass

2.17 Forests are the largest store of organic carbon of in China. The preliminaryassessment of woody biomass presented in Table 4 indicates that 85 percent of above andbelow ground woody biomass is held by forests. The above-ground woody biomassgrowing stock is 10 to 11 billion tons, and the below-ground growing stock is 5 to 5.5billion tons.4 Each year this growing stock produces an additional 655 million tons ofbiomass.

Table 4.-Woodyr biomass (million metric tons, air dry)Land use Total Cropland Forests Rangeland OtherArea (million ha) 960 146 182 400 231A/g growing stock /1 10,340-11,005 684-977 9,426 40-80 210-522B/g growing stock /2 5,280-5,503 342-489 4,713 20-40 105-261A/g annual growth 555-595 51-74 491 2-4 11-26B/g annual growth 185-198 17-24 164 1-1 3-9A/g annual growth leafy 693-743 63-92 614 2-5 14-32tissueNotes: 1) A/g = above ground

2) B/g = below groundSource: Openshaw, 1993

4 This estimate is based on a total forest area of 182 million hectares which is 40 percent higherthan the area used in other estimates.

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Soil carbon

2.18 Soil organic carbon plays an important role in the assessment of total forest carbon.Figure 3 indicates soil carbon content is lower in the tropical and subtropical climate of theSouth, where decomposition occurs rapidly, than it is in the temperate climate of theNortheast, where decomposition occurs slowly. Figure 3 presents estimates of themaximum soil carbon level in the five regions. Accumulation of soil carbon is higher onundisturbed land, such as mature grassland and forest land, than it is on cropland. Soilcarbon accumulates proportionally to tree growth and reaches equilibrium after 50 years.

Table 5. Average soil carbon to oneFigure 3. Soil carbon levels meter depth

Region Area (million Equilibriumha) carbon level

.......................................................... ,,,,,,,,,,,,,,,,,,.(to. .a )

Country 950 101

<---)<9Sl < ~~~~~~~North 95 ill

t ,i 341 Northeast 195 341>n 'I <r%4 z~~~~~~ 102-111

% 60a72 Northwest 284 60

-'s 0 500 IOM South 145 102

Southwest 231 72Source: US Department of Agriculture, SoilConservation Service, 1993

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3. MODELING CARBON SEQUESTRATION

3.1 If recent afforestation efforts in China can be maintained, the area of forested landwould increase from about 13 % in 1990 to 17% by the turn of the century. It wasassumed that China could increase the forested area by about 45 million hectares, or 4.5million hectares per year during the 1990s. At the same time, planting must also includethe reforestation of areas clearfelled for timber production, which currently amounts toapproximately 2.6 million hectares per year. Therefore, a total of 7 million hectares ofland should be planted each year. Given the magnitude of such tree planting, this wastaken as the high planting scenario. Two other scenarios -- 75% and 50% of the 7 m haper year goal -- were also used in the modeling of afforestation and carbon sequestration.(Table 6)

Table 6. Planting assumptions (million hectares prear)

Scenario Reforestation of Incremental Incremental natural Total areaclear-cut areas plantations regeneration (open

forests)

Low 2.62 1.34 0.89 4.85

Medium 2.62 2.01 1.34 5.97

High 2.62 2.68 1.79 7.09

3.2 Two computerized models have been developed for analyzing the potential forcarbon sequestration in China's forests: (a) a national model that predicts standing volume,age class structure, and forest carbon balance, and b) plantation models for assessing thecosts and benefits of forestry planting and net costs of carbon sequestration. Both modelsare simulated for 30 years, beginning in 1990, with the planted or managed areas based onthe scenarios given in Table 6.

A. NATIONAL MODEL

3.3 The National model has two sinks and five sources of atmospheric carbon. Thesinks are the biomass and the soil. The sources are sawlogs, pulpwood, fuelwood, soil onclearfelled land, and decaying slash and waste material. A diagram of the model isprovided in Appendix A.

Structure of the model

3.4 The core of the National model is a forest area divided into five age classes. Forestgrowth is represented by movement of land through these age classes. Standing volume iscalculated by multiplying the area in each age class by the average stand age and the mean

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annual increment. Demand for wood products was estimated by taking FAO forestryresource data (from 1979-1990) and regressing it against population and GDP per capita,and then extrapolating future years using population and GDP projections from the ChinaGHG Model (China: Issues and Options in Greenhouse Gas Emissions Control, SummaryReport, 1994). An algorithm based on demand projections determines the area oftimberland harvested each year. The algorithm starts in the oldest age class and works itsway downward, stopping before entering the youngest age class. A percentage of soilcarbon is released immediately after harvest. All harvested land re-enters the youngest ageclass after a three year delay. Government planting objectives are represented by equalincrements of new land entering the youngest age class. Soil carbon absorption follows theS shaped pattern of tree growth. The volume of soil carbon absorbed is equal to thedifference between the initial and equilibrium carbon levels.

Uncertainty and use limitations

3.5 Limited data and uncertainties in the carbon absorption and release process requiredtesting the model's sensitivity to a range of parameter estimates (Table 7). The mostinconstant parameters are the initial and equilibrium soil carbon levels, and the duration ofsoil carbon absorption. Soil carbon absorption has a significant effect on the total amountof carbon sequestered after 30 years. According to model results, it will by then representabout one-third of total absorption by the forestry sector. Greater resources should bededicated to assessing the soil carbon parameter if the model is to be used for furtheranalysis.

Table 7. Sensitivit analysisParameter Parameter Percent change in Total carbon sequestered

estimnate .......pFarmeter estimate after. 30yeas(ilo tons)...................................................................... . ................. .............................................................. ....... ................................................................................................

Volume of soil carbon 30 base case 4.2absorbed (tons per 40 + 33% 4.5hectare) 50 +66% 4.9Duration of soil carbon 50 base case 4.2absorption (years) 25 - 50% 5.5

100 + 100% 3.3

3.6 Construction of a carbon sequestration model for China requires extensive specificinformation on and about the relationship and interactions of the forest system components.Many factors, such as weather and fire, are not incorporated into the model because theyare exogenous and can not be predicted. Primary information on some endogenous factors,such as soil carbon absorption, was unavailable. Therefore the model is created largelyfrom secondary data, and where necessary, best guess estimates are made. Nonetheless,the model provides an illustration of important and already noticeable trends and tendenciesin Chinese forestry: the imbalance between yields and fellings, the rapid depletion of

11

mature stock, and the risk of not only raw material shortage but also net GHG emissionsfrom forestry unless a sizable and sustained plantation program is maintained.

3.7 Assumptions. Several assumptions were made to facilitate model construction.Assumptions that significantly effect results are: (a) harvesting in progressively youngerage classes as the timber supply is exhausted, (b) planting equal areas of new forest eachyear, (c) replanting 100 percent of clearfelled forest, and (d) projecting demand fromproduction rather than consumption. Harvesting is likely to occur in several age classes at atime. The area planted is prone to change as success rates vary and new technology isintroduced. Replanting is apt to shift with available resources and government incentives.Basing projections on production understates demand because it does not take into accountunreported and illegal felling or imports.

