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Which would work better for improved soil fertility management in sub-Saharan Africa: Fertilizer Subsidies or Carbon Credits?

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Listed:
  • Marenya, Paswel Phiri
  • Nkonya, Ephraim M.
  • Xiong, Wei
  • Rossel, Jose Deustua
  • Edward, Kato

Abstract

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.

Suggested Citation

  • Marenya, Paswel Phiri & Nkonya, Ephraim M. & Xiong, Wei & Rossel, Jose Deustua & Edward, Kato, 2012. "Which would work better for improved soil fertility management in sub-Saharan Africa: Fertilizer Subsidies or Carbon Credits?," 2012 Conference, August 18-24, 2012, Foz do Iguacu, Brazil 126904, International Association of Agricultural Economists.
  • Handle: RePEc:ags:iaae12:126904
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    File URL: http://ageconsearch.umn.edu/record/126904/files/Marenya.pdf
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    References listed on IDEAS

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    1. Franck Lecocq & Karan Capoor, "undated". "State and Trends of the Carbon Market 2003," World Bank Other Operational Studies 13416, The World Bank.
    2. John M. Antle & Bocar Diagana, 2003. "Creating Incentives for the Adoption of Sustainable Agricultural Practices in Developing Countries: The Role of Soil Carbon Sequestration," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 85(5), pages 1178-1184.
    3. Tewodaj Mogues, 2011. "The Bang for the Birr: Public Expenditures and Rural Welfare in Ethiopia," Journal of Development Studies, Taylor & Francis Journals, vol. 47(5), pages 735-752.
    4. Bationo, Andre & Kihara, Job & Vanlauwe, Bernard & Waswa, Boaz & Kimetu, Joseph, 2007. "Soil organic carbon dynamics, functions and management in West African agro-ecosystems," Agricultural Systems, Elsevier, vol. 94(1), pages 13-25, April.
    5. World Bank, 2008. "Sustainable Land Management Sourcebook," World Bank Publications, The World Bank, number 6478.
    6. Cacho, Oscar J. & Marshall, Graham R. & Milne, Mary, 2005. "Transaction and abatement costs of carbon-sink projects in developing countries," Environment and Development Economics, Cambridge University Press, vol. 10(05), pages 597-614, October.
    7. Yesuf, Mahmud & di Falco, Salvatore & Deressa, Temesgen & Ringler, Claudia & Kohlin, Gunnar, 2008. "The impact of climate change and adaptation on food production in low-income countries: Evidence from the Nile Basin, Ethiopia," IFPRI discussion papers 828, International Food Policy Research Institute (IFPRI).
    8. Michael Morris & Valerie A. Kelly & Ron J. Kopicki & Derek Byerlee, 2007. "Fertilizer Use in African Agriculture : Lessons Learned and Good Practice Guidelines," World Bank Publications, The World Bank, number 6650.
    9. Haggblade, Steven & Hazell, Peter & Kirsten, Ingrid & Mkandawire, Richard, 2004. "African agriculture," 2020 vision briefs 12 No. 1, International Food Policy Research Institute (IFPRI).
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    Cited by:

    1. Valbuena, Diego & Tui, Sabine Homann-Kee & Erenstein, Olaf & Teufel, Nils & Duncan, Alan & Abdoulaye, Tahirou & Swain, Braja & Mekonnen, Kindu & Germaine, Ibro & GĂ©rard, Bruno, 2015. "Identifying determinants, pressures and trade-offs of crop residue use in mixed smallholder farms in Sub-Saharan Africa and South Asia," Agricultural Systems, Elsevier, vol. 134(C), pages 107-118.
    2. repec:eme:ijsepp:ijse-04-2015-0086 is not listed on IDEAS

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    Keywords

    Farm Management; International Development; Land Economics/Use; Research and Development/Tech Change/Emerging Technologies;

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