With or without you: Should the international cooperation support reduction of deforestation in Bolivia?

There are some policies that are obviously correct from both environmental and economic viewpoints, but which are nevertheless difficult to implement. The elimination of fossil fuel subsidies is such an example. This year, the Bolivian government expects to spend at least US$750 million on direct subsidies to diesel (62%), gasoline (27%) and Liquefied Petroleum Gas (LPG) (10%) use (1). Apart from dramatically reducing funds available for public investment, these subsidies also encourage contamination, congestion and deforestation (2), all of which mean substantially higher social costs than the direct costs of the subsidy itself. The beneficiaries of the subsidy are dominated by the agro-industry in Santa Cruz, which profits greatly from the combination of cheap diesel and cheap land. Thus, the subsidy is by no means pro-poor, and a lot of the benefits are even lost to neighboring countries, as their nationals rent cheap land and use subsidized fuel for growing crops in Bolivia. For example, more than 70% of the area dedicated to soy production over the last decade is in the hands of foreigners (3). The Bolivian government realizes all this and has tried, unsuccessfully, to eliminate the fuel subsidy.

A possible alternative to reducing fuel subsidies would be a tax on large scale deforestation. It would be similarly beneficial, especially if the revenues are used to promote sustainable productive activities in rural communities that are committed to living well in harmony with nature. According to simulations made using a simulation tool called CISS-Bolivia (4), a tax of $1000/ha on large-scale deforestation could raise more than 200 million dollars per year in revenues (5) and cause a reduction in deforestation of about 21% (equating to about 60,000 ha of forest saved annually or 20 million tons of reduced CO2 emissions per year). If those tax revenues are reinvested in sustainable rural communities under the condition that they do not deforest further, it could reduce deforestation by about 27% (reducing CO2 emissions by about 35 million tons per year) and increase the incomes of the poor in these rural communities by about 25%.

However, most of the benefits from reduced deforestation in Bolivia accrue to the rest of the world, mainly in the form of reduced CO2 emissions (which in turn would help reduce the risk of catastrophic global warming). In addition, reduced deforestation would tend to put upward pressure on food prices due to the reduction in supply of agricultural products, implying a possible adverse effect on the urban poor, which would have to be compensated for.  Thus, it is reasonable to suggest that Bolivia be at least partially reimbursed for the costs of reducing deforestation.

If we complement the locally collected deforestation tax revenues with an international compensation of $10 per ton of reduced CO2 emissions, Bolivia would have a total of about $580 million in tax and compensation revenues per year to invest in sustainable rural development. Together these positive and negative incentives would cause a reduction in deforestation of 36%, a reduction in emissions of 40 million tons per year, an average increase in the income of all the poor in the country of about 21% and an increase of 33% for the poor benefitting directly from the reinvested revenues (see Figure 1).

Figure 1: Environmental and socio-economic effects of combinations of taxes and positive incentives.

Environmental and socio-economic impacts of different combinations of incentives to reduce differestation

Source: Results from CISS-Bolivia v. 2.1.

This last policy, combining positive and negative incentives and external financing, would be clearly beneficial for the country in terms of sustainable development and poverty reduction, and it would provide the financing necessary to put action behind the good intentions of the new “Ley Marco de la Madre Tierra y Desarrollo Integral para Vivir Bien” (6) .

However, it would imply a massive redistribution from the rich to the poor, so it is going to be met with considerable resistance from powerful people. Furthermore, it is not the only possible development strategy. Powerful factions within the government are planning to reduce poverty and create employment through infrastructure projects, land grants and expansion of the agricultural frontier—a strategy that would be highly incompatible with the policy outlined above.

Bolivia thus stands at a cross-roads and has to decide which route to choose. While the new Ley Marco de la Madre Tierra indicates the road to living well in harmony with nature, almost all the money, including the $750 million fuel subsidy mentioned at the beginning of the article, are going down the other road.

Although removing fossil fuel subsidies and implementing a tax on deforestation makes good economic sense for the government, it would require considerable political will and power to actually implement these policy changes. Currently, neither the will nor the power exists in Bolivia, but the prospect of a billion dollars of non-reimbursable external financing could potentially help create the necessary political will.

Failing to do so could amount to an economic, social and environmental disaster for Bolivia. Neighboring Brazil has smartly realized that they can earn billions of dollars in compensation for reduced deforestation within their own territory, while at the same time expanding soy bean cultivation in Bolivia where land is dirt cheap, diesel is heavily subsidized and taxes and regulations are non-existent. Thus, our neighbors are benefiting both from conservation and from agriculture, while Bolivia is footing the bill both financially and ecologically.

Do you think that the international cooperation should support the Bolivian efforts to implement a mechanism for reducing deforestation? Leave a reply below.

Lykke Andersen is the Director of the Center for Economic and Environmental Modeling and Analysis (CEEMA) at the Institute of Advanced Development Studies (INESAD), La Paz, Bolivia.

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(2) Bolivia has one of the highest per capita deforestation rates in the World, implying that its carbon emissions per capita are at the same high level as in the United States.

(3) Gandarillas, Marco (2011). La extranjerización del territorio en Bolivia. En Petropress. No 25. May-June.

(4) Andersen, L. E., Busch, J., Curran, E., Ledezma, J. C., J. Mayorga & P. Ruiz Junco (2012). Conservation Incentives Spread Sheet – Bolivia (CISS-Bolivia). Version 2.1, <http://www.conservation.org/osiris>, Downloaded 9 September 2012.

