Opportunity Cost Of Land Research Articles

Restricting Second-Generation Energy Crop Production to Marginal Land

Production of switchgrass as a dedicated energy crop in the USA was proposed as a way to produce valuable products on millions of hectares that had been bid from traditional crop production by a variety of federal programs. The objective of the present study is to determine the expected economic consequences in terms of cost to deliver biomass feedstock, from restricting switchgrass production to marginal land for a case study region, when (a) land use is restricted to class IV; (b) land use is restricted to classes III and IV; and (c) use of land capability classes I, II, III, and IV is permitted. A hypothetical biorefinery with a processing capacity of 2000 Mg/day is assumed with switchgrass as the single biomass source. Soils and weather data were used in combination with crop management data to simulate switchgrass yields for each land capability class, for 50 years, for each of 30 Oklahoma counties. Land opportunity cost required to bid land from current use for each land capability class and each county were simulated based on the 2013 revealed county average Conservation Reserve Program (CRP) rental rates adjusted across capability class by relative productivity. A mathematical programming model was constructed and solved to determine the optimal quantity, location, and quality of the land leased. For the case study region, restricting land use to only capability class IV increases the land requirement by 44 % and increases the cost to deliver feedstock by 32 % compared to when switchgrass production is permitted on land classes I–IV.

Economics and environmental performance issues of a typical Amazonian beef farm: a case study

Concerns about land use change and the sustainability of beef production are increasing around the world, particularly in the Amazonian region. We intend to improve understanding of economic and environmental issues of a typical Amazonian beef farm at the farm level. We use production cost and profitability analysis to assess farm economics. Through an original approach, we assessed greenhouse gas (GHG) emissions using a Life Cycle Assessment model to integrate land-use change (LUC) and Soil Carbon Storage (SCS). We show that beef farms are profitable only in the short-term. The main hotspots are land opportunity cost and livestock costs. The largest source of GHG emissions from beef production (15 kg CO2 equivalents per kg of live weight produced) is from enteric fermentation (83%). LUC emissions can double the impact of GHG. Therefore, forestland preserved on Brazilian farms is an important sink of SCS that can compensate for all farm GHG emissions. Based on the literature, we conclude that economic failure and the substantial GHG emissions are related to the low productivity of animals and land.

A comprehensive analysis of teak plantation investment in Colombia

A financial assessment of forest investments is comprehensive if the analysis includes reliable yield estimates, land expectation value (LEV) and risk calculation. All of these aspects were considered and applied to teak plantations in Colombia, an emergent economy where high forest productivity, low opportunity cost of land, and decreased financial/economic risk have substantially contributed to promote forest investments. The von Bertalanffy non-linear mixed effect model was used to estimate forest yields using data collected from 31 permanent sample plots, measured over a 17year period. A stochastic version of LEV along with other financial criteria was calculated by using a computer algorithm and Monte Carlo simulation. Finally, probabilities obtained from stochastic financial calculations were used in logistic models to estimate probabilities of success for a forest plantation project, a measure of risk assessment, after changing land prices. Results suggest that the potential forest productivity (i.e., the biological asymptote) ranges from 93 to 372m3ha−1. The mean annual increment is 27.8m3ha−1year−1, which is attained 6years after the forest plantation is established. Profitability analyses for teak plantations in Colombia suggest a LEV of US$7000ha−1. The risk analyses indicate negligible financial risk for forestlands whose prices are lower than US$2000ha−1.

To grow or not to grow? Factors influencing the adoption of and continuation with Jatropha in North East India

The study examines the personal, physical, economic, institutional, and risk and uncertainty factors that determine the adoption of and continuation with Jatropha plantations in North East India. The study is based on a sample of 144 present-growers, 137 past-growers, and 145 non-growers of Jatropha in the states of Assam and Arunachal Pradesh. Farmer characteristic such as their willingness to take risks and whether they have land that is not in use in agriculture play an important role. Two institutional factors are critical - availability of credit and extension services. If farmers are able to grow Jatropha in land that is really not suitable for agriculture, they are more likely to stick with the plantation. Non-farm labor availability and travel and time related to transportation of labor and seedlings also matter. The study recommends the extension of government credit facilities to the farmers as the opportunity cost of labor and land, the initial low returns, and the approximately 5-year payback period from Jatropha cultivation exert a negative and significant influence on farmers' desire to continue with Jatropha cultivation. The study also recommends that the government consider increasing the market price of Jatropha to ensure sustainability of the industry in the region.