National model scenarios

3.8 The forest's carbon sequestration performance is largely dependent on forestmanagement and planting programs. Six scenarios are developed to model the impact offorest management regimes and planting programs on carbon sequestration.

3.9 Forest management. Replacement of natural stands with man-made and managedtree stands effects the forest's growth rate. These interventions influence the species,planting density, and age of the forest. This effect is incorporated in the model by changingthe mean annual increment. Three management scenarios are developed: (a) low growth,(b) medium growth, and (c) high growth. Table 8 illustrates the progressive change inmean annual increment under increasingly intensive management.

Table 8. Mean annual increment (cubic meters per Lear) ...... _

Scenario Age class Year 0 Year 5 Year Year I Year Year Year._______ __________ _______ __10 15 20 25 30

Low Young . 2.1 3.3 4.4 5.2 5.9 6.5 6.5growth Middle-age 3.8 3.8 3.8 3.8 3.8 4.8 5.5

................ ........ .................... ........ .................................... .. .............. ,.................... ......... .......................Medium Y 21 3.8 4.9 58 64 6.5 6.5growth Middle-age 3.8 3.8 3.8 3.8 5.1 6.0 6.5High Young 2.1 4.2 5.4 6.2 6.5 6.5 6.5

growth I Middl e 38 3.8 3.8 3.8 54 6.3 6.8

3.10 Forest planting. China's ambitious planting program has met with varied successdue to poor conditions and a lack of incentives. Planting survival rates have ranged from100 percent to less than 50 percent. Three scenarios are modeled: (a) low success (50percent of goal), (b) medium success (75 percent of goal), and (c) high success (100percent of goal). Table 9 provides a summary of the area planted under each alternative.

12

Table 9. Cumulative area plnted under three scenarios (million hectares)Survival rate 1990 2000 2010 2020

Low success (50%) 0 22 43 65Medium success (75%) 0 32 65 97High success (100%) 0 43 86 130

3.11 Baseline parameters. A set of baseline parameters are chosen to emulate existingconditions in China's forests. Unless otherwise stated, these parameters are used in allsimulations. These are: (a) "low growth," (b) "medium success", and (c) 30 tons of soilcarbon is absorbed per hectare over the course of 50 years. Under these conditions 4.2billion tons of carbon is sequestered after 30 years.

Results of the national model

3.12 The combined results from the management and planting scenarios are presented inTable 10. The total volume of carbon sequestered after 30 years ranges from 2.2 billiontons to 7 billion tons. The greatest amount of carbon is sequestered under conditions ofhigh growth and high planting success, and the least amount of carbon is sequestered underlow growth and low success.

Table 10. Range of estimates for total on (mlion tons)Scenarios 2000 2010 2020

................................................................................................................................... I...............................

Low growth & low success 861 1,295 2,243Medium growth & medium success 1,277 2,388 4,653Hi !h_growth_&h. hsuccess 1,723 3,395 7,014

3.13 The volume of stemwood harvested and the standing stock of timber will increase inthe next decade. By 2020, 550 million cubic meters of stemwood will be harvested peryear, of which 50 percent will be used for sawlogs, 30 percent for pulpwood, and 20percent for fuelwood (Table 11).

Table 11. Stemwood harvested-b_ end product (million cubic meters)Product 1990 2000 2010 2020Total 209 273 389 550

Sawlogs 125 160 216 268Pulpwood 16 30 72 161Fuelwood 68 83 101 121

3.14 By 2020, the planting and reforestation program will more than double China'sstemwood from 12 to 28 billion cubic meters (Table 12). Harvesting and replantingcombine to change the age structure of the forest. In 1990, 38 percent of timber reservesconsist of mature and over-mature stands. After 30 years, only 6 percent of reserves are

13

mature and over-mature. The dramatic decrease in older age tree stands foreshadows ashortage of large diameter timber and a loss of old growth habitat.

Table 12. Stann stock by age class (million cubic meters)Age class 1990 2000 2010 2020Total 11,960 16,140 20,490 27,740Young 970 2,834 4,630 5,948Middle-age 4,345 5,151 6,359 11,130Near-mature 2,127 4,573 6,771 8,987Mature 3,503 3,425 2,623 1,607Over-mature 1,015 156 105 67

3.15 Sinks and sources. The annual atmospheric carbon uptake and release by themodel's two sinks and five sources is presented in Table 13. Biomass is the most importantsink in determining the carbon balance of China's forests, accounting for over 85 percentof sequestration. Soil becomes an increasingly important carbon sink. Slash decompositionand soil carbon release are the largest sources of carbon. By 2020 sawlogs, pulpwood, andfuelwood account for almost equal proportions of emissions, with the proportion of sawlogcarbon release increasing beyond the 30 year simulation horizon.

Table 13. Annual carbon balance (million tons)Carbon sinks and sources 1990 2000 2010 2020Sinks 148 238 281 429Biomass 148 209 204 305Soil carbon 0 29 77 124Sources 30 117 182 266Sawlogs 0 6 19 32Pulpwood 1 5 11 26Fuelwood 19 23 28 33Soil on harvested land 0 32 43 58Biomass 10 51 81 117

14

B. FORESTRY PLANTATION MODELS:FINANCIAL AND ECONOMIC ANALYSIS

3.16 A number of studies of the costs of carbon sequestration through tree planting andmodified forestry practices have reinforced the perception that the net costs of carbonsequestration by the forestry sector are positive.5 Such studies have generally calculatedthe cost of carbon sequestration as the total costs of tree planting -- purchasing or rentingland, establishing, and maintaining trees -- divided by total carbon sequestration (inbiomass and soil). What have not generally been considered are the direct economicbenefits from tree planting; i.e., revenues from the sale of timber products (sawlogs,pulpwood, fuelwood), social benefits from reducing deforestation, and environmentalbenefits such as erosion control and habitat protection. While the regular thinning andharvesting of timber plantations can result in lower overall carbon sequestration than if theforests are left untouched, the financial benefits from use of forestry products are crucial tothe success of afforestation programs, particularly in developing countries.

3.17 This analysis considers the net cost of carbon sequestration from tree planting andmodified forestry practices in China, whereby the private financial benefits are subtractedfrom the costs. Financial tables, which include the costs of establishment, maintenance,harvesting, and reforestation, and the benefits from sales of sawlogs, pulpwood, andfuelwood, have been prepared for intensive, extensive, and fuelwood plantations, and forthe improved management of open forests. 6 To calculate the cost-effectiveness of carbonsequestration, the net present value of each respective project is divided by the discountedcarbon sequestered in living biomass and in the soil.

