The financial and political opportunity costs of orangutan conservation in the face of oil-palm expansion

Swarna Nantha, Hemanath (2014). The financial and political opportunity costs of orangutan conservation in the face of oil-palm expansion. Working Papers on Economics, Ecology and The Environment 195, School of Economics, The University of Queensland.

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Author Swarna Nantha, Hemanath
Title The financial and political opportunity costs of orangutan conservation in the face of oil-palm expansion
School, Department or Centre School of Economics
Institution The University of Queensland
Open Access Status Other
Series Working Papers on Economics, Ecology and The Environment
Report Number 195
Publication date 2014-05
Publisher School of Economics, University of Queensland
Start page 1
End page 51
Total pages 54
Language eng
Formatted abstract
This paper examines the opportunity costs of conserving the forest habitats of the endangered orangutan (Pongo pygmaeus spp.) of Indonesia and Malaysia in the face of a highly profitable alternative land use, the conversion of these habitats for the production of palm oil. It shows that one component of the financial opportunity cost of conserving orangutan habitat, the business opportunity cost (profits foregone), was high in both Malaysia and Indonesia in the case of oil-palm development. It is argued that this would be difficult to offset under the payments-for-ecosystem-services (PES) approach. However, the government opportunity cost of conservation in Indonesia, such as the land-tax revenue foregone by local governments by conserving rather than leasing out orangutan habitats for agricultural use, are sometimes lower than the business opportunity cost of conservation. It is suggested that targeting government opportunity costs to conserve unleased forests could potentially offer lower-cost opportunities for conserving orangutan habitats. If, however, political and institutional realities are taken into account, there might exist another type of opportunity cost of conservation— a political one— that could impede the success of the PES approach. Some oil-palm companies in Borneo offer financial inducements in the form of kickbacks and other types of political donations to government officials to obtain land for growing oil palm. This ‘government decisionmaker’s opportunity cost’ has not been addressed in the PES literature, which typically compares potential ecosystem payments with the commercial profits that would have to be sacrificed as a result of conserving forests. The impact of this political opportunity cost on oil-palm expansion is discussed. It is suggested that solutions to this conservation problem cannot be restricted to the monetary valuation method but must also involve alternative political economic interventions.
Keyword Biodiversity conservation
Firm behaviour
Opportunity cost
Orangutan
Payments for ecosystem services
Political ecology
Q-Index Status Provisional Code
Institutional Status UQ
Additional Notes ISSN 1327-8231

Document type: Working Paper
Collection: School of Economics Publications
 
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Created: Tue, 13 May 2014, 11:29:05 EST by Emeritus Professor Clement Tisdell on behalf of School of Economics