Which would work better for improved soil fertility management in sub-Saharan Africa: Fertilizer Subsidies or Carbon Credits?
Date
18-08-12Author
Marenya, Paswel
Nkonya, Ephraim
Xiong, Wei
Rossel, Jose D
Edward, Kato
Type
PresentationLanguage
enMetadata
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Why do many smallholder farmers fail to adopt improved land-use practices which can improve yields
and incomes? The reason is not always because these practices are uneconomical but sometimes it is
because resource poverty prevents farmers from taking advantage of yield and income enhancing
agricultural practices. In this study we examine the relative merits of using a carbon payment scheme
compared to a subsidy policy to help reduce the cost of specific best management practices (BMPs) with
productivity and ecosystem benefits. Using a 30-year crop simulation model, we examine the impacts of
different soil fertility management treatments (SFTs) on yields and soil carbon and proceed to compute
discounted incremental revenue streams over the same period. We find that the SFTs simulated are on
average profitable given the conditions assumed in the DSSAT simulations and subsequent net present
value analysis and revenue-cost comparisons. When carbon was priced at $8 or $12/t, the increase in
incremental incomes generated from a carbon payment were higher than those imputed from a 50%
fertilizer subsidy. When carbon was priced at $4/t, the increase was almost always equal and sometimes
higher than that from the imputed income transfer from a 50% subsidy. If these indications hold in further
research, it could imply that using fertilizer subsidies as the sole mechanism for stimulating adoption of
improved soil fertility management practices may unnecessarily forgo other complementary and possibly
superior alternatives. Given the fiscal burden on public finances and unavoidable opportunity costs of any
substantial subsidy program, it is possible that a carbon payment system is a reasonable alternative even
at low carbon prices especially if accompanied by measures to ameliorate the costs of fertilizer to farmers.
Citation
Marenya, P et al(2012). Which would work better for improved soil fertility management in sub-Saharan Africa: Fertilizer Subsidies or Carbon Credits? Paper prepared for presentation at the International Association of Agricultural Economists (IAAE) Triennial Conference, Foz do Iguaçu, Brazil, 18-24 August, 2012.Publisher
Department of Agricultural Economics, University of Nairobi, Kenya
Description
Presentation