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Expert Workshop on NAMAs: national mitigation
               planning and implementation in agriculture.
                  Rome, 16-17 July 2012. CCAFS and FAO.




Economic analysis for mitigation
 alternatives - limits of MACCs
                                        Jeimar Tapasco
                                        Andy Jarvis
                                        Lini Wollenberg




        WWW.ciat.cgiar.org
                                    Eco-Efficient Agriculture for the Poor
MAC Curve




            McKinsey & Company (2010).

                 Eco-Efficient Agriculture for the Poor
MEXICO                            BRASIL




Source: World Bank (2010)   Source: World Bank (2010)

          UK Agriculture                      USA




Source: OECD (2010)           Sorce: Lutsey (2008)Agriculture for the Poor
                                           Eco-Efficient
MAC Curve for Colombia
              World Bank and DNP

-Energy

- Transport

- Agriculture, Forestry and Other Land Use



                               Eco-Efficient Agriculture for the Poor
Agriculture                         Agroforestry              Forestry
   Annual       Perrennial                             Tree +
                                                       Crops
                                   Livestock                        Natural          Plantation
                                                       or/and
                                                     Livestock
Efficient     Oil Palm
                                                                                    Commercial
Fertilization                Silvopastoral Systems
                                                                                    Forestry
(Case Study:
                                                                                    Plantations
Rice)
              Pasture
                          Rubber Plantations
              Improvement                                                      REDD+

              Conversion      of   Pastures    to    Fruit   Tree
              Plantations

Crops        in Cacao          Nutritional
Histosols                      Complements
Low-Carbon
                                                                    Ecological
Agricultural
                                                                    Restoration
Practices



                                                                     Eco-Efficient Agriculture for the Poor
Abatement
                                               Potential               Cost-
                                  potential
                                                 area              effectiveness
  Intervention alternative       (thousands
                                               evaluated          (US$/tCO2eq)
                                     of
                                                  (ha)            Min       Max
                                tCO2eq/year)
Commercial Forestry
                                  44,037       4,000,000          -4,4            -2,7
Plantations
Intensive Silvopastoral (ISS)
                                               3.739.109          -49              0.6
Projects                           43.819
Avoided Deforestation
                                  65,874       2,250,000          -0.2            -0.2
(REDD Projects)
Conversion of Pastures to
                                   1,938       359,320           -188             -25
Fruit Production
Rubber Plantations                 1,786       260,000           -1,05           -0,67
Efficient Use of Fertilizers        38         170,000           -267             145
Pasture Improvement                 54          51,487           -103             -62



                                                           Eco-Efficient Agriculture for the Poor
MAC Curve - Aggregate
                130


                30
MAC: US$/tCO2




                (70)


           (170)


           (270)
                       -                      10,000                        20,000                    30,000                          40,000
                                                                         Thousand tonnes of carbon saved/year
                 Rice Casanare (Irrigation)   Rice Valledupar                 Mango Huila Small         Mango Huila Large                 Avoca.Tolima Medium

                 Avoca. Tolima Large          Mango Cundinamarca Small        Avoca. Huila Medium       Avoca. Huila Large                Mango Cundinamarca Large

                 Rice Tolima                  Improve Pasture Meta            Rice Casanare             Mango Cundinamarca Medium         Mango Boyaca Small

                 Improve Pasture Casanare     Mango Tolima Small              Rice Meta                 Improve Pasture Arauca            Mango Tolima Large

                 Avoca. Risaralda Large       Avoca. Antioquia Medium         Avoca. Quindio Large      SSPi Bajo-Cauca (Antioquia)       Avoca. Risaralda Small

                 Avoca. Quindio Small         Avoca. Caldas Large             Mango Boyaca Large        Avoca. Antioquia Large            Avoca. Risaralda Medium

                 Avoca. Caldas Small          Avoca. Quindio Medium           Mango Antioquia Large     Avoca. Antioquia Small            Mango Boyaca Medium

                 Mango Antioquia Small        Avoca. Caldas Medium            Rice Guaranda y Nechi     SSPi Eastern -Antioquia           rest of the country (CIPAV)

                 SSPi CĂłrdoba                 SSPi Atlantico                  SSPi Sucre                SSPi Uraba-Antioquia              SSPi Northeast - Antioquia

                 Rice Jamundi                 Rice Cucuta




                                                                                                                        Eco-Efficient Agriculture for the Poor
CAUTION!!
            Economic tools
               must be
            appropriate for
            the problem at
                 hand.

