Understanding the economic barriers to the adoption of agroforestry: A Real Options analysis.

Agroforestry has a potentially important role in helping agriculture address both the climate and biodiversity crises. It provides a means of producing additional marketable goods from agricultural land and enhancing biodiversity at the same time as increasing carbon sequestration and, in silvo-pastural systems, reducing carbon emissions if livestock stocking rates are reduced. However, the uptake of agroforestry in the UK has been limited. This paper adopts Real Options techniques to explore how the decision to adopt agroforestry is influenced by the relative levels of returns from agriculture, forestry and the price of carbon under the scenario where there are financial penalties from livestock Greenhouse Gas (GHG) emissions, financial benefits from carbon sequestration in trees and reversibility in land use decisions. The results are compared to the equivalent findings from a Land Equivalent Value capital budgeting approach to agroforestry adoption. Analysis is based on data from a case study upland livestock farm in Scotland, comparing the impacts of introducing agroforestry into the hill sheep enterprise or the low ground cattle and sheep enterprise. The results suggest that the adoption of agroforestry is far less likely than would be suggested by standard budgeting approaches, especially in more extensive upland enterprises (hill area) where sequestration benefits are low relative to more productive farmland areas (low ground area). Upfront support payments are shown to increase the likelihood of agroforestry adoption. They also have the effect of reducing the rotation length of forestry in such systems.

A tool for cost-effectiveness analysis of field scale sediment-bound phosphorus mitigation measures and application to analysis of spatial and temporal targeting in the Lunan Water catchment, Scotland.

The cost-effectiveness of six edge-of-field measures for mitigating diffuse pollution from sediment bound phosphorus (P) runoff from temperate arable farmland is analysed at catchment/field scales. These measures were: buffer strips, permanent grassland in the lowest 7% of arable fields, dry detention bunds, wetlands, and temporary barriers such as sediment fences. Baseline field P export was estimated using export coefficients (low risk crops) or a modified Universal Soil Loss Equation (high risk crops). The impact of measures was estimated using simple equations. Costs were estimated from gross margin losses or local data on grants. We used a net cost:benefit (NCB) factor to normalise the costs and impacts of each measure over time. Costs minimisation for target impact was done using PuLP, a linear programming module for Python, across 1634 riparian and non-riparian fields in the Lunan Water, a mixed arable catchment in Eastern Scotland. With all measures in place, average cost-effectiveness increases from £9 to £48/kg P as target P mitigation increases from 500 to 2500kg P across the catchment. Costs increase significantly when the measures available are restricted only to those currently eligible for government grants (buffers, bunds and wetlands). The assumed orientation of the average field slope makes a strong difference to the potential for storage of water by bunds and overall cost-effectiveness, but the non-funded measures can substitute for the extra expense incurred by bunds, where the slope orientation is not suitable. Economic discounting over time of impacts and costs of measures favours those measures, such as sediment fences, which are strongly targeted both spatially and temporally. This tool could be a useful guide for dialogue with land users about the potential fields to target for mitigation to achieve catchment targets.