Julia Berazneva is a PhD candidate at Cornell’s Dyson School and is currently on the job market.
For the majority of the world’s poorest billion people living in rural areas, the connection between their livelihoods and the natural resource base is clear. Their agricultural production relies on soil, water, climate, and a range of biological processes, while their management practices affect the current and future state of local natural resources and contribute, beneficially or adversely, to climatic changes.
Over the last several decades the international community of policymakers and researchers has recognized this link. The 2012 World Bank report, for example, makes a strong case for climate-smart agriculture that is governed by three imperatives: “increase productivity in an environmentally and socially sustainable way, strengthen farmers’ resilience to climate change, and reduce agriculture’s contribution to climate change by reducing GHG emissions and sequestering carbon” (p. xv). Climate-smart agriculture encompasses a range of practices, however, all these practices focus on managing soil – the basic resource in agricultural land use – and many practices rely on agricultural residues.
In my job market paper (co-authored with Jon Conrad, David Güereña, and Johannes Lehmann), I examine the impact of a simple climate-smart agricultural practice – simultaneous use of mineral fertilizer and crop residues – on agricultural productivity, farm incomes, and soil carbon stocks. I develop a dynamic bioeconomic model of agricultural households and parameterize it using agronomic and socio-economic data from the western Kenyan highlands to find that this climate-smart agricultural practice can double maize yields and simultaneously sequester carbon.
Agronomists and soil scientists have long called for the combined application of mineral fertilizer and organic resources to overcome soil fertility constraints across Sub-Saharan Africa, which have been singled out as the most important biophysical cause of low per capita food production on the continent (Sanchez 2002, Vanlauwe and Giller 2006). Fertilizer supplies nutrients to plants, while organic resources replenish soil carbon and soil organic matter stocks that enhance soil physical, chemical, and biological properties and processes; all of these are fundamental to long-term soil fertility. The improvement of soil properties increases yields, provides a buffer against extreme climatic events, and enhances input use efficiency and the resilience of agro-ecosystems.
Dynamic bioeconomic model
Our study area is the western Kenyan highlands, one of the most densely populated and poorest regions of the country, with over 55% of the population living below the national rural poverty line (about US$0.59 per day). Average farms are small (0.5-2 hectares) and suffer from severe soil degradation.
Our theoretical framework extends the traditional agricultural household model to incorporate the dynamic nature of natural resource management and to integrate biophysical processes through soil carbon management. The farmer’s objective is to maximize the discounted present value of net returns from a representative hectare of land planted with maize over an infinite planning horizon. Soil carbon is a state variable that influences agronomic productivity, and carbon flows depend on the application rate of nitrogen fertilizer and the quantity of maize residues left on the field. The empirical model combines an econometrically estimated maize production function and a soil carbon flow equation calibrated with the Rothamsted Carbon Model in a maximum principle framework.
We treat soil fertility both as an input in agricultural production and a renewable resource. By explicitly recognizing that yields depend on the conditions of local natural resources, we extend the literature that examines crop responses to fertilizer, hybrid seeds, and other inputs or reasons for their limited applications (see, for example, recent studies in Kenya by Marenya and Barrett (2009), Suri (2011), Duflo, Kremer, and Robinson (2011), and Sheahan, Black, and Jayne (2013)). We also model farm household intertemporal management practices and their effects on current and future agricultural productivity and carbon sequestration potential (extending the work of Burt (1981) and Holden, Shiferaw, and Pender (2005)).
Data from several sources are used to build our bioeconomic model. Plot-level data come from an eight-year-long “chronosequence” experiment in Vihiga and Nandi districts of western Kenya designed to analyze the long-term effects of land conversion from primary forest to agriculture (see, for example, Ngoze et al. 2008 and Kimetu et al. 2008). The distinctive nature of this panel data set – which amounts to a quasi-natural experiment – allows for estimation of dynamic relationships between agronomic productivity, land use management decisions, and soil carbon. The data set is supplemented by the household and market data in the districts surrounding the agronomic sites that I collected in 2011-2013 (and described in my other papers here and here).
Increase in agricultural productivity
Assuming a discount rate of 10%, the main results of our model’s simulation are the following:
- Regardless of the initial soil fertility level, optimal management strategies lead to high maize yields (4.05 Mg/ha) – more than double those achieved with the current practices of Kenyan farmers (see Figure below);
- To achieve these yields both mineral fertilizer and organic resources are required in considerable quantities, with more depleted soils requiring higher application rates at the outset (the equilibrium application of nitrogen is 0.08 Mg/ha and the share of crop residues is 86% as compared to current practices – 0.014 Mg/ha and 53%); and
- Initial conditions matter: the discounted net present value of agricultural profits from a hectare of land is highest for farms with fertile soils (over US$5,300) and declines for farms with medium fertility and degraded soils.
Value of soil carbon and potential for soil carbon sequestration
Our analysis also has implications for global climate policy debates in terms of understanding the value of soil carbon and its potential in mitigating climate change.
We estimate the steady-state shadow price of soil carbon to be US$120 per Mg of carbon or US$33 per Mg of carbon dioxide equivalent (CO2e). This value reflects the significant local benefits of carbon in the form of soil fertility improvements and increased maize yields. And it is substantially higher than the majority of existing national and sub-national carbon pricing instruments (see recent carbon dioxide prices in the European Union Emissions Trading System or the average prices for forestry offsets).
Not surprisingly, the potential for soil carbon sequestration is highest for farms with depleted soils. Over 25 years, the soil carbon stock increases by 15.75 Mg/ha, with an average annual increase of 630 kg/ha of carbon. The annual sequestration rate for depleted soils in our model is the same as the annual carbon sequestration from a hectare of African tropical forests.
What this means for policy
Removing crop residues for fodder and fuel are prevailing agricultural practices throughout tropical and subtropical areas of the developing world (Lal 2006). The households in our study area, for example, use roughly a quarter of maize residues as fuel, allocate another quarter for feeding animals, and leave the remaining half as organic soil amendments. In many other areas, crop residues are burnt, contributing to carbon emissions and local pollution.
Climate-smart agricultural practices that rely on crop residues, therefore, will be adopted only if farmers recognize their significant benefits and if alternative sources for competing uses of organic resources are identified and made available. Such practices also need to become part of government policies or programs aimed at improving agricultural productivity, achieving food security, and eliminating poverty. They could include fertilizer subsidies, extension services, establishment of biofuel plantations on degraded and marginal lands, and improving access to credit.