Economic Potential of Agroforestry and Forestry in the Lower Mississippi Alluvial Valley with Incentive Programs and Carbon Payments

Abstract

Abstract Conversion of bottomland hardwood forests in the Lower Mississippi Alluvial Valley (LMAV) to agricultural land has caused a loss of ecosystem services. The primary approaches to reverse this have been the Wetlands Reserve Program and the Conservation Reserve Program, which provide financial incentives to landowners to reforest. However, other forest production regimes and forestry financing mechanisms will be necessary to meet reforestation goals. Using capital budgeting techniques, we estimated financial returns from eight agroforestry and seven forestry systems to compare to returns from agriculture on marginal and average lands in the LMAV, as an indicator for potential adoption. In all but a few cases, agriculture had higher returns than agroforestry and forestry, even on marginal lands, and this is especially true when considering federal agricultural payments. We then estimated the break-even carbon net revenue per metric ton that would create a large enough financial incentive to favor forestry or agroforestry systems over agriculture. Given prospective moderate prices from carbon credits from afforestation and reforestation activities and high costs for implementing those activities, a few forestry and agroforestry systems might have potential on marginal agricultural land in the LMAV, subject to requirements such as providing evidence that reforestation would not have taken place without carbon payments. Regimes that maintain a large carbon stock on site by avoiding clearcutting performed better under carbon markets.