Browsing by master's degree program "Maatalous-, ympäristö- ja luonnonvaraekonomian maisteriohjelma"

We study the compensation required to increase carbon sequestration in privately owned forests as a part of effective climate policy. We develop a theoretically correct understanding of compensating additional carbon sequestration in a voluntary stand-level carbon offset scheme by creating incentives for extending the rotation from the privately optimal length. We examine the cost of extending the length of the rotation to a socially desired level. The resulting costs and the increase in carbon sequestration determine the level of compensation required to make the private forest owner indifferent between joining the compensation scheme and resuming privately optimal forest management. A correctly defined subsidy scheme is required as forests are expected to play a major role in meeting national climate change mitigation targets, and so far, the existing schemes have failed to attract voluntary participants. The well-established univariate optimal rotation model (Faustmann 1894, Samuelson 1976) with a net carbon subsidy (van Kooten et al. 1995) is used to evaluate the compensation structure in the California Forest Offset Protocol and the New Zealand Emissions Trading Scheme, and to present a theoretically sound framework for subsidizing additional carbon sequestration in forests. An empirically more realistic size-structured forestry model with carbon storage (Assmuth et al. 2018) is used to verify the understanding of a correctly defined subsidy scheme when thinnings and multiple carbon pools are included. The results of the theoretical modelling are compared to practical applications in California Cap-and-Trade and the New Zealand Emissions Trading Scheme. These practical applications have faced various problems and have been subject to numerous revisions, due to issues with baseline establishment, over-crediting, questionable additionality, and leakage. We show that if the compensation scheme follows the Californian structure, a significantly high compensation is required to create sufficient incentives for private forest owners to participate in the sequestration program. The exclusion of carbon stored in harvested wood products may have decreased voluntary participation of post-1989 forests in the New Zealand Emissions Trading Scheme. These schemes serve as an example for the rest of the world of constructing a carbon sequestration compensation scheme. Thus, it is paramount to evaluate the choices in policy design, by comparing the compensation structure to a theoretically sound way of incentivizing additional carbon sequestration.

The European Union aims to be climate-neutral by 2050, and Finland targets to be carbon-neutral by 2030. There is progress towards the goal, but the current measures are inadequate. Therefore, a new technology is the need of the hour. Biochar has been considered one of the most affordable negative emission technologies. Biochar has a considerable potential to mitigate climate change by adding carbon to the soil. Additionally, it is a beneficial soil amendment that improves soil properties and controls nutrient runoff from agricultural land. Therefore, biochar is a promising carbon farming tool for achieving climate goals. Although the climate benefits of biochar are pretty well known, economic studies on biochar amendments in agriculture are lacking. The thesis aims to investigate the economic profitability of investing in biochar for private farmers. Additionally, this study focuses on determining whether biochar benefits society. The objective is to provide farmers with a cost-effective solution to earn a private profit from biochar, which benefits society when net greenhouse gas emissions and nutrient runoff are accounted for. This thesis performs a cost-benefit analysis as a method. Analytical and numerical models are developed to calculate the net present values of farmers' private profit and social welfare. Mathematica is used for simulations. As a case study, the thesis focuses on Finnish boreal agricultural soil cultivated with barley, with a 5 t/ha biochar application rate. The thesis finds that the net present value of profit with biochar becomes positive in ten years but never exceeds that of without biochar. However, the net present value of social welfare with biochar becomes positive and surpasses that of without biochar within 4 to 6 years. As biochar application is beneficial for society but not profitable for farmers, two policy instruments are studied: a fertilizer tax to lower the privately optimal fertilization to the socially optimal level and an investment subsidy to make biochar use profitable. Simulation shows that with 100% investment subsidies, both policies make the investment in biochar profitable for the farmers within 0 to 1 year. A 90% investment subsidy makes biochar profitable within 3 to 6 years, whereas an 80% investment subsidy generates profit with biochar within 6 to 11 years. There is minimal economic research on biochar. As the European Council is giving importance to carbon farming, carbon storage and carbon addition, there is an immense opportunity in future to work on this topic.