(5) Notice that this tax is not unreasonable considering the much larger subsidy the sector currently receives.

(6) This Framework Law for Mother Earth and Integral Development for Living Well was approved by Congress (Asamblea Legislativa Plurinacional) on the 31st of August 2012 and prescribes a new development paradigm for Bolivia aimed at living well in harmony with nature.



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  4. Dear Lykke,
    What inclusionality theories of collective action versus exclusional theories are being pursued beyond the scope of REDD+

  5. Dear Lykke,
    By asking of me, “whether I have seen Bolivian news lately” has brought to point an media idea to which I can only say no. To say that the forces of power and money are inhibiting the forces of the spirit is to say something which is not unique. Perhaps, similar to the “Arab Spring” to which brought to light the plight of those in the Near East, is the technology at peoples’ disposal available to get the word out beyond a local media. Has there be training in dealing with conflict resolution? Has there been an “ecological educational” environment sustainable program to which the present is seen as limited without moving the present into the benefits of the future?

  6. Dear Lykke,
    Thank you for your response. I am concerned with the notion of “fight.” For the word “fight” involves that lines-in-the-sand have been drawn with fixed economic states of affairs without considering the moderation of the thinking not as a “process,” which declares a dualist approach to thinking, but as a becoming of the self-imposed boundaries into the possibility of economic betterment and the sustainability of environmental justice. The notion of a common belief such as a location were peoples come to share in common the belief in existence would be far more affluent than the exclusion of those who are considered to be “conspirators” with pre-disposed beliefs of distributive justice. Perhaps, self-preservation should not be perceived as an adaptation to current state of affairs but as a creative tension of sustainability between an open inquiry and being.

    • Dear William,

      OK, maybe “fight” was not the best word to use in the context. But it is going to be hard work to implement the Mechanism, and there are going to be demonstrations and road blocks and protests by people who are used to have free access to exploit the country’s natural resources for private benefit, and who now will see that access restrained. Have you seen the Bolivian news lately? This is not exactly “a location where peoples come to share in common the belief in existence”. Just this week a man was killed in one of those demonstrations.

  7. Miguel Rodríguez Tejerina

    Thanks to the author for a very interesting analysis. It is plausible that INESAD is bringing to the discussion table the possibility of using economic instruments to reduce deforestation. It is novel in Bolivia and I hope it leads to more productive discussion and, ultimately, to the formulation of coherent public policy.

    To answer the question about whether international cooperation should support the Bolivian efforts to implement a mechanism for reducing deforestation, it is absolutely essential.

    On a broader scope, and touching upon the possibility of raising revenues through a tax on large-scale deforestation, I would like to ask the author which were the parameters used to determine making a simulation based on a tax of 1000 USD/ha. It seems to be a high value for the opportunity cost of the land, given that -as the article states- the price of land in Bolivia is very inexpensive. Has the simulation been run with lesser tax values? Which are the results of that? Thank you.

    • Dear Miguel,

      Thank you very much for your comment. The $1000/ha tax was a random round number picked by the Norwegian Representative in Bolivia, Trond Augdal. It feels high to Bolivians, but it is really not so high considering that just the carbon value of an average hectare of forest might easily be $5000 (if the carbon price is $10/tCO2). Also, much of the deforestation in Bolivia is caused by Brazilians, who are used to pay about $5000/ha to buy land in Brazil, so buying or renting deforested land in Bolivia would still be very cheap for them even including a $1000/ha tax on top of the typical price of $500/ha.

      But, yes, we have also made the analysis with lower tax values. This 8-page policy brief (in Spanish) shows the results of a tax of $450/ha.

      In both cases, the results show that the combination of sticks and carrots would be a very effective policy for reducing both deforestation and rural poverty.

  8. If international cooperation efforts to help Bolivia in reducing deforestation is based upon a “third way” market or non-market conditions, then I am concerned that sustainability of development will turn to anti-assistance because of the authoritarian conditions of either-or decision making will challenge the freedom of the Bolivian values. Rather than having an ex nihilo approach of a dogma that seems to be the case for a whole, I would like to see an inclusionality of nature as a space with boundaries that are continually becoming from within the time-space development by aiding the population of Bolivia to conserve and sustain themselves through self-development rather than telling them how to do it and then leave them to fend for themselves. I would rather help them to help themselves in a deforestation program with innovative capabilities rather than giving them a method that may or may not be what they want or need.

    • Dear William,

      Thank you very much for your comment. I totally agree with you that the Bolivian mechanism should be developed from within instead of being imposed from the outside. And that is exactly what has happened in Bolivia. Bolivia strongly rejected the international REDD+ mechanism that the international community wanted to implement in Bolivia, and has instead worked for the last two and a half years on developing an alternative mechanism outside the carbon market based on a combination of positive incentives to promote sustainable productive activities and negative incentives to discourage deforestation. This mechanism, called the Joint Mechanism for Mitigation and Adaptation for the Integral and Sustainable Management of Forests and Mother Earth, and the Framework Law for Mother Earth and Integral Development, within which it is imbedded, was presented to civil society just today in a Plurinational Workshop at the Ministry of Foreign Affairs. I am Bolivian and part of the team which developed and presented the Bolivian alternative mechanism, and I am happy to report that it was enthusiastically supported by the main indigenous groups and civil society representatives present at the workshop, it has been successfully passed by both chambers of congress, and it enjoys wide support from NGOs and the international cooperation in Bolivia. However, it is still awaiting the approval of the President, and it will surely be a fight to implement.


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