Lamb Production Costs: Analyses of Composition and Elasticities Analysis of Lamb Production Costs.

Since lamb is a commodity, producers cannot control the price of the product they sell. Therefore, managing production costs is a necessity. We explored the study of elasticities as a tool for basing decision-making in sheep production, and aimed at investigating the composition and elasticities of lamb production costs, and their influence on the performance of the activity. A representative sheep production farm, designed in a panel meeting, was the base for calculation of lamb production cost. We then performed studies of: i) costs composition, and ii) cost elasticities for prices of inputs and for zootechnical indicators. Variable costs represented 64.15% of total cost, while 21.66% were represented by operational fixed costs, and 14.19% by the income of the factors. As for elasticities to input prices, the opportunity cost of land was the item to which production cost was more sensitive: a 1% increase in its price would cause a 0.2666% increase in lamb cost. Meanwhile, the impact of increasing any technical indicator was significantly higher than the impact of rising input prices. A 1% increase in weight at slaughter, for example, would reduce total cost in 0.91%. The greatest obstacle to economic viability of sheep production under the observed conditions is low technical efficiency. Increased production costs are more related to deficient zootechnical indexes than to high expenses.

Payments for ecosystem services from watershed protection: A methodological assessment of the Oasis Project in Brazil

This study evaluates the methodology of payment for ecosystem services (PES) adopted in the Oasis Project in order to compensate landowners that voluntarily accept to conserve natural forest areas associated with watershed protection, with special focus on the experience of Apucarana, in the state of Parana, Brazil. It is argued that the establishment of a payment scheme combining the opportunity cost of land and indices for the quality and quantity of conservation (considering water resources, natural areas conservation, and best agricultural practices) guarantees more efficiency in terms of the conservation area that can be achieved using the same financial resources. This study also discusses other conditions for the successful implementation of new PES opportunities in Brazil, such as the involvement of local authorities, monitoring, and sources of funding.

Household-level effects of China's Sloping Land Conversion Program under price and policy shifts

This study examined how agricultural households involved in China's Sloping Land Conversion Program (SLCP) could respond to expected changes in environmental and livestock policies and changing commodity prices. We calibrated a farm household model using 2009 survey data collected in northeast Gansu Province, China, and examined the responses of four different household groups. Household groups were distinguished based on the resources they possessed for either cropping, livestock husbandry or off-farm employment. We also calculated the opportunity cost of converting sloping land from grain crop production to perennial grass production and included the net value of the replacement crop in these calculations. Our model simulations indicated that subsistence-oriented households were most likely to participate in the SLCP, and that SLCP payment reductions could have large negative income effects for this group. Reductions in SLCP payments increased income inequality among households in the study area. Migration- and cropping-oriented households have fewer incentives to participate in the SLCP. With rising commodity prices, SLCP payments need to rise to avoid that subsistence-oriented households reconvert their land from perennial grasses to annual grain crops. Local government policies related to livestock production are being devised in Gansu as a method to lift incomes, and these policies could also have positive environmental benefits by increasing grass production on sloping land. The introduction of these livestock promotion policies had modest income effects but did not alter the area grown with grasses under the SLCP.

Co‐benefits, trade‐offs, barriers and policies for greenhouse gas mitigation in the agriculture, forestry and other land use (AFOLU) sector

The agriculture, forestry and other land use (AFOLU) sector is responsible for approximately 25% of anthropogenic GHG emissions mainly from deforestation and agricultural emissions from livestock, soil and nutrient management. Mitigation from the sector is thus extremely important in meeting emission reduction targets. The sector offers a variety of cost-competitive mitigation options with most analyses indicating a decline in emissions largely due to decreasing deforestation rates. Sustainability criteria are needed to guide development and implementation of AFOLU mitigation measures with particular focus on multifunctional systems that allow the delivery of multiple services from land. It is striking that almost all of the positive and negative impacts, opportunities and barriers are context specific, precluding generic statements about which AFOLU mitigation measures have the greatest promise at a global scale. This finding underlines the importance of considering each mitigation strategy on a case-by-case basis, systemic effects when implementing mitigation options on the national scale, and suggests that policies need to be flexible enough to allow such assessments. National and international agricultural and forest (climate) policies have the potential to alter the opportunity costs of specific land uses in ways that increase opportunities or barriers for attaining climate change mitigation goals. Policies governing practices in agriculture and in forest conservation and management need to account for both effective mitigation and adaptation and can help to orient practices in agriculture and in forestry towards global sharing of innovative technologies for the efficient use of land resources. Different policy instruments, especially economic incentives and regulatory approaches, are currently being applied however, for its successful implementation it is critical to understand how land-use decisions are made and how new social, political and economic forces in the future will influence this process.