The accumulation of biological material, i.e., biofouling, on ship`s hulls is a significant issue both for the shipping companies and the environment. Biofouling on a ship`s hull increases friction, leading to increased fuel consumption and hence, an increase in the fuel costs and emissions from shipping. Furthermore, the EU maritime traffic will be included in the EU Emissions Trading System in 2024, meaning that shipping companies must pay for their carbon dioxide emissions. This creates an additional economic incentive for the companies to prevent biofouling. The main methods for preventing biofouling on a ship`s hull are different coatings and possible in-water cleaning of the coated surfaces. The coating types include biocidal coatings, fouling release coatings, and hard coatings. Despite the notable problems from biofouling, there is currently no international regulation concerning biofouling management of shipping companies. A holistic understanding of this complex issue is needed to develop more sustainable shipping in the future. In this thesis, I analyze this topic by further developing an existing Bayesian network model, which is a decision tool for examining the outcomes from different biofouling management strategies. My focus on the topic is the costs of shipping companies from biofouling and its management. The existing model concerns the costs of coating, in-water cleaning, and fuel consumption. In this thesis, I add emission allowance costs and uncertainty to the fuel prices in the model to study whether these additions would change the profitability of different biofouling management strategies. My hypothesis is that to minimize the costs of biofouling and its management, shipping companies should increase the in-water cleaning times when the emission allowance costs are included in the model. The study revealed that the most cost-effective coating type, for a general cargo ship and a tanker, is a fouling release coating. For a passenger ship, the cost-effectiveness depends on the age of the coating, but a biocidal coating is the most cost-effective option when the age of the coatings is two years. My additions to the existing model did not change the result concerning the cost-effectiveness of the coating types. The results also revealed that the future inclusion of maritime transport to the EU Emissions Trading System will increase the costs of shipping companies from biofouling. Despite this, my hypothesis got rejected since the inclusion of the emission allowance costs did not lead to increased in-water cleaning times. My changes in the fuel prices led to a decrease in the in-water cleaning times, for some ship types, compared to the original model. This is not due to the uncertainty itself but because the fuel price distributions, which I used, led to lower expected fuel costs than in the original model. The study highlights that fuel costs might be one of the most important factors in determining whether enhanced biofouling management will be profitable for shipping companies in the future.

Lack of finance is a major constraint for the smallholder soybean farmers in northern Ghana. The area is affected by soil degradation, poverty, and food insecurity, while a majority of the people in the area get their livelihood from agriculture. As a possible solution for the three problems, a natural biofertilizer and biocontrol agent, rhizobium bacteria, can be introduced to the rhizospheres of the soybean. This is usually done by applying rhizobium bacteria to the seeds of a legume prior to planting. This rhizobial inoculation technology improves plant growth, nutrient availability and uptake, as well as yields, thereby increasing the income and food security of the smallholder farmers. A credit to be invested in rhizobium inoculation technology would provide smallholder farmers with the opportunity to improve soil fertility and increase farm productivity, improving their food security and enabling them to earn additional income. The private market for rhizobial inoculants is nascent, but many of the farmers report financial constraints. To create a functioning market and to realise the social and environmental benefits of soybean cultivation and rhizobium inoculation technology, it is important to understand the causes of credit constraints of smallholder farmers and how to reduce them. In this thesis, I study the prevalence and the determinants of credit constraints among smallholder soybean farmers by applying a logistic regression model to a sample of 133 smallholder farmers in northern Ghana. I first define credit constrained status of the farmers and conclude that the prevalence of observable credit constraints in the sample is 57.1%. I conclude that there are two broad categories of variables affecting a farmer’s status as credit constrained. The first of these is the type of guarantees that a farmer can offer to the lender. Such guarantees are represented by membership in a farmers' association (and hence access to possible joint guarantees), existing assets such as ownership of cows, and a farmer's experience in soybean production (reflecting knowledge of good investment decisions in the sector). The second category relates to the supply of credit and the factors affecting it. The factors affecting credit supply identified in this study are regional disparities and loans targeted to a certain group, such as women. By influencing the supply and conditions of credit, the financial constraints of smallholder farmers can be alleviated. Such policy interventions, combined with other leverage points such as social learning and access to information, contribute to the adoption of desirable farming practices. Because of the many benefits of rhizobial inoculation in soybean production, its adoption could be promoted by offering credit directed particularly for the adoption of this technology. This would benefit not only the farmers but have broader benefits in the form of climate change adaptation and mitigation

