Evaluating land management practices under fertilizer subsidy or carbon sequestration compensation in Kenya


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Evaluating land management practices under fertilizer subsidy or carbon sequestration compensation in Kenya

  1. 1. Evaluating land management practices under fertilizer subsidy or carbon sequestration compensation in Kenya<br />By Paswel Marenya<br />International Food Policy Research Institute<br />Seminar Presentation at World Agro forestry Center-Nairobi<br />May 14, 2010<br />With others at IFPRI:<br />Yanyan Liu<br />Ephraim Nkonya<br />Jose Deustua Rossel <br />Paul Thangata<br />
  2. 2. Research Questions<br />What is the best way to organize input support systems for smallholder agriculture?<br />Are Subsidies the ‘New Normal’ as a final hope for improved input use in Africa?<br />Are subsidies not rather expensive?<br />What role is there for integrated soil fertility management (ISFM)?<br />Can the production of a global public good (carbon sequestration) offer extra revenue streams thereby relieving pressure on subsidy budgets? <br />
  3. 3. Outline<br />Introductory Background<br />Key features and requisites for agricultural carbon markets <br />Some tentative economic indicators for further analysis<br />Implications and future directions<br />Your Inputs<br />
  4. 4. Introduction<br />Carbon sequestration in the agriculture sector refers to the capacity of agricultural lands and forests to remove carbon dioxide from the atmosphere. <br />Carbon dioxide is absorbed by trees, plants and crops through photosynthesis and stored as carbon in biomass in tree trunks, branches, foliage and roots<br />Eventually forming soil organic matter (SOM)<br />SOM is an important variable in soil health <br />It improves soil structure, the soil is capable of absorbing water faster, retaining more moisture, and resisting erosion by wind and rain.<br />soil organic matter also acts as receptacles and reservoirs of nutrients. <br />provides carbon needed by soil microbial communities for metabolism.<br />
  5. 5. Introduction<br />The amount of carbon stored in soil organic matter is influenced by <br />the addition of carbon from dead plant material among other things<br />By employing farming practices that involve biomass retention: <br /> farmers may be able to slow or even reverse the loss of carbon from their fields.<br />
  6. 6. Examples<br />Establishing crops in the residue of previous crops, which are purposely left on the soil surface.<br />Cover crops and manures<br />Land restoration and land use changes that encourage the conservation and improvement of soil, water and air quality<br />Converting marginal cropland to trees or grass maximizes<br />
  7. 7. The value of soil carbon: Potential benefits foragriculture<br />‘Creating farm and forestry systems with strong incentives for growing soil carbon could well be at the center of climate stabilization’ Mazza (2007)<br />As with any farm produce, farmers need a market for the sequestered carbon <br />as well as a price that will make it profitable to grow.<br />From a broader social context, the questions of who will purchase this new output and what is a fair price <br />are also of private and public importance.<br />
  8. 8. Putting a Value on Sequestered Carbon<br />Carbon Tax<br />entities that emit greenhouse gases or use carbon-based fuels will have an incentive to switch to alternatives adopt practices that would lower their level of GHG emissions.<br />Cap and Trade<br />by creating a new property right — the right to emit with limitations and ability to trade these rights.<br />groups that exceed caps must purchase offsets from other entities that emit less than their allowance or from entities that sequester carbon.<br />Subsidizing Positive behavior<br />Farmers can receive incentives to adopt new practices or receive support to maintain such practices.<br />
  9. 9. Requisites for Agricultural Carbon Markets<br />Verifiability<br />The Chicago Climate Exchange (CCX) divided the United States into zones and allocated specific levels of carbon sequestration to each acre farmed in a particular zone under continuous no-till practices<br />The CCX does not verify the actual carbon storage as a result of the practice change, but only monitors that the practice is maintained during the life of the contract. <br />
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  11. 11. Requisites for Agricultural Carbon Markets<br />Additionality<br />Additionality refers to the issue that a farmer can only offer and be paid for an offset for a new sequestration of carbon, not for a practice or a system of production already in place.<br />Permanence<br />For farmers to provide carbon offsets they must be willing to make long term, or even permanent, changes in not only practices but perhaps whole systems of production<br />What happens after a farmer decides to change practices and potentially reverse sequestration? <br />
  12. 12. Comparing Agricultural and Forest Carbon Markets<br />Both have considerable uncertainties surrounding verifiability and monitoring<br />Agricultural carbon has superior appropriat-ability (more secure private claims to sequestered carbon)<br />Pilot projects in agriculture can offer insights into private incentives and carbon sequestration<br />The potential spatial scale covered by agricultural carbon is much larger <br />Admittedly transaction costs for agricultural carbon markets may be steeper<br />
  13. 13. Methodology<br />Simulations using a DSSAT crop modeling<br />To generate yield streams under various treatments over a 30-year horizon<br />Generate soil carbon under these treatments<br />Valuation of yield streams from DSSAT<br />Calculating net present values (NPVs)<br />Differences in revenues and costs (labor and fertilizer)<br />Econometric tests<br />
  14. 14. Some Indicative Findings: Impacts of Sustainable Land Management<br />
  15. 15. Some Indicative Results on the Impacts of Sustainable Land Management<br />
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  19. 19. Some Indicative Findings: NPVs of Some ISLMs (US$) <br />
  20. 20. Some Indicative Findings: NPVs of Some ISLMs (US$) <br />
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  22. 22. Econometric Indications<br />
  23. 23. Key Messages and Future Directions for Research<br />A diverse revenue source may help in supporting adoption of intensive NRM and ISFM<br />Or better prices for current outputs can also do that<br />The escalation of costs for the high input ISLMs may overtake yield and revenue growth<br />Econometric tests begin to suggest there is a discernible negative impact of Climate change on yields <br />Intensive organic and inorganic inputs mitigate these effects somewhat<br />In this research we want to investigate the role of carbon revenues in supporting ISFM<br />This is important to support the needed ISFM investments needed to face an uncertain climate future and sustain reasonable productivity<br />
  24. 24. Thank You<br />Questions and Comments Welcome<br />