Types of plantations

3.18 For the financial analysis of various plantation programs, the scenarios of new"incremental plantations" (Table 6) were subdivided into three categories: (a) intensivelymanaged plantations, (b) extensively managed plantations, and (c) fuelwood plantations.In 1990, 3.67 million hectares were closed for natural regeneration; this is referred to hereas open forest management.

3.19 Intensively managed plantations refer to the planting of fast-growing species, suchas Chinese fir, masson pine, larch, paulownia, poplar, and eucalyptus. Such plantationswould be established with the objective of maximizing biological production and financial

5 See for example, Moulton, R.J. and K.R. Richards, Costs of Sequestering Carbon ThroughTree Planting and Forest Management in the United States, US Department of Agriculture ForestService, December 1990.6 Financial data for the intensive plantations is taken from the National Afforestation Project(NAP), which has received financial and technical assistance from the World Bank.

15

returns and would be grown on the most productive forestry lands and have the highestgrowth rates and the highest costs.

3.20 Extensively managed plantations refer to naturally occurring species, such as oak,birch, spruce, fir and various pine species. These plantations would be managed ascommercial forests but with much longer rotations and much lower costs than intensiveplantations. The MAI is assumed to be much lower than for the intensive plantationsbecause of poorer land quality and fewer inputs.

3.21 Fuelwood plantations are dedicated, fast-growing regenerable species, such aslocust and eucalyptus, grown with the intention of maximizing biomass production andfinancial returns.. It should be noted that some fuelwood is produced from thinnings ofother plantations and on open forests. The area of fuelwood plantations (medium scenario)is taken from the 1991-95 five-year plan target (2.6 million hectares, or 520,000 ha/yr),while the proportion of intensive and extensive plantations is based on the current situation(40/60) as reflected in government forestry statistics.

3.22 Open forest management is the management of open forests to improve growth ratesand protection against illegal felling or other activities which damage trees or soil. Sometimber and fuelwood would be available from these lands through selective thinning andremoval of dead or dying trees.

Table 14. Plantation scenarios ('000 hectares per year)

Scenario Intensively Extensively Fuelwood Totalmanaged managed plantations incrementalplantations plantations plantations

Low 280 710 350 1,340

Medium 420 1,070 520 2,010

High 538 1,360 780 2,680

Source: Joint study team, China GHG Study. See Table 6 for total planting.

Results of the financial analysis

3.23 Intensively managed plantations. Table 15 shows that all but one of the intensivetimber plantations have rates of return exceeding 12%, and thus provide carbonsequestration at negative cost. Based on the most recent (1993) prices for timber products,and even the substantially lower prices prevailing in 1990, 10 of the 12 intensive plantation

16

species yielded internal rates of return (IRR) above the target rate (12 percent).7 TheWorld Bank has recently appraised similar FGHY plantations as part of a forestry projectin 16 provinces in China, and has estimated the average rate of return for such plantationsat 18.1 percent.8 One of the reasons for the relatively high rates of return for all of theintensive plantations is that real wages are not assumed to rise very much due to thecontinued existence of large amounts of rural surplus labor.

Table 15. Intensive antations: financial analysis and sequestration costsSpecies/MAI NPV (12%) IRR $/t C02

1 Larch/14 801 16.3% -1.762 White Poplar/11 711 24.8% -6.563 Yunnan Pine/16 4455 23.5% -5.724 Masson Pine/14 6720 22.0% -4.885 Chinese Fir/16 424 25.2% -10.746 Chinese Fir/18 7361 26.2% -11.297 Eucalyptus/20 230 45.9% -8.958 Larch/10 4 12.2% -0.079 Table Pine/6 -430 1.1% 1.6110 Italian Poplar/22 2340 45.9% -21.9611 Paulownia/20 96 36.6% -11.8112 White Poplar/10 548 23.5% -6.38

3.24 Extensively managed plantations. While not nearly as cost-effective as intensiveplantations, extensively managed plantations as a whole, and many individual species, alsoyield positive economic returns. Table 16 shows that only three of the ten extensiveplantation models yielded rates of return above 12 percent. The lower yields are offset bylower costs, resulting in an overall rate of return of more than 12%. The models thatyielded positive net present values were Chinese fir, masson pine, and Yunnan pinegrowing in South and Southwest China.

7 One of the reasons for the relatively high rates of return is that real labor costs areassumed to remain low due to future macroeconomic projections carried out under theChina Greenhouse Gas Study showing continued surplus labor in China well into the 21stcentury.8 The World Bank, Staff Appraisal Report, China: Forest Resource Development and ProtectionProject, May 1994.

17

Table 16. Extensive plantations: financial analysis and sequestration costsSpecies/MAI NPV (12%) IRR $/t

1 Oak/7 -797 4.1% 0.662 Birch/l l -478 8.4% 0.293 Oak/8 -937 5.6% 0.624 Yunnan Pine/12 1000 14.9% -0.595 Masson Pine/14 5481 23.1% -3.896 Chinese Fir/14 9241 26.4% -8.957 Table Pine/3 -1395 negative 1.988 Birch/5 -99 1.7% 0.959 Spruce/5 -1306 negative 1.5410 Oak/5 -1134 negative 1.10

3.25 Fuelwood plantations. The Chinese government has promoted fuelwoodplantations in order to reduce the adverse impact of fuelwood collection on natural forestsand timber plantations. Nearly two-thirds of fuelwood production would come fromfuelwood plantations, and one-third from thinnings and removal of dead or dying woodfrom other plantations. In contrast to other plantations, the production of fuelwood is notfinancially viable at official prices prevailing on current state-owned fuelwood plantations(30-50 Y/t). However, the true market price or opportunity cost of fuelwood is probablydouble this amount based on the cost of collection or compared with other fuels. At 100Y/t, which is roughly the fuel equivalent price of coal in the regions reviewed minus thedifference in fuel combustion efficiency, fuelwood production exceeds the 12 percent rateof return target in South and Southwest China.

Table 17. Fuelwood production from fuelwood andother plantations, high scenario (mt air dry wood)

Type of Plantation Thousand Offtake in Percenthectares year 2020

planted/yr

Fuelwood 780 176 64%

Intensively managed 535 34 12%

Extensively managed 1365 27 10%

Open forest management 1790 40 14%

Total 4470 277 100%

18

3.26 If all of the fuelwood produced under the high scenario could be substituted forcoal, 112 mt of carbon could be reduced, which is equivalent to 16% of China's 1990 CO2emissions.

3.27 Open forest management. It is possible to improve the growth rates of existingopen forests by applying better silviculture techniques and by protecting the forests againstdestructive felling and encroachment. Some timber and fuelwood would be available fromthese lands through selective thinning and removal of dead or dying trees. Based on thefinancial analysis, improved open forest management is typically commercially viable onlyin South China.