Exploring future changes in smallholder farming systems by linking socio-economic scenarios with regional and household models

We explore how smallholder agricultural systems in the Kenyan highlands might intensify and/or diversify in the future under a range of socio-economic scenarios. Data from approximately 3000 households were analyzed and farming systems characterized. Plausible socio-economic scenarios of how Kenya might evolve, and their potential impacts on the agricultural sector, were developed with a range of stakeholders. We study how different types of farming systems might increase or diminish in importance under different scenarios using a land-use model sensitive to prices, opportunity cost of land and labour, and other variables. We then use a household model to determine the types of enterprises in which different types of households might engage under different socio-economic conditions. Trajectories of intensification, diversification, and stagnation for different farming systems are identified. Diversification with cash crops is found to be a key intensification strategy as farm size decreases and labour costs increase. Dairy expansion, while important for some trajectories, is mostly viable when land available is not a constraint, mainly due to the need for planting fodders at the expense of cropland areas. We discuss the results in relation to induced innovation theories of intensification. We outline how the methodology employed could be used for integrating global and regional change assessments with local-level studies on farming options, adaptation to global change, and upscaling of social, environmental and economic impacts of agricultural development investments and interventions.

English

Indiscriminate allocation of farm farmlands beyond efficient level affect farmers return, hence suitability and standard value of lands for cassava production for optimal use were investigated. Data were obtained using a multi-stage sampling technique, from a sample of 203 cassava farmers in the state and were analysed using descriptive statistics, land productivity ratio and econonometric tools. Most farmers are female of 55.7 6.8 years of age and post primary education status. Nutrient ammendment is at the rate of 442.36 ± 102.73 Kg/Ha and at mean cost of N36401.77 ± 28575.84/Ha. The performance rate of 0.96 tons/person/Ha was obtained. The suitability index ranges from 0.139 to 0.908 with 46.3% cultivating on non-suitable land of 0.0-0.339 while only 20.7% cultivated on suitable lands of above 0.723 suitability index with a smaller mean area of 1.48Ha. The performance rate across these classes of land ranges from 0.44 tons/Ha/person to 2.11 tons/Ha/person for non-suitable land and suitable lands respectively. Suitable lands had the highest land productivity of 5.71 while moderate and non suitable lands had only 4.00 and 3.72 respectively, hence about 53.4% and only 7.5% increase in production is achieved as a piece of land is improved from non-suitable and moderately suiatble lands respectively to suitable land in the area. The MVP ranges from N302429.76/Ha for non-suitable lands to N718535.2/Ha for suitable lands. The study noted that suitable lands have higher opportunity cost than others for cassava production, hence recommentds that opportunity cost of land must be based on higher MVP for optimal use. Key words: Farmland, suitability, marginal, value, productivity, cassava.

Potential of cultivation of Gliricidia (Gliricidia sepium) in coconut triangle for bioenergy generation