                 Eco-Efficient Agriculture for the Poor
Overview of selected key limitations of the cost/supply
curve method*
• Negative costs (Not all cots were included)
• Strong focus on costs as selection criteria (there are other criteria)
• It does not include environmental and social benefit and costs
• Economic and technological uncertainty inherent to predicting the future
• Strong level of aggregation of the databases used
• High sensitivity relative to baseline assumptions (future)
• Ignoring interdependencies between measures
• High sensitivity to (uncertain) emission factor assumptions


    *Fischedick et al. 2011.


                                                         Eco-Efficient Agriculture for the Poor
MAC Curve global GHG beyond business as usual 2030




                                  Source: McKinsey & Company (2010)




                                               Eco-Efficient Agriculture for the Poor
Top priorities according to MAC curve          Carbon saved (tCO2e/year)         Cost (benefit) US$

                                                          Individual                    Individual
Priority               Measure              US$/tCO2e      Measure      Aggregate        Measure          Aggregate

    1         Rice Casanare (Irrigation)      (267.2)       2,075         2,075         (554,465)         (554,465)

    2         Rice Valledupar                 (202.0)        321          2,397          (64,923)         (619,388)

    3         Mango Huila Small               (188.2)       11,519        13,916        (2,168,430)      (2,787,819)

    4         Mango Huila Large               (158.4)       46,296        60,212        (7,332,158)     (10,119,977)

    5         Avoca.Tolima Medium             (138.1)      212,958       273,170       (29,412,260)     (39,532,237)




        Least priorities according to MAC curve         Carbon saved (tCO2e/year)          Cost (benefit) US$

                                                         Individual                    Individual
Priority               Measure             US$/tCO2e     Measure       Aggregate       Measure           Aggregate
    43         SSPi Uraba-Antioquia          (0.6)        898,966       898,966        (537,857)         (537,857)
    42         SSPi Sucre                    (2.6)       1,831,998     2,730,964      (4,699,801)       (5,237,657)
    41         SSPi Atlantico                (3.4)        596,711      3,327,675      (2,042,915)       (7,280,572)
    40         SSPi CĂłrdoba                  (4.5)       3,747,996     7,075,671      (16,882,013)      (24,162,585)
    39         SSPi Eastern -Antioquia       (8.5)       2,019,716     9,095,387      (17,218,786)      (41,381,371)



                                                                                         Eco-Efficient Agriculture for the Poor
Conclusions




• There are a large number of potential mitigation
options that could be implemented at the national
level, with highly varying degrees of emissions
reductions, and associated costs for implementation
                                    Eco-Efficient Agriculture for the Poor
.


 Clear goals should
  be set with any
emissions reduction
  plan or strategy,
and these goals can
  then be used as
    criterion for
    prioritization

       Eco-Efficient Agriculture for the Poor
MAC curves are a useful input to
evaluating priority interventions,
but…….should be interpreted with
caution.

Incorrect use of the MAC curve for
selecting interventions could lead to
failure to prioritize the most
appropriate interventions.
                          Eco-Efficient Agriculture for the Poor
Private
                         perspective




  Public
perspective



              Eco-Efficient Agriculture for the Poor
Biophysical efficiency (kg meat)




                        Eco-Efficient Agriculture for the Poor
Biophysical efficiency (ha)




                     Eco-Efficient Agriculture for the Poor
Time constrains




              Eco-Efficient Agriculture for the Poor
Thanks!



          Eco-Efficient Agriculture for the Poor
Business as usual:
   Agriculture
   (Colombia)


   Business as
 usual: Livestock
   (Colombia)


      Eco-Efficient Agriculture for the Poor
Cost (benefit)   -1.000.000            -1.000.000
Carbon capture        1                 1.000.000


                              Eco-Efficient Agriculture for the Poor
Figure 1 - Effect of the emission reduction amount on the cost-
effectiveness value.
Figure 1a - CEA value against different levels of emission reduction
and a constant cost.
Figure 1b - Representation of a cost-effectiveness curve


                                                    Eco-Efficient Agriculture for the Poor
Figure 2 - Effect of the emission reduction amount on the cost-
effectiveness value.
Figure 2a - CEA value against different levels of emission reduction
and a constant cost.
Figure 1b - Representation of a cost-effectiveness curve