3.28 Sensitivity analysis. The most important variable influencing the rate of return ofthe plantation projects is the price of forest products (sawlogs, smallwood, pulpwood,fuelwood). The most recent price information for fast-growing species in intensiveplantations, collected as part of the National Afforestation Project, has been used in theplantation models. Over the past five years, timber prices throughout the country haveincreased substantially as the government has eased price controls on "in-plan" timberharvests and as a growing percentage of "above-plan" timber harvests have been sold atmarket prices. In order to reflect the move to market prices for forestry products in China,the most recent (1993) prices for timber products have been used. Even at the substantiallylower prices prevailing in 1990, most intensive plantation species have IRRs above thetarget rate of return (12%). The exceptions are the species used primarily for pulp --eucalyptus, larch, and table pine -- since pulp prices have not increased nearly as rapidly inChina as prices for sawlogs and smallwood.

Table 18. Carbon sequestration by plantations, 1990-2020 (million tons C)

Type of Plantation Scenario

Low Medium High

Intensively managed plantations 419 630 803

Extensively managed plantations 1,181 1,777 2,266

Fuelwood plantations 141 208 312

Open forest management 630 949 1,267

TOTAL 2,370 3,564 4,648

19

3.29 The policy implications of the net versus gross cost analyses are significant. Forinstance, Xu (1993)9 calculated the gross costs of carbon sequestration for China using theMoulton and Richards methodology and concluded that the least-cost measure wasmanagement of open forests in Southwest China, where the MAI was high and the costs oflabor and other inputs were low. By contrast, under the net cost approach, open forestmanagement does not meet the target rate of return (12%) in most regions of the countryand in no region is open forest management as attractive in financial terms as intensiveplantations.

9 Xu, Deying, Economic Analysis and Forestry Options for Mitigating Global Climate Change: AChinese Case Study, Research Institute of Forestry, Chinese Academy of Forestry, Beijing, China,1993.

20

4. DISCUSSION AND CONCLUSIONS

4.1 By instituting a massive afforestation program, China could reduce net GHGemissions by about 10 percent in 2020 compared to the Baseline GHG Scenario. 10 Toachieve this level of carbon sequestration, China would have to increase forested land by 4-5 million hectares per year between now and the year 2020, extend the use of fast-growing, high-yield plantations, and broadly disseminate advanced silviculture techniques.This level of planting would increase the percentage of forested land in China from about13 percent in 1990 to more than 20 percent by the year 2020. Although fuelwoodplantations do not sequester much carbon on a net basis, they can contribute to GHGreduction by producing biomass, a substitute for fossil fuels. Utilizing wood and forestresidues grown on a sustainable basis to generate power is an effective way to reduceGHGs by both replacing coal and increasing carbon sequestered on forest stands.

4.2 A net cost analysis of carbon sequestration from forestry projects found that fourtypes of plantations in China are financially and economically attractive on a life-cyclebasis even if GHG benefits are not considered. By contrast, gross cost analyses done in theUS and elsewhere conclude that least-cost sequestration forestry projects are ones thatminimize total costs, even when the forestry projects in question are not commercial. 11Specifically, the following afforestation and forestry management practices have beenidentified as having the greatest potential for cost-effective reduction in net carbonemissions in China: (a) the planting of fast-growing, high-yield (FGHY) timberplantations on good quality land, (b) the establishment of certain multiple-use protectionforests, (c) the planting of high-yield fuelwood plantations on good sites, particularly insouthern China, and (d) improved management and supplemental planting of open forests,also predominantly in southern China. Although fuelwood plantations themselves do notprovide significant carbon sequestration, they can significantly reduce carbon emissions bylimiting destructive cutting of natural forests and by substituting fuelwood for coal andother fossil fuels, either in direct use or for power generation.

4.3 Despite the potential within China's forestry sector for carbon sequestration, themodeling also points out the growing difficulties that China will have in meeting the

10 See Summary Report, China: Issues and Options in Greenhouse Gas Emissions Control,December 1994, Chapter 2, for a description of the Baseline GHG Scenario.11 For instance, Xu calculated the gross costs of carbon sequestration for China using theMoulton and Richards methodology and concluded that the least-cost measure was management ofopen forests in Southwest China, where the mean annual increment was high and the costs of laborand other inputs were low. By contrast, under the net cost approach, open forest management doesnot meet the target rate of return (12%) in most regions of the country and in no region is openforest management as attractive in financial terms as intensive plantations. Xu, Deying, EconomicAnalysis and Forestry Options for Mitigating Global Climate Change: A Chinese Case Study,Research Institute of Forestry, Chinese Academy of Forestry, Beijing, China, 1993.

21

demand for mature timber over the coming decade. Mature forests are being diminished ata rapid rate in China and despite the massive afforestation efforts that have been underwayin the country, by the turn of the century there will be insufficient mature trees availablefrom the afforested areas. Measures to reduce the impending gap between the supply anddemand for mature timber include the liberalization of imports, increased efficiency ofharvesting and milling, and the adoption of technologies to use smaller diameter timber forvarious wood products such as plywood and particle board.

4.4 The priority afforestation programs for carbon sequestration are different than thepriorities for other environmental reasons such as erosion control, watershed management,or biological diversity. The objective of carbon sequestration is to amass the most carbonin standing biomass and in the soil as possible at the lowest cost. Therefore, afforestationand forestry management practices that have the potential for maximizing carbonsequestration at the lowest net cost should be the focus of government support.

4.5 Given the limited public resources available in China to support forestrydevelopment and the growing demand for forest products in the country, China shouldencourage private investment (both domestic and foreign) in commercial timber andfuelwood forestry projects. Policy measures that can accelerate forestry development inChina include: (a) improvements in capital markets, (b) further price reform, and (c)clarification of land-tenure rights. Improvements in capital markets, including equal accessto credit, is needed to allow individuals and firms to borrow for long-term forestryprojects. The reform of timber prices in the past several years has helped to encourageprivate sector investment; further reform of logs and wood product prices and the removalof international trade barriers would improve allocation of wood products in China. Landrights are another important aspect of forestry development; national and localgovernments in China need to provide legal assurances to individuals or groups that theycan secure the gains of forestry development in the distant future or will be able to transferthose rights to others.

4.6 The government can promote more cost-effective development and management ofpriority afforestation projects through technology transfer, demonstration, and technicalassistance. Among the areas of greatest significance are the improvement of (a) growingstock, including genetic improvement, seed supply, and plant propagation systems; (b) sitemanagement, including site identification and classification, fertilization, and weed control;and (c) stand management, including tree spacing, thinning and pruning. Human resourcecapacity building is needed in the areas of silviculture and nursery management, forestryresearch and extension, market analysis, and afforestation model design.

22

5. REFERENCES

China: Issues and Options in Greenhouse Gas Emissions Control, Summary Report.Report of a Joint Study Team from the National Enviromnental Protection Agency ofChina, the State Planning Commission of China, the World Bank, and UNDP. December1994.

Dale, V.A., R.A. Houghton, and C.A.S. Hall. 1991. "Estimating the Effects of Land UseChange on Global Atmospheric C02 Concentrations." Canadian Journal of ForestResearch 21(1):87-90.

