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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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  • 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
    DOI: 10.22004/ag.econ.126904
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    References listed on IDEAS

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    Cited by:

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    2. repec:fpr:export:2012ghifrench is not listed on IDEAS
    3. repec:fpr:ifprib:2012ghienglish is not listed on IDEAS
    4. von Grebmer, Klaus & Ringler, Claudia & Rosegrant, Mark W. & Olofinbiyi, Tolulope & Wiesmann, Doris & Fritschel, Heidi & Badiane, Ousmane & Torero, Maximo & Yohannes, Yisehac & Thompson, Jennifer & vo, 2012. "2012 Indice de la faim dans le monde:: Relever le defi de la faim: Assurer une sécurité alimentaire durable dan un monde sous contraintes en eau, en énergie et en terres," IFPRI books, International Food Policy Research Institute (IFPRI), number 2012 GHI French.
    5. Valbuena, Diego & Tui, Sabine Homann-Kee & Erenstein, Olaf & Teufel, Nils & Duncan, Alan & Abdoulaye, Tahirou & Swain, Braja & Mekonnen, Kindu & Germaine, Ibro & Gérard, 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.
    6. repec:fpr:ifprib:2012ghifrench is not listed on IDEAS
    7. Berta Moya & Ruben Sakrabani & Alison Parker, 2019. "Realizing the Circular Economy for Sanitation: Assessing Enabling Conditions and Barriers to the Commercialization of Human Excreta Derived Fertilizer in Haiti and Kenya," Sustainability, MDPI, vol. 11(11), pages 1-15, June.
    8. Koppmair, Stefan & Kassie, Menale & Qaim, Matin, 2017. "The influence of farm input subsidies on the adoption of natural resource management technologies," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 61(4), October.
    9. repec:fpr:resrep:2012ghienglish is not listed on IDEAS
    10. Chikobola, Musaka M. & Tembo, Gelson, 2018. "Policy brief Gaps in the implementation of the e-voucher system in Zambia: Implications for strategies to make the model efficient and effective," African Journal of Agricultural and Resource Economics, African Association of Agricultural Economists, vol. 13(2), June.
    11. Koppmair, Stefan & Kassie, Menale & Qaim, Matin, 2016. "Farm input subsidies and the adoption of natural resource management technologies," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 235313, Agricultural and Applied Economics Association.
    12. Falconnier, Gatien N. & Descheemaeker, Katrien & Traore, Bouba & Bayoko, Arouna & Giller, Ken E., 2018. "Agricultural intensification and policy interventions: Exploring plausible futures for smallholder farmers in Southern Mali," Land Use Policy, Elsevier, vol. 70(C), pages 623-634.
    13. Mansaray, B. & Jin, S. & Yuan, R. & Li, H., 2018. "Farmers Preferences for Attributes of Seed Rice in Sierra Leone: A Best-Worst Scaling Approach," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 277552, International Association of Agricultural Economists.
    14. repec:fpr:resrep:2012ghifrench is not listed on IDEAS
    15. Jayne, T.S. & Sitko, Nicholas J. & Mason, Nicole M., 2017. "Can Input Subsidy Programs Contribute To Climate Smart Agriculture?," Feed the Future Innovation Lab for Food Security Policy Research Papers 270626, Michigan State University, Department of Agricultural, Food, and Resource Economics, Feed the Future Innovation Lab for Food Security (FSP).
    16. Mkwara, Bentry, 2013. "To what extent do fertiliser subsidies improve household income and reduce poverty? The case of Malawi," African Journal of Agricultural and Resource Economics, African Association of Agricultural Economists, vol. 8(4), pages 1-12, October.
    17. Abubakar Hamid Danlami & Rabiul Islam & Shri Dewi Applanaidu & Ahmad Muhammad Tsauni, 2016. "An empirical analysis of fertiliser use intensity in rural Sub-Saharan Africa: Evidence from Tofa local government area, Kano State, Nigeria," International Journal of Social Economics, Emerald Group Publishing, vol. 43(12), pages 1400-1419, December.
    18. von Grebmer, Klaus & Ringler, Claudia & Rosegrant, Mark W. & Olofinbiyi, Tolulope & Wiesmann, Doris & Fritschel, Heidi & Badiane, Ousmane & Torero, Maximo & Yohannes, Yisehac & Thompson, Jennifer & vo, 2012. "2012 Global hunger index: the challenge of hunger: Ensuring sustainable food security under land, water, and energy stresses," IFPRI books, International Food Policy Research Institute (IFPRI), number 2012 GHI English.

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    Keywords

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