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COST-BENEFIT ANALYSIS OF SHORT ROTATION WOODY CROPS PLANTATIONS FOR LOCAL SUPPLY CHAINS AND HEAT USE
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 пїЅ 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.
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References12
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