Pine or Pasture? Estimated Costs and Benefits of Land Use Change in the Peruvian Andes

In the Peruvian sierra near the city of Cajamarca, livelihood options of extensive grazing and plantation forestry often conflict with ecosystem services provided by the native jalca grasslands where these land uses are undertaken. This study estimates financial returns for local landowners for grazing livestock and plantation forestry and compares these values with estimated values for environmental services under each land use. Results of the estimated financial returns to landowners suggest that the profitability of each land use varies significantly because of local variation in grassland productivity, proximity to the village, and rates of time preference. In comparison to the financial returns to each land use, resulting values for environmental services were relatively high in magnitude, especially for the ecosystem service of water provision, suggesting that in most cases, overgrazing and pine plantations in the jalca will yield net economic losses at the national level. Regarding pine plantations in particular, the value for increased carbon sequestration was outweighed by the value of expected losses in water provision for irrigation, suggesting that a potential market based on carbon could yield net economic losses if water is not considered. The paper concludes that rural development can be best achieved in the study area by promoting conservation of the jalca, encouraging low-impact grazing practices, and targeting pine plantations only for areas of the jalca that are already degraded.