Economics of

sustainable agricultural

systems

E S A S

Everything you always wanted to know about:

Constraints to adoption of sustainable land management practices

L. Lipper N..McCarthy and G. Branca

(Agricultural Development Economics Division, FAO)

Smallholder Mitigation: Mitigation Options and Incentive Mechanisms Expert Workshop

Rome, June 7-8 , 2011

Economics of

sustainable agricultural

systems

E S A S

Importance of SLM •  Poor soil fertility is a key constraint to agricultural productivity growth

and thus food security/poverty reduction •  Increasing soil fertility is an important component of many developing

country ag. development strategies (particularly Africa in CAADP)

•  Increasing soil fertility (SOC) has potential adaptation and mitigation benefits (IPCC 4AR – soil carbon largest technical and economic potential source of mitigation) Adaptation benefits through improved WHC, diversification, pest and disease resistance

•  Years of attempts to promote adoption of SLM have shown there are considerable barriers that have generally not yet been overcome

Question- if SLM is so good for farmers as well as the environment – why is the adoption rate so low?

Economics of

sustainable agricultural

systems

E S A S

Barriers  to  adoption:  •  Tenure  Security:  lack  of  tenure  security  and  limited  property  rights  (limits  on  transfer),  may  hinder  adoption  of  SLM  

•  Limited  Access  to  Information,  e.g.  very  low  levels  of  investment/support  for  agriculture  research  and  extension  

•  Up-­‐front  Hinancing  costs  can  be  high,  whilst  on-­‐farm  beneHits  not  realized  until  medium-­‐long  term  –  Local  credit  markets  very  thin  –  Local  insurance  options  very  limited  

Classic  barriers  to  technology  adoption  apply  in  SLM  case:

Economics of

sustainable agricultural

systems

E S A S

Adoption Barriers: Tenure Security & Common-Pool Resources

§  SLM practices may require collective action, e.g. management of communal resources (forests, grazing resources), and provision of local public investments (soil & water management measures)

§  Lack of tenure security and limited property rights (limits on transfer), may hinder adoption of SLM §  But… §  Customary tenure does not equal insecure tenure §  Titles/certificates to land does not necessarily lead to increased

access to formal credit §  Ambiguous, complex rights to land often function as an

insurance mechanism… e.g. for weather shocks

Photos: FAO Mediabase

Economics of

sustainable agricultural

systems

E S A S

Adoption Barriers: Lack of Access to Information

§  Very low levels of investment/support for agriculture research and extension in many countries

•  Quiggins & Horowitz 2003 “Information held…becomes more diffuse. Less valuable in the presence of a new source of uncertainty.Thus climate change may be regarded as destroying information.”

•  Implying even greater barriers as CC effects are felt...

Photos: FAO Mediabase

Economics of

sustainable agricultural

systems

E S A S

Adoption  Barriers:    Short  run  trade-­‐offs  even  where  long  run  is  

win-­‐win  

• Photos: FAO Mediabase

B. Investment Barrier to Adoption

Time ==>

Baseline net income Current net income

• Temporary net loss to farmer

• New management practices introduced

Source:    FAO  2007  

Economics of

sustainable agricultural

systems

E S A S

Examples  of  establishment  and  maintenance  costs  of  SLM  

 Establishment

costs

Average maintenance

costsUS$/ha US$/ha/year

Grevillea agroforestry system, Kenya 160 90Shelterbelts, Togo 376 162Different agroforestry systmes in Sumatra, Indonesia 1,159 80Intensive agroforestry system (high input, grass barriers, contour ridging), Colombia

1,285 145

Small-scale conservation tillage, Kenya 0 93Minimum tillage and direct planting, Ghana 220 212Medium-scale no-till technology for wheat and barley farming, Morocco

600 400

Natural vegetative strips, The Philippines 84 36Grassed Fanya juu terraces, Kenya 380 30Konso bench terrace, Ethiopia 2,060 540Compost production and application , Burkina Faso 12 30Tassa planting pits, Niger 160 33Runoff and floodwater farming, Ethiopia 383 814

Improved pasture management

Grassland restoration and conservation, Qinghai province, China (1)

65 12

Rotational grazing, South Africa 105 27Grazing land improvement, Ethiopia 1,052 126

Sources: Wocat 2007, Liniger et al. 2011, FAO 2009, Cacho et al. 2003

Various agro-forestry practices

Conservation agriculture (CA)

Improved agronomic practices

Improved grazing management

Soil and water conservation

Agro-forestry

Improved pasture and grazing management

(1) Project estimates

Technology options Practices Case study

Integrated nutrient management

Economics of

sustainable agricultural

systems

E S A S

An  example  of  opportunity  costs  of  implementing  improved  grazing  management  practices  (3  Rivers  Project,  Qinghai  province,  China)  

•  project  aim:  SLM  to  increase  livestock  productivity  (grassland  restoration  zoning  and  stocking  rate  management)  

•  C  Hinance  (voluntary  market)  used  to  compensate  foregone  income  during  the  transition  period  (pilot  prj)  

   

     

Baseline net income

NPV/HA over 20 years

No years to positive cash flow

No of years to positive incremental net income compared to baseline

net income

($/ha/yr) ($/ha) (number of years) (number of years)Small 14.42 118 5 10

Medium 25.21 191 1 4Large 25.45 215 1 1

Source: Wilkes 2011

Size of herd

Economics of

sustainable agricultural

systems

E S A S

But are these costs reflected in MACCs?

-­‐60  

-­‐100  

-­‐80  

60  

80  

-­‐20  

40  

-­‐40  

20  

0  

Reduced  deforesta4on  from  pastureland  conversion  

Wind  (high  penetra4on)  

Abatement  poten+al    Gt  CO2e  

10   15   20  

Breakdown  by  abatement  type  • 9  Gt  for  terrestrial  carbon  (forestry  and  agriculture)  

• 6  Gt  for  energy  efficiency    • 4  Gt  for  low  carbon  energy  supply  

 Source:    McKinsey  Global  GHG  Abatement  Cost  Curve  v2.0  

Ligh4ng:  switch  CFLs  to  LEDs,  residen4al  

Economics of

sustainable agricultural

systems

E S A S

Public investment to support adoption may also not be fully costed

• Source: Sutter, Bockel and Tinlot 2011: Afolu sectors and climate change in Nigeria FAO

Economics of

sustainable agricultural

systems

E S A S We  need  to  understand  full  costs  of  SLM  adoption  better  to  

design  effective  incentive  mechanisms  –  until  now  there  is  probably  a  signiHicant  underestimate  of  the  transition  costs  that  will  be  required  to  achieve  high  adoption  levels  and  signiHicant  food  security,  adaptation  and  mitigation  beneHits.  

 In  particular  we  need  to  focus  on:  

 Information  barriers  and  how  they  change  under  climate  change          Opportunity  costs  over  a  transition  period  and  how  they  vary  by  income  group  

   Public  sector  investments  required  to  support  SLM  adoption  and  incentives      

Conclusions

Economics of

sustainable agricultural

systems

E S A S

THANK YOU!