Dixon, R. K., P. E. Schroeder, and J. K. Winjum, (eds.). 1991. Assessment of PromisingForest Management Practices and Technologies for Enhancing the Conservation andSequestration of Atmospheric Carbon and Their Costs and the Site Level. EPA/600/3-91/067. Washington: US Environmental Protection Agency, Office of Research andDevelopment.

Openshaw, K. 1992. China: Organic Carbon Assessment and Sequestration Potential.Draft report. The World Bank, Washington, D.C.

Repetto, R., and M. Gills, (eds.). 1988. Public Policies and the Misuse of ForestResources. Press Syndicate of the University of Cambridge, New York, New York.

Richardson, S.D. 1990. Forests and Forestry in China. Island Press, Washington, D.C.

Schlesinger, W. H., and R. H. Waring. 1985. Forest Ecosystems: Concepts andManagement. Academic Press, Inc., San Diego, California.

Sharma, N.P (ed.). 1992. Managing the World's Forests. Kendall/Hunt PublishingCompany, Dubuque, Iowa.

Tans, P.P., I.Y. Fung, and T. Takahashi. 1990. "Observational Constraints on the GlobalC02 Budget." Science 247: 1431-1438.

The World Bank. 1994. Staff Appraisal Report. China: Forest Resource Development andProtection Project, Report No. 12762-CHA. Washington, D.C.

The World Bank. 1990. Staff Appraisal Report. China National Afforestation Project,Report No. 8487-CHA. Washington, D.C.

The World Bank. 1992. China Environmental Strategy Paper. Report No. 9669-CHA.Washington, D.C.

23

The World Bank/UNDP/Bilateral Aid Energy Sector Management Assistance Program.1989. Activity Completion Report: County-level Rural Energy Assessments, A Joint Studyof ESMAP and Chinese Experts. Report No. 101/89. Washington, D.C.

The World Resources Institute. 1992. World Resources 1992-1993: A Guide to the GlobalEnvironment. Oxford University Press, New York, New York.

Xu Deying. 1993, Economic Analysis and Forestry Options for Mitigating Global ClimateChange: A Chinese Case Study, Research Institute of Forestry, Beijing, China.

Xu, Deying. 1993a. China's Forests, C02 Emissions and Related Strategies. Draft report.The World Bank, Washington. D.C.

24

6. APPENDIX A: NATIONAL MODEL

FOREST SYSTEM

SINKS OF SOURCES OF

ATMOSHERIC CARBON | NEW LAND ATMOSPHERIC CARBON

ATMOSHERIC CARBONRS

l1l 2l0 SAWLOGS l

SOIL 2140 YEARS - > | PULP&PAPER]

BIOMASS1-6 YEAR .ON* FUELWOOD

BIOMASS J | FCELLETIONR l| 61-80 YEARS FELUT

| s l | ~~~~~~DECAY&

7. APPENDIX B: PLANTATION MODEL RESULTS

Appendix Table B.1 Intensively Managed Plantations: summary sheet for all species;calculation of accumulated carbon in woody biomass and soil;calculation of net (economic) cost per ton of carbon (C02 basis)sequestered.

Appendix Table B.2 Extensively Managed Plantations: summary sheet for all species;calculation of accumulated carbon in woody biomass and soil;calculation of net (economic) cost per ton of carbon (C02 basis)sequestered.

Appendix Table B.3 Fuelwood Plantations: summary sheet for all species; calculation ofaccumulated carbon in woody biomass and soil; calculation of net(economic) cost per ton of carbon (C02 basis) sequestered;summary table by species and region of NPV, IRR $/t C02, MAIassumptions, and carbon sequestered.

Appendix Table B.4 Open Forest Management: summary sheet for all species;calculation of accumulated carbon in woody biomass and soil;calculation of net (economic) cost per ton of carbon (C02 basis)sequestered; summary table by species and region of NPV, IRR $/tC02, MAI assumptions, and carbon sequestered.

Appendix Table B.1 Intensively Managed Plantations

CHINA GREENHOUSE GAS STUDY PLANTATION MODULE INTENSIVELY MANAGED PLANTATIONS

SUMMARY SHEET, par I AREA DISTURBUTON PER REGION AND SPECIES(PROPORTIONS)

TOTAL AREA PLANTED, '000 HA PER YEAR REGION: 1 2 3 4 5SCENARIO 1 990.000 PROPORTION 0.1848864 0.2426109 0.2986429 0.1154451 0.1584146 1SCENARIO 2 1490.000 CHOOSE| 1900.000| SPECIES ROT/MAISCENARIO 3 1900.000 I LARCH 20/14 0.802 0.1482789

2 WHITE POPLAR 15/11 0.198 0.0366075MANAGEMENT, % OF AREA 3 YUNNAN PINE 20/16 0.726 0.1761355

INTENSIVE EXTENSIVE 4 MASSON PINE 20/14 0.189 0.608 0.2274284REGION I 24.68 75.32 5 CHINESE FIR 20/16 0.052 0.0126158REGION 2 26.12 73.88 6 CHINESE FIR 20/18 0.372 0.1110952REGION 3 43.72 56.28 7 EUCALYPTUS 7/20 0.002 0.02 0.0064581REGION 4 26.56 73.44 8 LARCH 20/10 0.0S 0.231 0.042366REGION 5 8.16 91.84 9 P. TABLAEFORMIS 30/6 0.576 0.282 0.1111693

10 ITALIAN POPLAR (V) 10/22 0.351 0.040521211 PAULOWNIA 10/20 0.022 0.002539812 WHITE POPLAR 15/10 0.031 0.487 0.0846689

1.000 1.000 1.000 0.999 1.0L01.000

NATIONAL SUMMARYYEAR I 2 3 4 5 6 7 8 9 10 11 12 13 14 15YEARS (1990-2020) 1990 1 2 3 4 5 6 7 8 9 2000 1 2 3 4LOGS, '020 CU M 0 0 0 0 0 0 455 455 512 2168 2168 2278 2278 3159 5396SMALLWOOD, '000CU M 0 0 0 0 0 0 0 0 196 1838 1838 2004 2004 2857 4157FUELWOOD, '0D0 TON 0 0 0 0 0 0 36 36 177 719 719 832 832 1373 1890CARBON STORED IN WOODY BIOMASS, MILLION TONS 3 8 16 27 41 57 76 97 121 146 173 203 236 270 304EXPENSES, 'OD0 000 YUAN 735 791 843 884 904 923 974 961 1044 1326 1375 1421 1440 1613 1817REVENUES -EXPENSES -735 -791 -843 -884 -904 -923 -868 -888 -789 89 40 164 144 547 2019REVENUES 0 0 0 0 0 0 106 106 247 1407 1407 1576 1576 2226 3975ACCUMULATED CARBON IN SOIL, MILLION TONS 0 0 1 2 4 5 8 10 13 16 20 23 27 32 37TOTAL CARBON IN WOODY BIOMASS AND SOIL (MT) 3 9 17 29 44 62 83 107 134 162 193 226 263 301 341