Evaluation ofleast cost and environmentally friendly energy alternatives is essential to overcome theprevailing energy crisis. Dendro thermal energy generation has been identified as one of the bestoptions due to its potential as a low cost and locally available environmentally sound energy source.However. this potential has not been exploited by the people in most of the potential areas whichhinder the further expansion of establishing bio-energy plants. With this background, a study wasundertaken to evaluate the present status and the potential of gl iricidia (Gliricidia sepium) cultivationin coconut triangle for bio-energy generation. Gliricidia sepium is a multipurpose crop used forwood, fuel wood, fodder and nitrogenous organic fertilizer. The wood is presently used for thermalenergy i.e., electricity generation for the national grid (Walapane); electricity generation for off-gridrural electrification (Kakkapalliya, Thanamalwi la);industrial heat application (Madarnpe, Kottawa etc.)and household cooking. The study further attempted to determine the factors associated with thesupply of gliricidia for bio-energy generation and attitudes of the coconut growers towards the gliricidiaintercropping. Finally, it examined the strengths and weaknesses of the supply as well as demand inorder to make sound recommendations to promote gliricidia cultivation in coconut lands for bio-energygeneration.Two field surveys were simultaneously conducted to gather the necessary data. The first survey dealtwith the existing suppliers in Anarnaduwa area, while the second survey was carried out in Kuliyapitiyaarea with the potential growers. In addition, a case study was conducted with successful growers.Logit modeling was used to analyze the data.The study found that the opportunity costs ofland and labour of the both sites of study were fairly low.Moreover, the investment on agriculture related activities in marginal coconut lands were extremelylow. Further the study revealed that even though there was a positive attitude and high demand forgl iricid ia cultivation, there is an inadequate supply to the thermal plants for bio-energy generation. Thetechnical information on growing gliricidia for bioenergy generation had not disseminated into thepeople of the area mainly due to lack of awareness programmes. The results of the logit analysisrevealed that income from coconut, total highland availability and willingness to become a contractfanner are significant variables that influence the willingness to cultivate gliricidia. The case studyrevealed that the cultivation of gliricidia appear to be economically profitable and technically feasibleoption given that its low input nature, availability of marginal coconut lands, low opportunity cost oflabour and less income opportunities avai lable in these areas, Government involvement and having areasonable price with stable market for gliricidia will encourage the public to enter into this businesswhereas effective extension service is a must for making people aware.

Optimal Conversion of Forest Land to Agriculture: Evidence from Côte d’Ivoire

The Ivorian economy is based on agriculture which constitutes by far the main cause of deforestation through its shifting characteristic. This situation threatens the ecological equilibrium on which depends in turn agricultural productivity. This paper investigates the determinants for optimal conversion of forest land to agriculture. To this end, we firstly established the optimal rule of forest land allocation to agriculture based on a rigorous forest land use modelling using optimal control techniques. Secondly, we evaluate the effects of the variables highlighted by the theoretical model through an econometric model in the form of error correction model. The study shows that the opportunity cost of forest land and the marginal cost of agricultural exploitation preserve the forest by limiting forest land conversion to agriculture. However, a technological progress in agricultural sector amplifies land conversion process. Finally, we found that there is a minimum level of agricultural yield (967.1 kg/ha) required to reduce forest land conversion. Thus, the paper recommends the development of off farm activities, an increase in agricultural yield and the adoption of labour intensive technologies in order to ensure a sustainable economic growth.

Economic dynamics and forest clearing: A spatial econometric analysis for Indonesia

This paper uses a large panel database to investigate the determinants of forest clearing in Indonesian kabupatens since 2005. Our study incorporates short-run changes in prices and demands for palm oil and wood products, as well as the exchange rate, the real interest rate, land-use zoning, forest protection, the estimated opportunity cost of forested land, the quality of local governance, the poverty rate, population density, the availability of communications infrastructure, transport cost, local rainfall and terrain slope.The econometric results highlight the role of dynamic economic factors in forest clearing: significant roles for lagged changes in all the short-run economic variables—product prices, demands, the exchange rate and the real interest rate—as well as communications infrastructure, some types of commercial zoning, rainfall and terrain slope. We find no significance for the other variables, although our measure of protected-area status is too general for strong conclusions to be drawn about the empirical relationship between forest clearing and protection. It is also possible that the insignificance of transport cost in our results is due to collinearity with our proxy for communications cost, and/or the offsetting effects of transport cost on the direct profitability of forest clearing (negative) and the effectiveness of local forest regulation (positive).Our results strongly support a model of forest clearing as an investment that is highly sensitive to expectations about future forest product prices and demands, as well as changes in the cost of capital (indexed by the real interest rate), the relative cost of local inputs (indexed by the exchange rate), and the cost of land clearing (indexed by local precipitation). By implication, the opportunity cost of forested land fluctuates widely with changes in international markets and decisions by Indonesia's financial authorities about the exchange and interest rates. Our results suggest that forest conservation programs are unlikely to succeed if they ignore such powerful forces.

