Presentation for Smallholder Mitigation: Mitigation Options and Incentive Mechanisms - Expert Workshop 7 - 8 July 2011


1. E
S
A S
Economics
of
sustainable
agricultural
systems
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

2. E
S
A S
Economics
of
sustainable
agricultural
systems
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?

3. E
S
A S
Economics
of
sustainable
agricultural
systems
Classic
barriers
to
technology
adoption
apply
in
SLM
case:
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

4. E
S
A S
Economics
of
sustainable
agricultural
systems
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

5. E
S
A S
Economics
of
sustainable
agricultural
systems
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

6. E
S
A S
Economics
of
sustainable
agricultural
systems
Adoption
Barriers:
Short
run
trade-­‐offs
even
where
long
run
is
win-­‐win
• Photos: FAO Mediabase
B. Investment Barrier to Adoption
Baseline net income Current net income
Time ==>
• Temporary net loss to
farmer
• New management practices
introduced
Source:
FAO
2007

7. E
S
A S
Economics
of
sustainable
agricultural
systems
Examples
of
establishment
and
maintenance
costs
of
SLM
Establishment
costs
Average
maintenance
costs
US$/ha US$/ha/year
Technology
options Practices Case study
Grevillea agroforestry system, Kenya 160 90
Shelterbelts, Togo 376 162
Different agroforestry systmes in Sumatra, Indonesia 1,159 80
Intensive agroforestry system (high input, grass
1,285 145
barriers, contour ridging), Colombia
Small-scale conservation tillage, Kenya 0 93
Minimum tillage and direct planting, Ghana 220 212
Medium-scale no-till technology for wheat and barley
600 400
farming, Morocco
Natural vegetative strips, The Philippines 84 36
Grassed Fanya juu terraces, Kenya 380 30
Konso bench terrace, Ethiopia 2,060 540
Compost production and application , Burkina Faso 12 30
Tassa planting pits, Niger 160 33
Runoff and floodwater farming, Ethiopia 383 814
Various agro-forestry
practices
Conservation
agriculture (CA)
Improved agronomic
practices
Integrated nutrient
management
Improved pasture
management
Grassland restoration and conservation, Qinghai
province, China (1)
65 12
Rotational grazing, South Africa 105 27
Grazing land improvement, Ethiopia 1,052 126
Improved grazing
management
Agro-forestry
Soil and water
conservation
Improved pasture
and grazing
management
Sources: Wocat 2007, Liniger et al. 2011, FAO 2009, Cacho et al. 2003
(1) Project estimates

8. E
S
A S
Economics
of
sustainable
agricultural
systems
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)
Size of herd
Small 14.42 118 5 10
Medium 25.21 191 1 4
Large 25.45 215 1 1
Source: Wilkes 2011

9. E
S
A S
Economics
of
80
sustainable
agricultural
systems
But are these costs reflected in MACCs?
60
40
20
0
-­‐20
-­‐40
-­‐60
-­‐80
-­‐100
Reduced
deforesta4on
from
pastureland
conversion
Wind
(high
penetra4on)
10
15
20
Abatement
poten+al
Gt
CO2e
Breakdown
by
abatement
type
• 9
Gt
for
terrestrial
carbon
(forestry
and
agriculture)
• 6
Gt
for
energy
efficiency
• 4
Gt
for
low
carbon
energy
supply
Ligh4ng:
switch
CFLs
to
LEDs,
residen4al
Source:
McKinsey
Global
GHG
Abatement
Cost
Curve
v2.0

10. E
S
A S
Economics
of
sustainable
agricultural
systems
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

11. E
S
A S
Economics
of
sustainable
agricultural
systems
Conclusions
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

12. E
S
A S
Economics
of
sustainable
agricultural
systems
THANK YOU!