title: Cost-Benefit Analysis of the Biochar Application in the U.S. Cereal Crop Cultivation
Creators: name: Kulyk, Nataliya
Publisher: name: University of Massachusetts Amherst
Year: 2012
Subjects: subject: Public Affairs, Public Policy and Public Administration

description: Increasing global warming and food insecurity give ample rationale for research on biochar in view of its properties: enhancement of soil fertility and crop productivity, soil water retention and carbon sequestration. As a new technology the introduction of biochar into farming faces challenges and uncertainties, which are highlighted in the report along with the policy implications. Biochar is a type of charcoal created through pyrolysis of biomass. It is a carbonaceous substance produced with the intent to apply to soil for agricultural and environmental management. Biochar use and production can be deemed a mere business activity that should be ruled out by the market; however, due to multi-functionality of biochar properties this technology has important policy implications. Biochar can exert positive externalities, i.e. provide social benefits in the form of carbon sequestration or reduced agricultural water runoff, etc. Biochar, however, has not yet been studied in its entirety, and as such its application in some cases faces risks and uncertainty. Biochar advocates need to give a convincing argument to farmers about the benefits of biochar application in agronomy. Apart from the considerations of pure financial costs and benefits occurred to an individual farmer, it is necessary to be mindful of the social costs and/or benefits, risks and uncertainties that a new technology may impose on people and the environment. The research aimed to review the available literature on biochar, conduct a cost-benefit analysis (CBA) of the biochar application in the US cereal crop cultivation and give a recommendation to farmers and policy-makers on biochar use. A mix of qualitative and quantitative research methods were sued to collect the data and carry out an analysis over the fall 2011 - spring 2012. Specifically this research intended to answer the following questions: Do private and social benefits of biochar outweigh its private and social costs? Under what conditions? Is policy needed to promote biochar? The study was informed by the interviews with farmers from the Amherst area; literature and document review, and personal communication with biochar researchers and stakeholders. A costbenefit analysis (CBA) of the biochar application in the US wheat crop cultivation was conducted to identify the biochar profitability. The CBA used the field data of the Washington State research and the data from biochar studies in the northerly and tropical climates, using the formula “Benefits - Costs &gt; 0” as a criterion. Expert information and the existing literature were used to identify and fill in the gaps in the CBA. Based on the factual data and assumptions the private and social costs were compared to the total benefits ensuing from the biochar application. Private costs are measured as total costs accrued to a farmer during the purchase and field application of one ton of biochar per ha. Private benefits are measured as financial revenues a farmer gains from the increased wheat yield as a result of biochar soil treatment. This analysis is based on the biochar crop yield effect during the 1st year. It does not consider the prolonged effect of biochar on the wheat yield in the following years. Hence, the private benefits include only the revenues gained in the 1st year with hypothetical revenues ensuing from the biochar yield effects over the following 10 years. Social costs represent the risks and uncertainties of introducing biochar as a new agricultural technology. This research, though, does not include a specific value for social costs because of the difficulty in quantifying and monetizing the potential increase of soil temperature and loss of crops, biodiversity, and social tension the society may have to pay if biochar shows adverse effects. However, the considerations for social costs are included into the CBA analysis and conclusions. The blanks are identified and filled in with the appropriate use of bounds to manage uncertainty. Social benefits are measured as benefits accruing from the CO2 sequestration. Benefits resulting from the higher nutritional value and better soil water retention, conservation of biodiversity and higher food security (better yield predictability in the face of weather change), benefits of waste management, and the reduction of methane emissions from landfills are not included in the analysis. The CBA findings suggest that under the current costs the biochar application in the US cereal crop cultivation does not work privately in the first year because of the high costs of biochar. The 5 inclusion of a multi-year biochar effect on soil fertility and crop productivity, however, can add a significant value to biochar profitability, had the field research proved a positive yield effect. The findings demonstrate that the CO2 sequestration payments can play a very important role in biochar profitability. The carbon markets are not set up yet, therefore one way to look at biochar promotion is to consider the feasibility of introducing a policy on carbon sequestration payments, or to think of ways of reducing the cost of biochar by increasing the production scale. Meanwhile, farmers may find it profitable to use biochar for cultivation of cash crops that give a high return on investment, or on a small-scale in specific settings (greenhouses, tree nurseries, florist shops, etc.) Governmental investments in R&amp;D and larger scale biochar applications are required to account for a vast heterogeneity of biochar systems. In the mean time the government should introduce an “incremental” biochar policy regulating current biochar application, while promoting the information exchange among the researchers, policy-makers and practitioners.