Insights into a black box! Comparison of organizational modes and their monetary implications for the producers of short rotation coppice (SRC) in Brandenburg/Germany

Abstract

A substantial change in energy policy in Germany towards the substitution of fossil, nonrenewable energy resources is part of a current political and social process. This change has been accelerated by the government’s decision in summer 2011 to phase out nuclear energy, a direct result of the nuclear disaster in Fukushima, Japan. As part of this development, new business activities and modes of organization for the provisioning of energy from alternative sources have emerged; one such activity is short rotation coppice (SRC) cultivation on agricultural land. In this paper, we compare the two prevailing organizational modes for SRC: independent production and contract farming. We use a mixed-methods approach to examine these modes from the producers’ point of view in Brandenburg/Germany. First, we give reasons for the producer’s choice between these two modes of organization based on the interviewee’s qualitative assessment of how these modes cope with perceived SRC-related challenges e.g. uncertainties. As economic uncertainty plays a major role in both refusal to adopt SRC and the choice of the mode of organization for SRC production, we secondly model the unknown economic outcome of the independent mode. We thereby give insights into the “black box”. This consists on the one hand of lacking economic figures for an economic comparison of both modes, and on the other hand of the producer’s decision-making process between both modes. For the latter, we use the theoretical approach of transaction costs to display ostensible non-monetary decision factors. Using a known monetary reference for the contract farming mode, we are able firstly to support a comparison of economic factors and secondly to identify and interpret the critical variables whose manifestations and/or changes are decisive for the economic outcome. The modelling results show that neither of the two modes performs better per se. This finding suggests that the weight ascribed to the transaction costs of SRC in each individual producer’s decision-making process is decisive for the producer’s choice of mode.