Tree-crop interactions and their environmental and economic implications in the presence of carbon-sequestration payments
Russell Wise and Oscar Cacho
Growing trees with crops has environmental and economic implications. Trees can help prevent land
degradation and increase biodiversity while at the same time allow for the continued use of the land to
produce agricultural crops. In fact, growing trees alongside crops is known to improve both the
productivity and sustainability of the land. Often, however, due to high labour-input requirements, high
costs of establishment, and delayed revenue returns, trees are not economically attractive to
landholders. Because of the growing emphasis on market-based solutions to environmental problems,
both under and outside of the United Nations Framework Convention on Climate Change, carbon
sequestered and stored in the biomass and soils of agroforestry systems may have a direct market value
which is likely to alter the economic landscape of agroforestry systems. In this study, the economic and
management implications of carbon-sequestration payments on agroforestry systems are addressed
using a bioeconomic-modelling approach. An agroforestry system in Indonesia is simulated using a
biophysical process model. A general economic analysis of this system, from the standpoint of
individual landholders, is then undertaken and the implications for management are discussed. The
importance of the baseline is illustrated by undertaking economic analysis for land-use changes from
either grasslands or continuous cropping to an agroforestry system.