NET COST/TON C02 REDUCED -8.84 Y/ton1990 shadow exchange raw (Y/S) 5.5 -1.61 S/ton

Appendix Table B.1 Intensively Managed Plantations

CHINA GREENHOUSE GAS STUDY PLANTATION MODULE INTENSIVELY MANAGED PLANTATIONSSUMMARY SHEET, part

2

AREA DISTPJBUItON PER REGIONAND SPECIESIN 000 HA ACCORDING TO THE SELECTED SCENARIOREGION: I 2 3 4 5 TOTAL REGION INCREMENT

PER SP.SPECIES

I LARCH 69.530956 0 0.000 0.000 0.000 69.531 B 1 11622 WHITE POPLAR 17.165997 0 0.000 0.000 0.000 17.166 C 2 18223 YUNNAN PINE 0 87.412532 00.0 0000 0.000 87.413 D 3 38724 MASSON PINE 0 22.756155 150.831 0.000 0.000 173.587 E 4 7055 CHINESE FIR 0 6.2609527 0.000 0.000 0.000 6.261 F 5 2186 CHINESE FIR 0 0 92.285 0.000 0.000 92.285 G7 EUCALYPTUS 0 0.2408059 4.962 0.000 0.000 5.202 H8 LARCH 0 0 0.000 2.913 5.673 8.586 19 P. TABLAEFORMIS 0 0 0.000 33.557 6.926 40.483 J

10 ITALIAN POPLAR (V) 0 0 0.000 20.449 0.000 20.449 KI PAULOWNIA 0 0.000 0.000 1.282 0.000 1.282 GRAND TOTAL,12 WHITE POPLAR 0.000 3.732 0.000 0.000 11.961 15.694 INTENSIVELY MANAGED

PLANTATIONSTOTAL PER REGION 86.697 120.403 248.077 58.200 24.561 537.937

TOTAL NPV IRR16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 (CO2 basis)

5 6 7 8 9 2010 11 12 13 14 15 16 17 18 19 20205396 5396 5396 5396 65642 66097 66097 66097 66097 66097 66097 66097 66552 66610 73964 73964 8498684157 4157 4157 4157 20006 20006 20006 20006 20D06 20006 20006 20006 20006 20203 22901 22901 2775841890 1890 1890 1890 12550 12586 12586 12586 12586 12586 12586 12586 12622 12769 14054 14054 168324

341 381 423 468 471 474 482 491 504 519 536 556 578 603 626 650 2385 21291951 1969 1987 2005 7989 8536 8460 8614 8646 8662 8678 8694 8740 8604 9532 9651 129769 140991965 1947 1930 1913 36530 36001 35964 35929 35896 35880 35864 35849 35833 35828 38503 38381 439590 23259 23.3%3484 3484 3484 3484 44086 44682 44682 44682 44682 44682 44682 44682 44788 44929 48372 48372 569884 37239

42 47 53 59 65 72 79 86 93 101 109 117 126 134 144 153 561 501383 428 476 527 536 546 560 577 597 620 645 673 704 738 769 803 2945 2630

Appendix Table B.2 Extensively Managed Plantations

CHINA GREENHOUSE GAS STUDY PLANTATION MODULE EXTENSIVELY MANAGED PLANTATIONS

SUMMARY SHEET AREA DISnIBUTION PER REGION AND SPECIES(PROPORTIONS)

TOTAL AREA PLANTED, '000 HA PER YEAR REGION: 1 2 3 4 5SCENARIO I 990.00 PROPORTION 0.1848864 0.2426109 0.2986429 0.1154451 0.15U4146 1SCENARIO 2 1490.000 CHOOSE 1900.000 SPECIES ROT/MAISCENARIO 3 1900.000 1 OAK 40n 0.500 0.0924432

2 BIRCH 40/11 0.500 0.0924432MANAGEMENT, % OF AREA 3 OAK 40/8 0.514 0.124702INTENSIV EXTENSIVE 4 YUNNAN PINE 30/12 0.486 0.1179089

REGION I NE 24.68 75.32 5 MASSON PINE 25/14 0.5 0.1493215REGION2 S 26.12 73.88 6 CHINESEFIR 25/14 0.5 0.1493215REGION 3 SW 43.72 56.28 7 P. TABLAEFORMIS 40/3 0.9 0.1039006REGION 4 N 26.56 73.44 8 BIRCH 40/5 0.1 0.0115445REGION5 NW 8.16 91.U4 9 SPRUCE 60/5 0.5 0.0792073

10 OAK 60/5 0.5 0.0792073

1.000 1.000 1.000 1.000 1.0001.000

NATIONAL SUMMARYYEAR (t) 1 2 3 4 5 6 7 8 9 10 I1 12 13 14 15YEARS (19902020) 1990 1 2 3 4 5 6 7 8 9 2000 I 2 3 4LOGS, '0S0 CU M 0 0 0 0 0 0 0 0 0 0 0 0 0 0 7577SMALLWOOD, 'ODO CU M 0 0 0 0 0 0 0 0 0 0 0 0 0 0 6730FUELWOOD, '0S0 TON 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1257CARBON STORED IN WOODY BIOMASS, MILLION TONS 5 15 30 50 75 105 141 181 226 276 331 391 457 527 594EXPENSES, 'OO000OYUAN 1265 1371 1471 1559 1608 1657 1707 1755 1799 1842 1885 1928 1972 2015 2803REVENUES-EXPENSES -1265 -1371 -1471 -1559 -1608 -1657 -1707 -1755 -1799 -1842 -1885 -1928 -1972 -2015 5090REVENUES 0 0 0 0 0 0 0 0 0 0 0 0 0 0 7892ACCUMULATED CARBON IN SOIL, MILLION TONS 0 1 3 6 10 15 21 28 35 44 53 64 75 87 100TOTAL CARBON IN WOODY BIOMASS AND SOIL (MT) 5 16 33 56 85 120 161 208 261 320 385 455 532 614 694

NET COST/TON C02 REDUCED -1.29 Y/ton1990 shadow exchange rae (Y/S) 5.5 -0.23 S/ton

Appendix Table B.2 Extensively Managed Plantations

CHINA GREENHOUSE GAS STUDY PLANTATION MODULE EXTENSIVELY MANAGED PLANTATIONS

AREA DIS7RTB UTON PER REGION AND SPECIESIN 000 HA ACCORDING TO THE SELECTED SCENARIOREGION: 1 2 3 4 5 TOTAL

PER SP.SPECIES REGION INCREMENT

I OAK 132.29365 0 0.000 0.000 0.000 132.294 B 1 23812 BIRCH 132.29365 0 0.000 0.000 0.000 132.294 C 2 33663 OAK 0 174.00419 0.000 0.000 0.000 174.004 D 3 44714 YUNNAN PINE 0 164.52536 0.000 0.000 0.000 164.525 E 4 5155 MASSON PINE 0 0 159.672 0.000 0.000 159.672 F 5 13826 CHINESE FIR 0 0 159.672 0.000 0.000 159.672 G7 P. TABLAEFORMIS 0 0 0.000 144.979 0.000 144.979 H8 BIRCH 0 0 0.000 16.109 0.000 16.109 19 SPRUCE 0 0 0.000 0.000 138.214 138.214 J