Maatalouden rakennemuutos ja liiketoimintaympäristön muuttuminen edellyttävät nykypäivän maatiloilta uudenlaisia kyvykkyyksiä. Miksi toiset tilat selviävät muutoksessa paremmin kuin toiset tilat? Strategiatutkimus lähestyy kysymystä käyttäen selittäjänä dynaamisten kyvykkyyksien teoriaa. Kyvykkyyksien avulla selvitetään, miten maatilayrittäjä aistii muutoksen liiketoimintaympäristössään ja miten hän tarttuu havaittuun muutokseen miettien tilansa jatkuvaa uudistamista. Tutkimuksessa haastateltiin seitsemää yrittäjää, joiden päätuotantosuuntana oli emolehmät. Yrittäjät olivat päätoimisia yrittäjiä tai emolehmätuotanto oli eriytetty tilan muista toiminnoista, joten tuotannon kannattavuuden arvioiminen oli konkreettisempaa. Teemahaastatteluna toteutetut haastattelut tehtiin kyselylomakkeen pohjalta, joka oli muotoiltu Teecen (2007b) ajatusten perustalle dynaamisista kyvykkyyksistä. Miten tunnistetaan, tartutaan sekä otetaan muutos käytäntöön suomalaisilla emolehmätiloilla. Yrittäjän päätöksiin tutkimuksessa vaikuttivat tilan resurssit, strategia sekä yrittäjän oma arvomaailma tilan historiaan kytkettynä. Yrittäjät olivat kyllä avoimia uudelle, keräsivät tietoa toimintaympäristöstään sisä- ja ulkopuolelta mutta käytännön toteutuksen suhteen monella tilalla oli parannettavaa. Pitkän- ja lyhyen aikavälin suunnitelmia olisi hyvä tehdä myös paperille asti. Tavoitteena tutkielmassa ei ole tehdä yleistettäviä päätelmiä emolehmätuotannon johtamistavoista. Tulosten avulla voidaan havainnoida vain, miten pieni määrä emolehmätiloja tekee päätöksiä tuotantonsa suhteen. Tulevaisuuden tutkimuksissa tulisikin perehtyä laajemmin dynaamisten kyvykkyyksien vaikutuksiin yleensä maatilojen johtamisessa.

Dairy farms account for a large portion of the greenhouse gas emissions in the planet. Since cow manure provides a good medium for anaerobic digestion, this study analyzes the economic feasibility of installing a biogas plant adjacent to a 200-cow farm in Finland. The farms in this study produce only cow manure and grass silage to feed the digester. This paper focuses in comparing different scenarios such as electricity production for farm needs and the production of biofuels such as compressed biomethane as an additional business activity. After designing the farm economic model and the biogas installation, we provide an economic analysis of each scenario. The first one shows that it is not feasible to run the biogas business model based only on electricity savings for the farm. The second one proves that additional revenue streams such as biofuel production can revitalize and strengthen the financial model of the plant. Then, the sensitivity and reliability of the model is discussed by providing reasons (i.e. Finnish electricity tariff system) for the outcome of the results. The model reinforces the idea that farms must base their biogas business model on alternative side-streams and do not rely on energy production only. For further research, it is recommended that real life farm business models are incorporated as input data and a proven plant and CHP engine energy balance is secured.