How sustainable are forestry clean development mechanism projects?—A review of the selected projects from India

This paper analyses social, economic and ecological issues affecting sustainability of the four selected forestry clean development mechanism (CDM) projects from India. Data from the group discussions and stakeholder interviews suggest that three out of the four projects are economically unsustainable for local people because of high opportunity cost of land and labour, and delayed and low benefits. The average opportunity cost of the land is 20000, 12000 and 9000 INR/ha/year in case of Haryana, Himachal Pradesh and Tamil Nadu, India projects respectively, which is unlikely to be met through projected carbon revenues and other benefits. A significant number of farmers have already withdrawn their private lands in Haryana and Tamil Nadu projects. Very few of them have undertaken plantations on the private lands in the Himachal project. All the four projects have undertaken block plantations of predominantly fast growing species such as Eucalyptus (Eucalyptus hybrid), Casuarina (Casuarina equisettifolia) and Ailanthus (Ailanthus excelsa) for high growth and quick returns, which could have adverse social and ecological impacts over long term. There are social and institutional issues such as low participation of local communities, weak or non existing community institutions, inflexible design and rigid CDM rules, which affect sustainability of these projects. It has implications for other carbon forestry programmes such as Green India Mission and Reducing Emissions from Deforestation and Degradation (REDD+) being rolled out at a large scale in the country. The rationale and significance of these programmes needs to be objectively reexamined in context of the issues affecting CDM projects.

A stochastic analysis of the decision to produce biomass crops in Ireland

There is increasing interest in biomass crops as an alternative farm activity. However farmer concerns about the production and financial risks associated with growing these crops may be impeding the actual rates of adoption. The uncertainty surrounding risky variables such as the costs of production, yield level, price per tonne and opportunity cost of land make it difficult to accurately calculate the returns to biomass crops. Their lengthy production lifespan may only serve to heighten the level of risk that affects key variables. A stochastic budgeting model is used to estimate distributions of returns from willow and miscanthus in Ireland. The opportunity cost of land is accounted for through the inclusion of the foregone returns from selected conventional agricultural activities. The impact on biomass returns of bioremediation is also examined. The Net Present Values (NPVs) of various biomass investment options are simulated to ascertain the full distribution of possible returns. The results of these simulations are then compared using their respective Cumulative Distribution Functions (CDFs) and the investments are ranked using Stochastic Efficiency with Respect to a Function (SERF). While the distributions of investment returns for miscanthus are wider than those of willow, implying greater risk, the distribution of willow returns is predominantly to the left of zero indicating that such an investment has an extremely high probability of generating a negative return. The results from the SERF analysis show that miscanthus generally has higher certainty equivalents (CEs), and therefore farmers would be more likely to invest in miscanthus rather than willow.

Saving and consumption in cities

This paper examines urban residential location and rent determination within a city populated by consumers acting with perfect foresight. In this setting, the consumption and saving decisions of city residents are determined jointly with their choice of location, thereby offering an initial step to understanding how housing services influence non-durable consumption, and vice versa. Housing, supplied by profit-maximizing land owners, is distinguished from more non-descript varieties of durable consumption by the attributes and amenities it provides occupants. These attributes are limited in supply, indivisible, and distinguished by their location in geographic space and time of development.In equilibrium, both household consumption and the rental price of housing are expressed in terms of the resident household’s permanent income. In contrast to models presuming hand-to-mouth dynamics, dwelling rents depend on interest rates, future realizations of economic fundamentals such as income and commuting costs, and accumulated wealth. Finally, residential saving is determined not only by wealth, income, and market prices, but also by city-specific factors such as population, supply constraints, and the opportunity cost of land, suggesting a novel and important role for regional and geographic differences in consumer behavior.

Economic Dynamics and Forest Clearing: A Spatial Econometric Analysis for Indonesia

This paper uses a large panel database to investigate the determinants of forest clearing in Indonesian kabupatens since 2005. Our study incorporates short-run changes in prices and demand for palm oil and wood products, as well as the exchange rate, the real interest rate, land-use zoning, forest protection, the estimated opportunity cost of forested land, the quality of local governance, the poverty rate, population density, the availability of communications infrastructure, transport cost, and local rainfall and terrain slope. Our econometric results highlight the role of dynamic economic factors in forest clearing. We find significant roles for lagged changes in all the short-run economic variables — product prices, demands, the exchange rate and the real interest rate — as well as communications infrastructure, some types of commercial zoning, rainfall, and terrain slope. We find no significance for the other variables, and the absence of impact for protected-area status is particularly notable. Our results strongly support the model of forest clearing as an investment that is highly sensitive to expectations about future forest product prices and demands, as well as changes in the cost of capital (indexed by the real interest rate), the relative cost of local inputs (indexed by the exchange rate), and the cost of land clearing (indexed by local precipitation). By implication, the opportunity cost of forested land fluctuates widely with changes in international markets and decisions by Indonesia’s financial authorities about the exchange and interest rates. Our results suggest that forest conservation programs are unlikely to succeed if they ignore such powerful forces.

