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This document presents the results of the financial evaluation of the potential of carbon markets for cocoa production systems in the departments of Caquetá and Cesar on small producer farms. The economic benefits were evaluated from the potential of carbon capture from the implementation of Cocoa agroforestry systems and the containment of the expansion of natural forest areas for the REDD initiative.
The net benefits of the carbon capture component per farm were estimated at COP$4.48 million pesos for Caquetá and COP$1.18 million pesos for Cesar, estimated for 25 years. For this analysis, local market prices (COP$23,394/tCo2), the implementation of at least 2 hectares of Cocoa Agroforestry Systems per farm and the linking of at least 1000 farms were taken into consideration. The equilibrium point regarding the number of farms in the grouped project is reached in Caquetá at 166 farms, while for Cesar it is reached at 443 farms. The profit from the carbon component amounts to COP$4,480 million pesos in Caquetá and COP$1,126 million pesos in Cesar. The internal rate of return of the carbon component by capture is 38% and 17% in Caquetá and Cesar respectively.
For its part, the net benefits of the REDD+ project per farm were estimated at COP$2.5 million pesos in Caquetá and COP$1.78 million in Cesar, estimated for 25 years. For this analysis, local market prices (COP$23,394/tCo2), an average of 5 hectares per farm in natural coverage, and the linking of at least 1000 farms were taken into consideration. The breakeven point regarding the number of farms in the grouped project is approximately 330 farms. The net benefits amount to COP$1,784 and COP$ 2,210 million pesos for Cesar and Caquetá respectively. The internal rate of return of the carbon component from REDD+ is 23% and 27% in Cesar and Caquetá.
Finally, it is highlighted that the returns are achieved if they only include the transaction costs related to access to the carbon market such as validation, registration and certification costs. If the investment costs associated with the establishment of agroforestry systems and conservation actions are included, the mechanism is not viable. The profit from the carbon component amounts could be distributed among the participating farms or used partially to cover system costs.