Finland has set ambitious goals to reduce road transport emissions. One of these goals includes halving emissions from transport by 2030 compared to the 2005 levels. Another goal is the carbon-neutrality target of 2035, in which the transport sector plays an important role as well. Achieving these targets requires efficient instruments. A possible instrument which can be used to reduce transport emissions sufficiently is emission trading. The possibility of creating a national emission trading system for the transport sector to reach Finland’s targets regarding emissions is the focus of this thesis. Establishing an emission trading system would likely have effects on the fuel price. I present the theoretical background before modelling these effects. Understanding how the fuel market works and how emission trading would affect it is crucial before analysing the impacts by modelling. The role of the price elasticity of demand in determining the change in the fuel price is highlighted. The existing literature has studied the topic of emission trading for transport extensively and points out three important design elements: the inclusion of the transport sector, the allocation of permits, and the point of regulation. These elements are discussed using previous studies on the topic. Furthermore, many studies highlight the possible distributional effects an emission trading system could cause. Exploring the currently operational emission trading systems around the world gives real-life examples of the different design elements and how distributional effects could be corrected in practice. When modelling the effects of emission trading on the fuel price, the value for the price elasticity of demand can be estimated using meta-analysis. For the meta-analysis, I selected 28 previous studies. The weighted average for the short-term elasticity is found to be -0.1607. For the long-term elasticity, the value is found to be -0.448. Using Monte Carlo simulations and the values obtained from the meta-analysis, it is possible to calculate the average changes in the fuel price and in the emission permit price, and also illustrate the uncertainty arising from the fact that the actual price elasticity of demand is not known. For emission reductions of 0.6 megatonne, the total change in the fuel price by 2030 is calculated to be 0.34 euros per litre. This means that the emission permit price would be approximately 204 euros per tonne of CO2 in 2030. In addition, other possible instruments as well as other emission reduction target values are modelled in the analysis. Finally, I discuss the design elements in more detail. An upstream system with auctioning would be an efficient option for the design of an emission trading system. In addition, I discuss the interaction of emission trading with other instruments and the possible EU ETS for transport. Last, I present limitations and some topics for future research.

The study investigated whether energy poverty exists in Finland, and if so, under what conditions. The aim was also to investigate the reasons behind geographical differences. In addition to the geographical analysis, the study focused on the differences in electricity consumption between socio-economic groups. The aim was to investigate the differences in electricity consumption for different variables and how to tackle the globally growing energy poverty in Finland. The study aimed to find out whether energy poverty is associated with inequality in Finland. The research method was statistical analysis of household electricity consumption. The research style was descriptive statistical analysis. The study combined three different datasets and mainly used Excel to process and analyse the data. All Finnish households were used as the observation unit in the analysis of the results. The energy poverty threshold used in the study is 10% of electricity costs as a share of household disposable income. The results highlighted the importance of the type of dwelling when adjusting household electricity costs. The study found a strong correlation between electricity costs and energy poverty. This was also evident when examining regional differences, with low density residential areas emerging significantly as an area at risk of energy poverty. Geographically, these areas were located in Northern and Eastern Finland. Another significant finding from the results was the concentration of energy poverty in the lowest income bracket. However, the other income groups were very evenly distributed, as shown, for example, by the fact that energy poverty was also found in the highest income group. A key finding of the study was that the causes of energy poverty in Finland and around the world are different. In Finland, unlike in other countries, the impact of the type of housing on energy poverty was particularly pronounced. The results of the study suggest that energy poverty will have a multiplier effect on inequality, which will be more pronounced in areas with low population density. Further research on this topic would be important to explore the link between inequality and energy poverty in more detail.

