The Rimba Raya Biodiversity Reserve REDD Project

dedicated to bio-­‐fuel production, there is a large body ofresearch validating the flaws in this argument whenenvironmental costs are taken into account.Moreover, with the implementation of REDD, saving even oneparcel of peat land will have positive leakage effects due to thehigh level of carbon released both during and afterdeforestation along with the lost sequestering capacity of peatland. Activity shifting may occur, but since there is a finitesupply of peat and since it is a non-­‐renewable resource, theactivity must necessarily shift to non-­‐peatlands. The carbonoutput from the re-­‐directed production onto non-­‐peatlands willbe less than the “without project scenario”.The market will respond to the changing demand for carboncredits and peat land. Through direct and indirect priceadjustments for palm oil and carbon credits, along with theelevated level of competition brought about through thescarcity imposed by REDD, both producers of palm oil andcarbon credit companies should be made better off as landpreviously not demanded will ultimately be utilized in a moreallocatively efficient way with an elevated knowledge andunderstanding of the external costs associated therein.This paper has attempted to cover the fact that peat land, giventhe hundred’s and even thousands of years required toregenerate, should be treated as a non-­‐renewable resource thatis being depleted at a rate from which it will not be able toregenerate, eventually yielding volatile climatic outcomes.in favor of palm oil production for bio-­‐fuel development arehighly flawed when environmental costs, also known asexternalities, are unaccounted for.The adoption of REDD into a global compliance scheme, willprovide for the revaluation of peatlands, both literal andfigurative, as a result of the cost and benefit placed on storedcarbon values and increased land use competition.Added competition for peatlands will have upward pressures onshort term palm oil prices due to increased making alternative,more sustainable oils more competitive. Ultimately, once palmoil producers shift production capacity to marginalized non-­‐peatland the short term input price increases would equilibrate aslower cost plantation land will be identified and developedthrough allocative efficiency. Moreover, the carbon creditmarket would settle at a higher equilibrium price and quantity asdemand gains traction among developed countries adoptingREDD. Increased input prices will cause activity shifting amongpalm oil producers due to the high level of demand elasticity forpalm oil in commodities and consumer markets in order to keepcosts competitive.This activity shifting away from the depletion and conversion ofpeat land for agricultural uses to marginalized land will ultimatelyyield positive leakages with respect to emissions, all else equaland the value placed on preserved peat will help to bring marketoutcomes closer to equilibrium as a result of external effectaccounting.Because peat land is currently not considered, either socially or interms of acknowledged importance, a non-­‐renewable resource, itis therefore significantly undervalued. Moreover, the arguments222