Agricultural Carbon Sequestration and Poverty John M. Antle Dept of Ag Econ & Econ, Montana State U

Thanks to my colleagues without whose support this research would not be possible: Charles Crissman, CIP, Nairobi Bocar Diagana, Montana State U Kara Gray, Montana State U Ibrahima Hathie, ENEA, Senegal Andre de Jager, LEI, the Netherlands Jetse Stoorvogel, Wageningen UR Roberto Valdivia, Montana State U Alejandra Vallejo, Wageningen UR David Yanggen, CIP, Lima

I.Basic Concepts II.Linkages to Poverty III.Evidence from Peru, Senegal and Kenya IV.Conclusions

I. Basic Concepts oLand use & management practices increase or decrease ecosystem C (key indicator of soil health)

I. Basic Concepts oLand use & management practices increase or decrease ecosystem C oPayments to farmers can create incentives for farmers to change LU & management to increase C until stock is max’ed oIssues in C seq literature: Technical vs economic potential Productivity effects & dynamics Permanence & leakage Adoption costs Incentive design  Additionality  Per-hectare vs per-ton payments  Symmetric vs asymmetric incentives  Transaction costs

Contract participation decision (Antle et al, JEEM, 2003): g >  NR + A + TC For per-ton carbon payment, g = P  C, thus P > (  NR + A + TC)/  C

II. Linkages to Poverty Those who benefit most have low opp cost of adoption Are the poorest farmers on the adoption margin? Additionality targets non-adopters … Fixed cost and trans cost create adoption threshold These costs have greatest impact at low C prices and where carbon rates are low. Opp cost  NR may decline over time as C accumulates and system productivity increases

Carbon Permanece as an Emergent Property of Production Systems: Farmers who lack knowledge of system dynamics can be provided an incentive to learn the benefits of improved soil management. This can lead to permanent adoption of improved practices without permanent external incentives. (Antle and Diagana, AJAE 2004)

III.Evidence from Three Case Studies oCase studies: Terracing and agroforestry in the Peruvian Andes Nutrient and crop residue management in Senegal’s peanut basin Nutrient management (mineral fertilizer, manure, crop residues) in Machakos district of Kenya oMethods: Case studies based on statistically representative samples of spatially-referenced data Bio-physical and econometric-process models simulate site- specific land use and management decisions under base scenario and carbon contract scenarios Spatial distribution of contract participation decisions are used to derive carbon supply curves for the population in the region

Tradeoff Analysis: Integrated Assessment of Agricultural Production Systems DSSAT/ Century Econometric - Process NUTMON Spatial Aggregation

The Tradeoff Analysis Software is a GIS-based system designed to integrate disciplinary data and models for integrated assessment of agricultural systems. An on-line course, the software, and applications for Ecuador, Peru, Senegal and Kenya can be downloaded at

Terracing and agroforestry in the Peruvian Andes (Cajamarca) Evidence shows terracing and agroforesty are profitable for some farmers but adoption is only about 30% Incomplete adoption explained by spatial heterogeneity in bio-physical and economic conditions Carbon contracts would provide payments for carbon in soil and above-ground biomass In contrast to conservation “projects” that subsidize all farmers, only farmers at the adoption margin would have an incentive to participate

The importance of heterogeneity: profitability of terracing is a function of site-specific conditions (e.g., slope). Carbon payments create incentive for additional adoption.

Carbon Supply Curves for Terracing and Agroforestry for Low (LC) and High (HC) Carbon Rate Scenarios

The adoption margin: What conditions favor additional adoption of carbon- sequestering practices?

Nutrient and crop residue management in Senegal’s Peanut Basin Field data show very low use of mineral fertilizer, high rates of nutrient depletion, very low SOM Carbon contracts would pay farmers to increase mineral fertilizers and incorporate crop residues

Crop residues are the key to increasing soil C in nutrient-deficient systems Policy: (peanut fert kg/ha, millet fert kg/ha; R=residue incorporation) D: 0, 0; R=50%G: 0, 0; R=100% E: 30, 20; R=50%H: 30,20; R=100% F: 60, 40; R=50%I: 60, 40; R=100% Note participation at zero carbon price

Key constraint is opportunity cost of crop residues that are used by small, poor farmers to feed livestock

Transaction costs constrain participation in C contracts at low carbon prices

Nutrient management in Machakos, Kenya Mineral fertilizer use low in this maize-based, mixed crop-livestock system Extensive terracing has reversed catastrophic soil erosion seen in the early-mid 20 th Century (Tiffen et al., More People, Less Erosion), but WUR Nutrient Monitoring data show high rates of nutrient depletion Carbon contracts would pay farmers to increase use of mineral and organic fertilizers

Technology: Zero-grazing units provide opportunity to improve nutrient management efficiency and livestock productivity.

Machakos C Supply Curves for Low, Medium and High Carbon Rates

Machakos: Impact of Carbon Sequestration Payments on Poverty (% < $1/day)

Machakos: Impact of Carbon Sequestration on Nutrient Depletion (kg/ha/season)

Machakos: Impact of Carbon Sequestration on Poverty and Nutrient Depletion

Importance of Heterogeneity: Impact of C Sequestration on Poverty and Nutrient Depletion in Machakos, by Village (Medium C Rate)

Conclusions oEvidence shows ag C sequestration has some potential to reduce poverty and enhance sustainability in semi-subsistence systems However evidence also suggests that disadvantaged areas may benefit less than more productive regions. oKey issues are: System dynamics and heterogeneity Opportunity costs of improved practices Transaction costs & institutional capability Can participation in carbon markets help disadvantaged areas overcome constraints on technology adoption? For example, could a carbon-based rural micro-credit program enhance farmers’ ability to reverse soil nutrient depletion in marginal areas?

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