What is the impact of reduced-impact logging (RIL) policy on the Berau Economy?
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A dynamic recursive CGE model of the Berau District (East Kalimantan Province, Indonesia) was
constructed, to analysis the impact of REDD policies. The model was used to simulate a policy to
implement reduced-impact logging (RIL) by inducing a seven percent raise in logging cost. Results
suggest that impact of the policy to the Berau economy is small. Agricultural-based households’ welfare
decreased (with forestry households the most impacted) while non-agricultural households were better
off. As logging output declines, other agricultural outputs increase, since factors of production that are
not used in the logging sector, are re-employed in other agricultural sectors, especially the oil palm
sector.