Tree-crop interactions and their environmental and economic implications in the presence of carbon-sequestration payments

Growing trees with crops has environmental and economic implications. Trees can help prevent landdegradation and increase biodiversity while at the same time allow for the continued use of the land toproduce agricultural crops. In fact, growing trees alongside crops is known to improve both the productivityand sustainability of the land. However, due to high labour-input requirements, high costs of establishment,and delayed revenue returns, trees are often not economically attractive to landholders. Because of theKyoto Protocol, and the growing emphasis on market-based solutions to environmental problems, theability of trees to sequester and store CO2 has altered the economic landscape of agroforestry systems. Theeconomic and management implications of carbon-sequestration payments on agroforestry systems areaddressed in this study using a bioeconomic modelling approach. An agroforestry system in Indonesia issimulated using a biophysical process model. A general economic analysis of this system, from thestandpoint of individual landholders, is then developed and the implications for management and policy arediscussed.