Financial attractiveness of wood production in smallholder plantations of Central Vietnam in the context of developing carbon markets

In Vietnam, fast-growing Acacia hybrid dominates commercial smallholdings and is largely managed in short rotations for pulpwood. However, increasing demand for logwood implies growing Acacia hybrid in longer rotations. One way of encouraging smallholders to prolong the rotation would be payments for aboveground carbon storage. Thus, this study evaluated the financial attractiveness of shifting from pulpwood to logwood production, with and without hypothetical carbon payments of $5, $10 and $20 tCO(2)e ha(-1). The data were drawn from smallholder interviews, a plantation inventory and a market study. The growth models for a 5-year pulpwood regime and various logwood regimes used for financial modelling were developed in CO2FIX simulation software. With a financially optimal rotation length of 9-10 years, the study finds that growing Acacia hybrid for logwood is much more profitable than growing it for pulpwood. However, due to thinning in logwood regime, a financially optimal logwood regime stores only 15-16% more carbon than a 5-year pulpwood regime. Consequently, carbon payments at any of the three price levels would not shift the financially optimal rotation length. The study concluded that carbon payments alone are unlikely to be an effective means to encourage smallholders in central Vietnam to prolong the rotation.