How attractive are short-term CDM forestations in arid regions? The case of irrigated croplands in Uzbekistan

This study analyzed the financial attractiveness of Clean Development Mechanism Afforestation and Reforestation (CDM A/R) in irrigated agricultural settings. The Net Present Value (NPV) and Internal Rate of Return (IRR) of CDM A/R were estimated by analyzing the case of Khorezm region in Uzbekistan, where a mixed-species tree plantation was established on marginal cropland. The dual purposes of carbon sequestration and production of fruits, leaves as fodder, and fuelwood were studied over a seven-year rotation period. We compared the opportunity costs of land in marginal agricultural areas between this short-rotation plantation forestry and the annual cultivation of the major crops in the region, i.e., cotton, winter wheat, rice, and maize. The analyses were performed considering different levels of irrigation water availability, from 0 to 30,000m3/ha, to reflect the reality of a high variability of water supply in the region. The NPV of CDM A/R ranged between 724 and 5794USD/ha over seven years, depending on the tree species. Among the latter, Elaeagnus angustifolia L. had the highest profits due to the annually recurring cash flows generated from fruit production. Temporary Certified Emission Reductions (tCER) ranged within 399–702USD/ha after the assumed 7-year crediting period and would not suffice to cover initial investments and management costs of tree plantations. IRR peaked at 65% with E. angustifolia under the conventional afforestation and measured −10% and 61% when considering only the tCER and the CDM A/R, respectively. In contrast, other species had higher IRRs in case of the CDM A/R. The total profits from tree plantations exceeded those of both cotton and winter wheat, even with the assumption that there was an optimal irrigation supply for these crops. Rice production was overall the most profitable land use option but required water input of 26,500m3/ha/year, which is not consistently available for marginal croplands. We argue that the current global average price of 4.76 USD/tCER is insufficient to initiate forestry-based CDM projects but, in the absence of other incentives, can still motivate forestation of degraded croplands for land rehabilitation and the provisioning of non-timber products. Given the low irrigation needs of trees, 3–30% of the crop water demand, a conversion of degraded cropland to forested areas could save up to 15,300m3/ha/year at the current tCER price. Combining the monetary value of water and carbon would enlarge the scope for CDM A/R in irrigated drylands, thus enhancing the investments in marginal land rehabilitation and strengthening the resilience of rural populations to the repercussions of climate change.

Potential Biodiversity Benefits from International Programs to Reduce Carbon Emissions from Deforestation

Deforestation is the second largest anthropogenic source of carbon dioxide emissions and options for its reduction are integral to climate policy. In addition to providing potentially low cost and near-term options for reducing global carbon emissions, reducing deforestation also could support biodiversity conservation. However, current understanding of the potential benefits to biodiversity from forest carbon offset programs is limited. We compile spatial data on global forest carbon, biodiversity, deforestation rates, and the opportunity cost of land to examine biodiversity conservation benefits from an international program to reduce carbon emissions from deforestation. Our results indicate limited geographic overlap between the least-cost areas for retaining forest carbon and protecting biodiversity. Therefore, carbon-focused policies will likely generate substantially lower benefits to biodiversity than a more biodiversity-focused policy could achieve. These results highlight the need to systematically consider co-benefits, such as biodiversity in the design and implementation of forest conservation programs to support international climate policy.

Afforestation for the Provision of Multiple Ecosystem Services: A Ukrainian Case Study

This paper presents an economic analysis of the planting of trees on marginal lands in Ukraine for timber production, erosion prevention, and climate mitigation. A methodology combining econometric analysis, simulation modelling, and linear programming to analyse the costs and benefits of such afforestation has been adopted. The research reveals that, at discount rates lower than 2%, establishment of new forests is economically justified in the majority of forestry zones. Incorporating the effects of afforestation on mitigating climate change increases social benefits. However, the results indicate that whilst soil protection benefits to agriculture from afforestation in the Steppe are expected to be high, carbon sequestration and timber production activities in the Steppe are cost inefficient due to low rates of tree growth and relatively high opportunity costs of land. The opportunity costs of land are also high in the Polissja where afforestation is cost inefficient at 2% and higher discount rates.