The Forest Bond Initiative shows how business profitability can help achieve sustainability. One reason government control over forest reserves has not been successful is the lack of resources for forest protection. Therefore, if forests can be managed in a way that generates profits, jobs, and income for various stakeholders, these beneficiaries will be motivated to protect the forests because the forests are sources of their income and well-being.
Cost Benefit Analysis of forest plantation
| Economic (million USD) 100=2015 | Financial (million USD) | |
| Benefit streams | ||
| 1. Timber production | 52,032 | 90,146 |
| 2. Carbon credit | 541 | 819 |
| 3. Water users | 370 | 500 |
| 4. Flood and drought reduction | 2,625 | 3,529 |
| 5. Ecotourism | 84 | 113 |
| Total Benefits | 56,567 | 96,604 |
| Cost streams | ||
| 1. Forest plantation | 2,162 | 2,906 |
| 2. Forest maintenance | 2,959 | 4,319 |
| 3. Logging and processing | 7,971 | 13,638 |
| 4. Transportation | 7,667 | 13,117 |
| 5. Opportunity cost of land | 4,648 | 5,717 |
| Total Costs | 25,407 | 39,697 |
| Net Present Value (NPV) | 30,246 | 56,907 |
Our research collects data on revenue streams and cost streams of forest plantation and can show that forest replantation is a worthwhile investment as the benefit generated is higher than its costs. The positive financial feasibility indicates that the revenue flows will cover the costs hence there will be sufficient income to compensate all the stakeholders.
The positive economic feasibility demonstrates that converting an area as large as 4.2 million hectares into forests generates social benefits that exceed the opportunity cost of all the inputs used. Our research shows that investing in forest replantation yields an Economic (Social) Internal Rate of Return as high as 20.14 percent and an Economic Net Present Value of 30 billion USD. As long as this profitability continues, forest plantation and long-term sustainability will also persist.
Economic Net Present Value (NPV) 30,246 million USD
Economic Internal Rate of Return (EIRR) 20.14 percent
B/C Ratio (B/C) 2.19
Assumptions used in the calculation
Plantation area 4.2 million hectares
Plantation period 20 years
Harvest rotation year 7, 15 and 20
Base year 2015
Inflation rate 3%
1 USD 35 Baht
