Costs and Benefits of Halting Deforestation in the Paraguayan Chaco

Abstract

The Gran Chaco forest is the second-largest forest in South America after the Amazon forest. It has experienced some of the world's highest deforestation rates, with cattle ranching identified as the primary driver of deforestation in the Paraguayan region of the Chaco. The purpose of this paper is to estimate the costs and benefits of halting deforestation and determine if saving forests would be more profitable than cattle ranching in the Paraguayan Chaco. Data from 80 cattle ranches and national data were analyzed to find the opportunity cost of giving up cattle ranching in the Paraguayan Chaco, and forest valuation and project costs were estimated. Results show that the mean opportunity cost, based on a 30-year project scenario, is 10.82 $/tCO2. The opportunity cost of giving up cattle ranching falls in the low range of carbon prices in the voluntary carbon market, meaning that the profits from preserving forests, especially from selling carbon credits, can exceed the profits of cattle ranching. The overall annual benefits of halting deforestation far outweigh the costs when considering the opportunity cost of cattle ranching and forest preservation project transaction costs for the entire Paraguayan Chaco by at least 115 times. Halting deforestation can be a viable alternative for stakeholders and is important for policymakers to acknowledge.