                                                    Eco-Efficient Agriculture for the Poor
MAC Curve: Silvopastoral Systems




                               Eco-Efficient Agriculture for the Poor
MAC Curve: Improved Pastures




                               Eco-Efficient Agriculture for the Poor
MAC Curve: Efficiency of Fertilizer Use in Rice




                                         Eco-Efficient Agriculture for the Poor
MAC Curve: Mango and Avocado




                               Eco-Efficient Agriculture for the Poor

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Economic analysis for mitigation alternatives - limits of MACCs by Andy Jarvis and Lini Wollenberg

  • 1. Expert Workshop on NAMAs: national mitigation planning and implementation in agriculture. Rome, 16-17 July 2012. CCAFS and FAO. Economic analysis for mitigation alternatives - limits of MACCs Jeimar Tapasco Andy Jarvis Lini Wollenberg WWW.ciat.cgiar.org Eco-Efficient Agriculture for the Poor
  • 2. MAC Curve McKinsey & Company (2010). Eco-Efficient Agriculture for the Poor
  • 3. MEXICO BRASIL Source: World Bank (2010) Source: World Bank (2010) UK Agriculture USA Source: OECD (2010) Sorce: Lutsey (2008)Agriculture for the Poor Eco-Efficient
  • 4. MAC Curve for Colombia World Bank and DNP -Energy - Transport - Agriculture, Forestry and Other Land Use Eco-Efficient Agriculture for the Poor
  • 5. Agriculture Agroforestry Forestry Annual Perrennial Tree + Crops Livestock Natural Plantation or/and Livestock Efficient Oil Palm Commercial Fertilization Silvopastoral Systems Forestry (Case Study: Plantations Rice) Pasture Rubber Plantations Improvement REDD+ Conversion of Pastures to Fruit Tree Plantations Crops in Cacao Nutritional Histosols Complements Low-Carbon Ecological Agricultural Restoration Practices Eco-Efficient Agriculture for the Poor
  • 6. Abatement Potential Cost- potential area effectiveness Intervention alternative (thousands evaluated (US$/tCO2eq) of (ha) Min Max tCO2eq/year) Commercial Forestry 44,037 4,000,000 -4,4 -2,7 Plantations Intensive Silvopastoral (ISS) 3.739.109 -49 0.6 Projects 43.819 Avoided Deforestation 65,874 2,250,000 -0.2 -0.2 (REDD Projects) Conversion of Pastures to 1,938 359,320 -188 -25 Fruit Production Rubber Plantations 1,786 260,000 -1,05 -0,67 Efficient Use of Fertilizers 38 170,000 -267 145 Pasture Improvement 54 51,487 -103 -62 Eco-Efficient Agriculture for the Poor
  • 7. MAC Curve - Aggregate 130 30 MAC: US$/tCO2 (70) (170) (270) - 10,000 20,000 30,000 40,000 Thousand tonnes of carbon saved/year Rice Casanare (Irrigation) Rice Valledupar Mango Huila Small Mango Huila Large Avoca.Tolima Medium Avoca. Tolima Large Mango Cundinamarca Small Avoca. Huila Medium Avoca. Huila Large Mango Cundinamarca Large Rice Tolima Improve Pasture Meta Rice Casanare Mango Cundinamarca Medium Mango Boyaca Small Improve Pasture Casanare Mango Tolima Small Rice Meta Improve Pasture Arauca Mango Tolima Large Avoca. Risaralda Large Avoca. Antioquia Medium Avoca. Quindio Large SSPi Bajo-Cauca (Antioquia) Avoca. Risaralda Small Avoca. Quindio Small Avoca. Caldas Large Mango Boyaca Large Avoca. Antioquia Large Avoca. Risaralda Medium Avoca. Caldas Small Avoca. Quindio Medium Mango Antioquia Large Avoca. Antioquia Small Mango Boyaca Medium Mango Antioquia Small Avoca. Caldas Medium Rice Guaranda y Nechi SSPi Eastern -Antioquia rest of the country (CIPAV) SSPi CĂłrdoba SSPi Atlantico SSPi Sucre SSPi Uraba-Antioquia SSPi Northeast - Antioquia Rice Jamundi Rice Cucuta Eco-Efficient Agriculture for the Poor
  • 8. CAUTION!! Economic tools must be appropriate for the problem at hand. Eco-Efficient Agriculture for the Poor
