DBPapers
DOI: 10.5593/sgem2017/53/S21.017

COST-BENEFIT ANALYSIS OF SHORT ROTATION WOODY CROPS PLANTATIONS FOR LOCAL SUPPLY CHAINS AND HEAT USE

A. Auzins, P. Lakovskis
Wednesday 13 September 2017 by Libadmin2017

References: 17th International Multidisciplinary Scientific GeoConference SGEM 2017, www.sgem.org, SGEM2017 Conference Proceedings, ISBN 978-619-7408-10-2 / ISSN 1314-2704, 29 June - 5 July, 2017, Vol. 17, Issue 53, 133-140 pp, DOI: 10.5593/sgem2017/53/S21.017

ABSTRACT

The article deals with the cost-benefit analysis of Short Rotation Woody Crops plantations (SRC) for local supply chains and heat use. There are analysed benefits and costs (expenditure) from the positions of farmers (land operators). The cost-benefit analysis has been carried out by applying the method of discounted cash flow as this method allows assessing the entire life cycle of the plantations including initial establishment of the plantation and several rotation cycles. There are assessed the plantations in Latvia. To measure the balance of benefits and costs two indicators are used – net discounted cash flow or net present value and break-even price of woodchips (at which the net present value is 0). The cost-benefit analysis has been conducted for several alternatives, for example, the assessment of direct benefits and costs of the plantations (the cultivation of SRC per se), the assessment by considering area payments (subsidies), the assessment of the effect of fertilising the plantations with sewage sludge. According to the results of the analysis carried out the balance of benefits and costs are negative for the cultivation of SRC per se even if the plantations are fertilised with sewage sludge. Moreover, the effect of the fertilization becomes negative if the level of soil fertility is low. However, the balance of benefits and costs is positive if the area payments (subsidies) are included in benefits. Thus, the cultivation of SRC is quite similar to traditional agricultural branches: negative profitability for the branch per se and positive profitability with area payments. The results of the research imply that to promote the cultivation of SRC (as well as to reduce dependency on area payments (subsidies)) it is necessary to increase significantly the yield of the SRC crops and to develop innovative technological solutions that are less resource (labour, equipment / hardware, etc.) intensive.

Keywords: cost-benefit analysis, Short Rotation Woody Crops, net present value, break-even price