Socioeconomic Aspects of Carbon Sequestration

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Socio-Economic Aspects of Carbon Sequestration
Wealth Ranking Cost-Benefit Analysis Cash-Flow
Analysis (Systems Analysis with STELLA)
Petra Tschakert Arid Lands Resource
Sciences University of Arizona March , 2003
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Decision-Making Processes
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Resource Endowment Groups

• Participatory Wealth Ranking
• Farmers define wealth criteria for 3 groups
• (poor, medium, rich)
• Farmers stratify all households/compounds
  according to
• the wealth groups defined (3 pots/hats)
• Stratified random sampling to select households/
• compounds for further activities

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Example CriteriaResource Endowment Groups
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Data Collection at HH Level

• HH members
• Land (ha) inherited, rented, borrowed, etc.
• Animals
• Equipment
• Agricultural calendars (labor hours)
• Crops, production (yields GPS)
• Distribution of ag. products
• Income/expenditures
• Consumption patterns.

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Income and Expenditures
Sources of income Categories of
expenditure Ranking by importance
Responsible person Transaction period Actual
amounts
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Differences in Resource Endowment
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Cost-Benefit AnalysisFarmer-centered, ex-ante
Costs inputs, labor, land rent (forgone
production) Benefits increased yields, animals,
animal products, tree products

• Other possible costs and benefits
• Energy costs
• (fertilizer production)
• Measurements, monitoring
• Training
• Benefits to general society

• Data source
• Farmers
• Market study
• Reports
• Web
• Etc.

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Costs (Example Poor HH)
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Cost Description
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Benefits
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Benefits Description
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Calculations

• Undiscounted
• Total costs over time (25 years)
• Total benefits over time (25 years)
• Subtraction - Undiscounted Net Benefits

• Discounted
• Undiscounted Net Benefits
• Add discount rate
• Net Present Value (NPV) or Discounted Net Benefits

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Undiscounted Net Benefits(CFA ha-1)
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CalculateNet Benefits (Undiscounted), in
tC-11. C increase per ha
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CalculateNet Benefits (Undiscounted), in tC-1
2. Calculate per carbon increase
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Net Benefits (Undiscounted), in tC-1
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Discounted Benefits
Given a choice, individuals would prefer to have
a unit of benefits today rather than in the
future A unit next year is worth less than a
unit this year ? next years amounts must be
divided by (1i) to obtain the current or
present value, (NPV), to be comparable in
today-value terms With future benefits
discounted, both figures (todays investment
tomorrows benefit) are in present term value
and can be compared
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Example Discounting
1/(10.2)
1/(10.22)
1/(10.23)
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Net Present Values (NPV), in 20 Discount Rate
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Net Present Values (NPV), 20 Discount Rate
Indicates Profitability
NPV - Rich HH Costs Yr1 Rich HH NPV Medium
HH Costs Yr1 Medium HH NPV Poor HH Costs Yr1
Poor HH
Black circles negative NPV
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Sensitivity Analysis on CBA

• Test effect of changes in key parameters
• Different discount rate (10, 40)
• Different prices for inputs, labor, outputs
• Subsidies

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Net Present Values (NPV) with Subsidies20
Discount Rate
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HH Budgets and Decision-Making (STELLA Model)
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STELLA Example Millet Sector
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Model Validation Example Rich Household
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Model ValidationExample Poor Household
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Integrating C Management into HH Budgets
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Inventory of Management Choices
Poor HH
Rich HH