  • 9. Overview of selected key limitations of the cost/supply curve method* • Negative costs (Not all cots were included) • Strong focus on costs as selection criteria (there are other criteria) • It does not include environmental and social benefit and costs • Economic and technological uncertainty inherent to predicting the future • Strong level of aggregation of the databases used • High sensitivity relative to baseline assumptions (future) • Ignoring interdependencies between measures • High sensitivity to (uncertain) emission factor assumptions *Fischedick et al. 2011. Eco-Efficient Agriculture for the Poor
  • 10. MAC Curve global GHG beyond business as usual 2030 Source: McKinsey & Company (2010) Eco-Efficient Agriculture for the Poor
  • 11. Top priorities according to MAC curve Carbon saved (tCO2e/year) Cost (benefit) US$ Individual Individual Priority Measure US$/tCO2e Measure Aggregate Measure Aggregate 1 Rice Casanare (Irrigation) (267.2) 2,075 2,075 (554,465) (554,465) 2 Rice Valledupar (202.0) 321 2,397 (64,923) (619,388) 3 Mango Huila Small (188.2) 11,519 13,916 (2,168,430) (2,787,819) 4 Mango Huila Large (158.4) 46,296 60,212 (7,332,158) (10,119,977) 5 Avoca.Tolima Medium (138.1) 212,958 273,170 (29,412,260) (39,532,237) Least priorities according to MAC curve Carbon saved (tCO2e/year) Cost (benefit) US$ Individual Individual Priority Measure US$/tCO2e Measure Aggregate Measure Aggregate 43 SSPi Uraba-Antioquia (0.6) 898,966 898,966 (537,857) (537,857) 42 SSPi Sucre (2.6) 1,831,998 2,730,964 (4,699,801) (5,237,657) 41 SSPi Atlantico (3.4) 596,711 3,327,675 (2,042,915) (7,280,572) 40 SSPi CĂłrdoba (4.5) 3,747,996 7,075,671 (16,882,013) (24,162,585) 39 SSPi Eastern -Antioquia (8.5) 2,019,716 9,095,387 (17,218,786) (41,381,371) Eco-Efficient Agriculture for the Poor
  • 12. Conclusions • There are a large number of potential mitigation options that could be implemented at the national level, with highly varying degrees of emissions reductions, and associated costs for implementation Eco-Efficient Agriculture for the Poor
  • 13. . Clear goals should be set with any emissions reduction plan or strategy, and these goals can then be used as criterion for prioritization Eco-Efficient Agriculture for the Poor
  • 14. MAC curves are a useful input to evaluating priority interventions, but…….should be interpreted with caution. Incorrect use of the MAC curve for selecting interventions could lead to failure to prioritize the most appropriate interventions. Eco-Efficient Agriculture for the Poor
  • 15. Private perspective Public perspective Eco-Efficient Agriculture for the Poor
  • 16. Biophysical efficiency (kg meat) Eco-Efficient Agriculture for the Poor
  • 17. Biophysical efficiency (ha) Eco-Efficient Agriculture for the Poor
  • 18. Time constrains Eco-Efficient Agriculture for the Poor
  • 19. Thanks! Eco-Efficient Agriculture for the Poor
  • 20. Business as usual: Agriculture (Colombia) Business as usual: Livestock (Colombia) Eco-Efficient Agriculture for the Poor
  • 21. Cost (benefit) -1.000.000 -1.000.000 Carbon capture 1 1.000.000 Eco-Efficient Agriculture for the Poor
  • 22. Figure 1 - Effect of the emission reduction amount on the cost- effectiveness value. Figure 1a - CEA value against different levels of emission reduction and a constant cost. Figure 1b - Representation of a cost-effectiveness curve Eco-Efficient Agriculture for the Poor
  • 23. Figure 2 - Effect of the emission reduction amount on the cost- effectiveness value. Figure 2a - CEA value against different levels of emission reduction and a constant cost. Figure 1b - Representation of a cost-effectiveness curve Eco-Efficient Agriculture for the Poor
  • 24. MAC Curve: Silvopastoral Systems Eco-Efficient Agriculture for the Poor
  • 25. MAC Curve: Improved Pastures Eco-Efficient Agriculture for the Poor
  • 26. MAC Curve: Efficiency of Fertilizer Use in Rice Eco-Efficient Agriculture for the Poor
  • 27. MAC Curve: Mango and Avocado Eco-Efficient Agriculture for the Poor