The economics of forest plantations and on-farm planting as a rural income-generating activity

1. The economics of forest plantations and on-farm planting as a rural income-generating activity Claire Coote Issues for the Sustainable Use of Biomass Resources for Energy, Colombo, August 2005

2. Compare UK & Sri Lanka Situation • Both islands, net energy importers, forestry sector not a major industry but important in certain regions • Both recent converts to need for biomass generation • In UK driven by need to reduce carbon emissions, plus interest to support rural areas • In Sri Lanka driven by need to reduce fuel imports and extend power supply to more people, plus interest in improving rural livelihoods

3. Sri Lanka: Considerable experience in biomass production & use • Knowledge of species and seed selection for fast growth rates, calorific value • Woodfuel management techniques to maximise efficiency • Smallholder expertise should not be overlooked • Need to consider possible association with low efficiency and drudgery

4. UK: Short Coppice Rotation • Despite Energy Crops Scheme subsidy farmers been slow to invest • Unused to crops without annual payment • Key is establishment of end users • Need for more research to increase yields & provide better idea of costs and returns • Support to producer groups appears successful • Some concerns about visual impact

5. The TV Bioenergy Coppice Contract • Growers decides no. of hectare (3 ha min) • Grower controls crop husbandry and management • TVBC guarantees index-linked min price £36/odt • Grower can become shareholder in group • TVBC assist with planting, harvesting & transport • TVBC contract for 10 years (3 harvests) • TVBC provides technical and support services • Grower must be located in certain region • Grower pays small annual membership feeSource: www.tvbioenergy.co.uk

6. UK: SRC Costs & Returns • Need to compare costs and returns of alternative farm enterprises: gross margin • GM usually based on one year’s figures • SRC income not received each year so equivalent annual value (EAV) calculated • EAV estimate £203 - £287 • Lower than GMs for arable crops • Comparable GM with upland sheep farming

7. UK SRC: other considerations • Price paid per oven dried tonne: £30-40 • Farmers have to pay for chip drying & haulage • Conflict of interest between growers & power generators • Generators able to pay £25 – 35/tonne • Growers need £30 – 60/tonne

8. Sri Lanka: Gliricidia SRC • Grown in two farming systems • Coconut intercrop on plantations • Intermittent planting on smallholdings • Estimated revenue of Rs.9 per tree per annum

9. Sri Lanka: Gliricidia SRC • Need more information on costs of production, including opportunity cost of labour • Particularly for women • Must consider pest control including goats and cattle • Need to value additional benefits

10. Economic Costs & Benefits • Societal viewpoint • Employment creation • Import substitution of fossil fuel • Local economic development

11. Bioenergy Employment CreationEmployment per unit of energy in person yearsSource: Remedio, E Socio-economics of Bioenergy, FAO

12. Social Issues • Understanding why people grow trees • Keeps land in productive use • Trees may be planted where lack of capital prevents farmers from growing more capital-intensive crops • Diversification of farm production • Provide products and income in between crop harvests • Concerns over growing trees as cash crop – fears of land being withdrawn from essential food production

13. Social Issues 2 • Land tenure and security of tenure • Lack of secure tenure has been assumed to inhibit tree growing • Evidence from other countries that this is less critical than other factors – credit, markets • Sri Lanka experience with poor establishment of farmer woodlots due to lack of lease agreements with Forestry Dept.?

14. Social Issues 3 • Existing uses of so-called scrub/waste land • Need to investigate if this land is used e.g. for grazing • Animal herders may resent trees planted and set fire to them

15. Thank you for your attention