Despite much scholarly attention given to values and preferences toward the environment, comparatively few studies have examined the spatial relationships between relational values and more established concepts including instrumental and intrinsic values, self-reported knowledge of natural resource management issues, and perceived landscape threats. This study examines these context-based relationships using public participation geographic information systems (PPGIS) survey techniques. An online PPGIS survey was administered during the summer of 2019 to 1,200 residents in Mjölby kommun in Sweden, a community heavily reliant upon silvo-pastoral landscape use. A total of 301 responses were obtained, resulting in a 25.1% response rate. Spatial association and statistical analyses tests were conducted to examine the relationships between different categories of values, self-reported knowledge of natural resource management issues, and values and preferences for landscape threat management. Results indicate that socio-demographics alone have little to no significant impact on how many value points of any category are associated with the environment; however, significant differences in the spatial distribution of values were found by gender and self-reported knowledge of forestry, agriculture, and native biodiversity. Male respondents tended to assign instrumental values in more diverse areas across the landscape. Respondents who rated themselves as knowledgeable about biodiversity tended to assign relational values inside Natura 2000 sites, while those who rated themselves as knowledgeable about forestry avoided placing instrumental values in Natura 2000 sites. Contrary to expectations, instrumental values were the most evenly dispersed across the landscape, while intrinsic values were more concentrated in specific areas, and relational values were the most concentrated around the towns of Mjölby, Skänninge, and Mantorp. High degrees of spatial overlap were found between intrinsic and relational values, implying these value types may be conceptually similar for residents. Future PPGIS research could focus on smaller regions such as those at the municipal or regional level to more precisely identify the context-specific relationships between instrumental, relational and intrinsic values and natural resource management preferences in the local landscape.

Forests play a key role in climate change mitigation. There are different ways in which forests can contribute to both increasing carbon sequestration and reducing emissions. In Finland, forests are largely owned by private forest owners and thus the actions of these forest owners have a great impact on the climate change mitigation potential of forests. Thereby, this study examined the perceptions of Finnish forest owners on the following climate change mitigation strategies in the forest sector: Forest management, More harvest, Less harvest, Wood products, Conservation, Adaptation, and Land use change. Especially, the study focused on “Less intervention” (a combination of three individual strategies), and “Forest management” as strategies and tested how the following hypothesized aspects are associated with the support for these strategies: the prioritized values affecting the choice between climate change mitigation strategies in the forest sector, risk perception of climate change, political orientation, education level, and the size of forest land. The tested hypotheses were derived from the existing literature on theories and empirical findings on the perceptions of citizens and forest owners. The effect of the independent variables on the chosen climate change mitigation strategies was studied through linear regression analysis based on a quantitative survey with 892 responses. Regression models were established separately for both chosen strategies. On average, forest owners supported all climate change mitigation strategies in the forest sector, except Less harvest. Further the results of the linear regression analysis supported all hypotheses to some degree. Perceived risk of climate change emerged as an important measure affecting the support for climate change mitigation strategies in general. Left-right political orientation was found important, where individuals positioned more on the right side of the political spectrum generally supported strategies that have more human intervention in forests. Forest owners’ prioritized values were discovered to significantly affect the support for climate change mitigation strategies in the forest sector, and forest owners who valued biodiversity gave more support towards Less intervention and less support towards Forest management. Forest owners with a smaller property tended to be slightly more supportive towards Less intervention, but in the Forest management model, the effect was not significant. Similarly, the simultaneous effect of education and political orientation was significant in the Less intervention model, indicating that forest owners with a university degree and right-winged political orientation tended to be more supportive towards strategies with more human intervention in forests, compared to forest owners with a university degree and left-winged political orientation. Apart from hypothesized variables, gender was found a significant predictor of support towards strategies, where, on average, women were more likely to support Less intervention, and similarly be more opposing towards Forest management, compared to men. In light of the results, Finnish forest owners tend to be rather conscious about climate change and support on average different climate change mitigation strategies in the forest sector. Nevertheless, private forest owners are a heterogeneous group of people whose preferences vary greatly, and thus policies need to be implemented accordingly.