10 OAK 0 0 0.000 0.000 138.214 138.214 KTOTALEXTENSIVELY MANAGEDPLANTATIONS

TOTAL PER REGION 264.587 338.530 319.345 161.087 276.427 1359.976TOTAL NPV IRR

16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 (CO2basis) (at 12%)5 6 7 8 9 2010 11 12 13 14 15 16 17 18 19 2020

7577 7577 7577 7577 26078 26078 26078 26078 26078 59509 59509 59509 59509 59509 86107 86107 6380356730 6730 6730 6730 13097 13097 13097 13097 13097 22139 22139 22139 22139 22139 28753 28753 2673321257 1257 1257 1257 4015 4015 4015 4015 4015 12367 12367 12367 12367 12367 15945 15945 120086666 743 826 913 986 1064 1147 1236 1329 1394 1465 1541 1621 1707 1775 1848 6775 6049

2846 2889 2932 2975 4498 4543 4580 4616 4652 8647 8993 9055 9117 9166 11525 11722 129392 175365047 5003 4960 4917 10834 10788 10752 10716 10680 37399 37053 36991 36929 36879 50803 50606 341613 9576 16.1%7892 7892 7892 7892 15332 15332 15332 15332 15332 46046 46046 46046 46046 46046 62328 62328 471005 27112

114 129 145 161 178 196 215 234 255 276 298 320 344 368 393 418 1533 1368781 872 970 1074 1164 1260 1362 1470 1584 1670 1763 1861 1965 2075 2167 2266 8308 7418

APPENDIX TABLE B.3 FUELWOOD PLANTATIONS

CHINA GREENHOUSE GAS STUDY PLANTATION MODULE FUELWOOD PLANTATIONS

SUMMARY SHEET, par I AREA DISTRIBUTION PER REGION AND SPECIES(PROPORTIONS)

TOTAL AREA PLANTED, '000 HA PER YEAR REGION: 1 2 3 4 5SCENARIO I 350.000 PROPORTIONS 0.1848864 0.2426109 0.2986429 0.1154451 0.1584146 1SCENARIO 2 520.000 CHOOSE 780.000 reg. SPECIES ROT/MAISCENARIO 3 780.000 I LOCUST 3/8,5 TIHA 1.000 0.1848864

LESPEDEZA2 ALNUS 3/12,5 1.000 0.2426109

CASSIA3 -CENTE OAK 3/12,5 0.56 0.16724

COEROSPONDIAS3-SOUTH EUCALYPTUS 3/22,5 0.44 0.1314029

ACACIA4 LOCUST 2/ 8,5 1 0.1154451

AMORPHA5 ELAEAGNUS 3/6,5 1 0.1584146

HIPPOPHAE1.000 1.000 1.000 1.000 1.000

1.000Cumulative Area Planted ('000 ha) 780 1560 2340 3120 3900 4680 5460 6240 7020 7800 8580 9360 10140 10920 11700YEAR (t) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15YEAR (199D-2020) 1990 1 2 3 4 5 6 7 8 9 2000 1 2 3 4LOGS, '000 CU M 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0SMALLWOOD, W CU M 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0FUELWOOD, '000 TON 0 0 17597 17597 17597 35195 35195 35195 52792 52792 52792 70389 70389 70389 87987CARBON STORED IN WOODY BIOMASS, MILLION TONS 3 8 8 10 15 15 18 23 23 25 30 30 33 38 38EXPENSES, '000D0YUAN 1020 1165 1825 2055 2199 2860 3090 3234 3894 4124 4265 4921 5942 6086 6746REVENUES -EXPENSES -793 -905 -735 -913 -1025 -855 -1033 -1145 -975 -1153 -1262 -1089 -1882 -1994 -1824REVENUES 0 0 673 673 673 1346 1346 1346 2019 2019 2019 2691 2691 2691 3364CARBON STORED IN SOIL, O00D OD TON 0 1 2 3 6 8 12 15 20 25 30 36 42 49 56TOTAL CARBON IN WOODY BIOMASS AND SOIL (MT) 3 8 9 13 21 23 29 38 42 50 60 66 75 86 94

NET COST/TON C02 REDUCED 39.321990 shadow exchange rate (Y/$) 5.5 7.15

APPENDIX TABLE B.3 FUELWOOD PLANTATIONS

CHINA GREENHOUSE GAS STUDY PLANTATION MODULE FUELWOOD PLANTATIONSSUMMARYSHEE, pot 2

AREA DISRIBUIION PER REGION AND SPECIESIN 000 HA ACCORDING TO THE SELECTED SCENARIOREGION: I 2 3 4 5 TOTAL

PER SP.SPECIES REGION INCREMENT

I LOCUST t44.211 0.000 0.000 0.000 0.000 144.211 1 1442LESPEDEZA 0.000 0.000 0.000 0.000 0.000 0.000 2 2649

2 ALNUS 0.000 189.237 0.000 0.000 0.000 189.237 3 4389CASSIA 0.000 0.000 0.000 0.000 0.000 0.000 4 855

3 -CENTE OAK 0.000 0.000 130.447 0.000 0.000 130.447 5 890COEROSPONDIAS 0.000 0.000 0.000 0000 0.000 0.000

3- SOUTH EUCALYPTUS 0.000 0.000 102.494 0.000 0.000 102.494ACACIA 0.000 0.000 0.000 0.000 0 .000 0.000

4 LOCUST 0.000 0.000 0.000 90D047 0 000 90.047AMORPHA 0.000 0.0D0 0.000 0.000 0.000 0.000

5 ELAEGNUS 0.000 0.000 0.000 0.000 123.563 GRAND TOTAL,HIPPOPHAE 0.000 0.000 0.000 0.000 0.000 FUELWOOD

PLANTATIONSTOTAL PER REGION 144.211 189.237 232.941 90.047 123.563 780.000 TOTAL NPV IRR

12480 13260 14040 14820 15600 16380 17160 17940 18720 19500 20280 21060 21840 22620 23400 24180 (C02 basis)16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 315 6 7 8 9 2010 11 12 13 14 15 16 17 18 19 22000 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 00 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

87987 87987 105584 105584 105584 123182 123182 123182 140779 140779 140779 158376 158376 158376 175974 175974 2727591 34836740 45 45 48 53 53 55 60 60 63 68 68 70 75 75 78 285 254

