An analysis of externalities in agroforestry systems in the presence of land degradation

Abstract

Agroforestry can help prevent land degradation while allowing continuing use of land to produce crops and livestock on a sustainable basis. Despite the recognition that trees may have a high environmental value at the local level and the attention agroforestry has received as a tool for sustainable agricultural development, there is a lack of formal economic analyses on the role of agroforestry; this need is addressed in this study. A general economic analysis of an agroforestry operation on land prone to degradation and in the presence of positive forest externalities is developed. A numerical application is presented, based on a biophysical model of a watershed. The model is used to assess the value of forest externalities and the marginal cost of land degradation. The potential cost of incentives required to achieve a given target level of land productivity is estimated. The technique illustrated in this paper could be used to provide cost estimates that would serve as a basis for initial negotiations between stakeholders in a watershed wishing to establish a common-property approach to land management.