Mitigation Opportunities     and Challengesan Economic Perspective             ALEX DE PINTOEnvironment and Production Tec...
The Goal and the Challenge    Profitability           Adaptation               Mitigation
A Tall Order  What are the proper incentives that promote   mitigation compatibly with adaptation?  One can throw lot of...
Some Projects Directly Addressing These                Issues  IFAD-IFPRI partnership on CC mitigation activities and   s...
IFAD-IFPRI PartnershipGeophysical        Climate                   projections   Measurement Issuescharacteristics      •...
IFAD-IFPRI Partnership  Transaction costs  •  Cost-benefit analysis of most promising mitigating     practices: implicit ...
Adaptation to Climate Change for    Smallholder Agriculture in Kenya  Synergies between adaptation and mitigation  •  Lan...
Some Results  Soil and water conservation measures showed limited   impacts in terms of crop yield and SOC sequestration...
Some Results  Combinations of inorganic fertilizer, mulching, and   manure have positive impacts for SOC; are important  ...
Management	  prac,ces	    The Issue of Incentives                                         Produc,vity	                 Var...
Role of Uncertainty and Risk  Uncertainty and risk-aversion is notably absent in the   modeling of farmers’ adoption of c...
Role of Uncertainty and Risk  We used the DSSAT crop modeling system to simulate   maize yields and soil carbon content ...
Input Usage and VariabilityEffect of the input usage on yieldvariability for years two and twenty
Input Usage and Variability  Note: different input   applications can increase   or decrease yield   variability. Year 2 ...
Payments for AdoptionTotal payments necessary to induce adoption under risk-aversionand risk-neutrality for different leve...
Implicit Cost of a Ton of Carbon  We kept track of   difference in SOC   between usage and no-   usage: C sequestered  T...
Farmers’ risk aversion?  The differences in   payments and implicit   cost of carbon depend   upon the parameters that   ...
Considerations  Risk-neutrality hides the complexities of implementing   payment for environmental service schemes  Thes...
Back to the Incentive Issue  Two extremes for compensation plans  •  By adoption of mitigation practice: very inefficient...
Back to the Incentive Issue  If the price of carbon not high enough to make a   significant difference for farmers, could...
Research Needs  More work on dynamics and measurements of GHG  Improve modeling tools (DSSAT/Century, CropSyst,   etc.)...
Upcoming SlideShare
Loading in …5
×

De Pinto - Mitigation opportunities and challenges: An economic perspective

579 views

Published on

Alessandro De Pinto (IFPRI) Mitigation opportunities and challenges: An economic perspective (presentation from Mitigation session at CCAFS Science Workshop, December 2010)

0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total views
579
On SlideShare
0
From Embeds
0
Number of Embeds
1
Actions
Shares
0
Downloads
6
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide

De Pinto - Mitigation opportunities and challenges: An economic perspective

  1. 1. Mitigation Opportunities and Challengesan Economic Perspective ALEX DE PINTOEnvironment and Production Technology Division
  2. 2. The Goal and the Challenge Profitability Adaptation Mitigation
  3. 3. A Tall Order  What are the proper incentives that promote mitigation compatibly with adaptation?  One can throw lot of money at the problem and farmers will adopt….but there are obvious repercussions with failed projects and policies  Getting the right incentives IS important
  4. 4. Some Projects Directly Addressing These Issues  IFAD-IFPRI partnership on CC mitigation activities and small farmers  Objective: link farmers to markets for carbon sequestration  Four countries: Morocco, Ghana, Mozambique, and Vietnam. Focus on: •  Technical issues: implementation and reliability of measurement •  Operational issues: transaction costs  Adaptation to Climate Change for Smallholder Agriculture •  Kenya, World Bank
  5. 5. IFAD-IFPRI PartnershipGeophysical Climate projections   Measurement Issuescharacteristics •  country-wide assessment of CarbonMost common/ DSSAT agricultural mitigationimportant crops potential crop model BASELINE Mitigation •  creating an “acceptable” baseline at the project levelCurrent Ag. potentialpractices (costs?) Carbon profile ag.   Transaction costs Climate practice #1Geophysical •  the role of institutions: mapping and analysis ofcharacteristics projections Carbon profile ag. practice #2 institutional structures with potential to connect farmers DSSATMost common/importantwith carbon markets #3 crops #4 crop model . .Mitigation Ag.practices Carbon profile ag. practice #n
  6. 6. IFAD-IFPRI Partnership  Transaction costs •  Cost-benefit analysis of most promising mitigating practices: implicit cost of ton of C •  Vietnam: rice and alternative water management practices •  Ghana: Cassava new high yield variety
  7. 7. Adaptation to Climate Change for Smallholder Agriculture in Kenya  Synergies between adaptation and mitigation •  Land management practices •  Adaptation strategies •  Implications for SOC •  Impact on Productivity
  8. 8. Some Results  Soil and water conservation measures showed limited impacts in terms of crop yield and SOC sequestration  There are tradeoffs in the short term before long-term benefits can be reaped  These include: •  Carbon losses due to construction (terraces, bunds, ridge and furrow) •  Loss of cropping area before yield benefit (bunds, terraces, ridge and furrow, agroforestry) •  Short-term production losses due to decrease in cropping intensity (rotation/fallowing) •  Increased labor costs (e.g. minimum tillage) (analysis ongoing)
  9. 9. Some Results  Combinations of inorganic fertilizer, mulching, and manure have positive impacts for SOC; are important adaptation strategies, and are relatively low-cost management practices as well  Some farmers already implement such combinations. Specific combinations will vary depending on the crop type, agroecological zone, and planting date  However, in parts of Kenya where residues are used as a source of feed, there is an economic tradeoff with livestock production
  10. 10. Management  prac,ces   The Issue of Incentives Produc,vity   Variability   Adapta,on   Mi,ga,on  poten,al   short  term  long  term  Improved  crop  varie,es  and/ ↑   ↑   ↓   +++   Depends  on  variety/type  or  types    Changing  plan,ng  dates   ↓   +++  Improved  crop/fallow   ↓   ↑   ++   High,  par,cularly  for  rota,on/rota,on  with   rota,on  with  legumes  legumes  Use  of  cover  crops   ↑   ↑   ++   High  Appropriate  fer,lizer/manure   ↑   ↑   ↓   +++   High,  par,cularly  when  use   underu,lized  as  in  SSA  Incorpora,on  of  crop   ↑   ↑   ↓   +++   High  residues  Reduced/zero  ,llage   ↓   ↑   ↓   +   High  Agroforestry   ↓   ↑   ↓   +   High  Irriga,on/water  harves,ng   ↑   ↑   ↓   +++  when  well   Low  to  high  depending  on   designed  and   whether  irriga,on  is  energy   maintained   intensive  or  not  Bunds,  terraces,  ridge  and   ↓   ↑   ↓   +++   Low,  minus  soil  carbon  furrow,  diversion  ditches     losses  due  to  construc,on    Grass  strips   ↓   ↑   ↓   +++   Posi,ve  mi,ga,on  benefits  Sources:  FAO  2009,  Smith  et  al.  2008  
  11. 11. Role of Uncertainty and Risk  Uncertainty and risk-aversion is notably absent in the modeling of farmers’ adoption of climate change mitigation practices in developing countries  A farmer will adopt mitigation practices when the net present value of farming with these practices is greater than with the alternatives or NPVA + S ≥ NPVN  Antle and Stoorvogel (2008) point out: “it is important to note that risk could impact farmers’ willingness to participate in carbon contracts both positively and negatively.”
  12. 12. Role of Uncertainty and Risk  We used the DSSAT crop modeling system to simulate maize yields and soil carbon content  Cropping system cassava for twenty years  Daily weather data simulated using DSSAT’s  Record the yield and soil carbon content repeated 100 times using a different random seed each time: obtain an estimate of yield variability  The input: organic soil amendment, such as green manure and we simulated 13 levels of use intensity: 0-20 tons/ha  Through this series of simulations we obtain yields, yield- variability, as well as the soil carbon content at the end of the 20 year period
  13. 13. Input Usage and VariabilityEffect of the input usage on yieldvariability for years two and twenty
  14. 14. Input Usage and Variability  Note: different input applications can increase or decrease yield variability. Year 2 from about 9000 kg of manure, yield variability is lower than with no input usage. In year 20, the standard deviation is always higher
  15. 15. Payments for AdoptionTotal payments necessary to induce adoption under risk-aversionand risk-neutrality for different levels of input usage
  16. 16. Implicit Cost of a Ton of Carbon  We kept track of difference in SOC between usage and no- usage: C sequestered  The lowest cost per ton of sequester carbon is about $67.5 under risk-neutrality assumption while for a risk-averse farmer the lowest cost is about $49.0.
  17. 17. Farmers’ risk aversion?  The differences in payments and implicit cost of carbon depend upon the parameters that characterize the utility function. The implicit cost of carbon varies from $67.5 to $48.9  Can make the difference between success and failure of a project
  18. 18. Considerations  Risk-neutrality hides the complexities of implementing payment for environmental service schemes  These results add one more layer of complexity  Could save money targeting the “right practices” to the “right” farmers
  19. 19. Back to the Incentive Issue  Two extremes for compensation plans •  By adoption of mitigation practice: very inefficient but easy to implement •  CRP style: efficient but data intensive •  Anything in between? Are there ways to address the “adverse selection” problem?
  20. 20. Back to the Incentive Issue  If the price of carbon not high enough to make a significant difference for farmers, could be used by institutions?  What is the role of marginal land? •  Important behavioral difference between farmers on degraded land and farmers on fertile land: (all other things equal) farmers on fertile land have an incentive to mine the resource while farmers on degraded land have an incentive to restore the resource
  21. 21. Research Needs  More work on dynamics and measurements of GHG  Improve modeling tools (DSSAT/Century, CropSyst, etc.)  Bring risk back in economic analysis  Better understanding of potential role of institutions  Need for a global model of land use change

×