6976 7121 7781 8011 8155 8816 9046 9186 9843 10863 11007 11668 11898 12042 12702 12932 211473 30280.2002 -2114 -1944 -2122 -2234 -2064 -2242 -2351 -2178 -2971 -3083 .2913 -3091 -3203 -3033 -3211 -58348 -9995 NEGATIVE3364 3364 4037 4037 4037 4710 4710 4710 5383 5383 5383 6056 6056 6056 6729 6729 104295 13321

64 72 81 90 100 110 120 131 143 155 167 179 193 206 220 234 859 767104 117 126 138 152 162 175 191 203 217 234 247 263 281 295 312 1143 1021

APPENDIX TABLE B.3 FUELWOOD PLANTATIONS

Fuelwood Plantations Carbon SequesteredNPV (12%) IRR $/t C02 MAI Biomass Soil Total

SPECIES cm/ha (gr) '000 tC1 (NE) LOCUST

LESPEDEZA -2638 #NUM! 2.04 10 14753 57191 719442 (SW) ALNUS

CASSIA -229 #NUM! 0.28 14 1805 44090 458953 - (S) CENTER OAK

COEROSPONDIAS -1795 #NUM! 1.96 14 20551 30393 509443- (S) SOUTH EUCALYPTUS

ACACIA -1238 #NUM! 1.45 25 23592 23880 474724 (N) LOCUST

AMORPHA -1669 #NUM! 2.08 10 8751 35711 444625(NW) ELAEGNUS

HIPPOPHAE -2427 #NUM! 2.64 7 8191 42877 51068

Total Average 77642 234142 311784

APPENDIX TABLE B.4 OPEN FOREST MANAGEMENT

CHINA GREENHOUSE GAS STUDY PLANTATION MODULE OPEN FOREST MANAGEMENT

SUMMARY SHEET, part I AREA DISTRIBUTION BY REGION(PROPORTIONS)

TOTAL AREA ESTABLISHED, '000 HA PER YEAR REGION: 1 2 3 4 5

SCENARIO I 890.000 PROPORTIONS 0.171061528 0.293077443 0.386487752 0.071462007 0.077911271 1

SCENARIO 2 1340.000 CHOOSE 1790.003 REGION MAISCENARIO 3 1790.000 1 2.53 1 0.171061528

2 3.21 1 0.293077443

AREAS AVAILABLE, '000 HAREGION I 3289 3 3.20 1 0.386487752

2 56353 7431 4 2.20 1 0.071462007

4 13745 1498 5 3.53 1 0.077911271

19227

1.000 1.000 1.000 1.000 1.000

YEAR (t) 1 2 3 4 5 6 7 8 9 10 I1 12 13 14 15

YEARS (1990-2020) 1990 1 2 3 4 5 6 7 8 9 2000 1 2 3 4

LOGS, '000 CU MSMALLWOOD, '000 CU M 0 0 0 0 0 0 0 0 0 0 0 0 0 0 6789

FUELWOOD, 'OODTON 0 0 0 0 0 0 0 0 0 0 0 0 0 0 7113

CARBONSTOREDINWOODYBIOMASS,MILLIONTONS 2 5 11 18 27 38 51 65 82 100 120 141 165 190 211

EXPENSES,'O000 YUAN 188 224 260 295 331 367 403 439 474 510 537 564 591 618 908

REVENUES -EXPENSES -188 -224 -260 -295 -331 -367 -403 -439 -474 -510 -537 -564 -591 -618 1267

REVENUES 0 0 0 0 0 0 0 0 0 0 0 0 0 0 2174

ACCUMULATEDCARBONINSOIL,MILLIONTONS 0 1 4 8 14 21 29 38 48 60 73 87 102 119 136

TOTrAL CARBON IN WOODY BIOMASS AND SOIL (MT) 2 7 15 26 41 59 79 103 130 160 193 228 267 309 346

NET COST/TON C02 REDUCED -0.04 Y/ton1990 shabw exchange rate (Y/5) 5.5 -0.01 S/ton

APPENDIIX TABLE B.4 OPEN FOREST MANAGEMENT

CHINA GREENHOUSE GAS STUDY PLANTATION MODULE OPEN FOREST MANAGEMENTSUMMARY SHEET, part 2

AREA DISTRIBUTION BY REGIONIN 0S0 HA ACCORDING TO THE SELECTED SCENARIOREGION: 1 2 3 4 5 TOTAL REGION INCREMENT AREA Increment per ha

PER SP. 000 cu m 000 ha planted

1 306.200 0.0S0 0.000 0.0D0 0.000 306.200 1 775 306.2001352 0.433

2 1684 524.6086233 0.9412 0.0S0 524.609 0.000 0.000 0.000 524.609 3 2442 691.8130754 1.364

4 281 t27.9169917 0.1573 0.0S0 0.000 691.813 0.0S0 0.000 691.813 5 307 139.4611744 0.171

5489.012144 1790 3.066487314 0.000 0.0S0 0.0S0 127.917 0.000 127.917

5 0.0D0 0.0D0 0.000 0.000 139.461 139.461

GRAND TOTAL,OPEN FORESTMANAGEMENT

TOTAL PER REGION 306.200 524.609 691.813 127.917 139.461 1790.000 TOTAL NPV IRR(C02 basis)

16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 315 6 7 8 9 2010 11 12 13 14 Is 16 17 18 19 2200

07191 7191 7191 7191 7191 7191 7191 7191 7191 17555 18169 18169 18169 18169 18169 18169 1980717534 7534 7534 7534 7534 7534 7534 7534 7534 19194 19884 19884 19884 19884 19884 19884 213413

234 259 285 314 344 377 411 446 484 513 543 575 609 645 683 722 2648 2364952 979 1006 1033 1060 1087 1113 1140 1167 1605 1632 1659 1686 1712 1739 1766 28043 4029

1222 1195 1168 1142 1115 1088 1061 1034 1007 3931 3904 3878 3851 3824 3797 3770 32455 149 12.4%2174 2174 2174 2174 2174 2174 2174 2174 2174 5536 5536 5536 5536 5536 5536 5536 60498 4178154 174 194 216 238 262 286 311 338 365 393 422 451 482 513 545 1999 1785388 432 480 530 583 638 697 758 822 877 936 997 1061 1127 1196 1267 4647 4149

APPENDIX TABLE B.4 OPEN FOREST MANAGEMENT

Open Forest Management Carbon SequesteredNPV (12%) IRR $/t C02 MAI Biomass Soil Total

REGION '000 tC1 NE -151 8.7% 0.03 2.53 115105 176037 291141

2 SW -52 11.4% 0.01 3.21 216869 88470 305339

3 S 498 15.3% -0.06 3.53 314500 116667 431167

4 N -88 7.0% 0.04 2.20 36242 78443 114685

5 NW -57 9.4% 0.03 2.20 39512 85522 125035

Summary 149 12.4% -0.01 722227 545138 1267366