China has become one of the main countries emitting the greenhouse gas （GHG）. As one major source of the GHG emission, agriculture contributes for 15% to 19% of the total emission in China, which is above the global average level by 13.5% and decides whether the whole mitigation goal will be achieved or not in 2020. Local experiments show that some low carbon technologies and management modes not only reduce the GHG emission efficiently, but also guarantee the crop yield and livestock production technically. However, whether choosing those technologies and management modes or not depends on peasants. In practice, peasants make decisions based on maximizing their own profits. If peasants apply those technologies and management modes to agricultural production, their marginal costs will change generally. Provided the marginal revenue is constant or changes little in the short term, peasants will probably suffer lost in profits in the new equilibrium, and be reluctant to choose low carbon agricultural technologies and management modes voluntarily. To overcome economical obstacles hindering peasants’ choices of low carbon agricultural technologies and management modes, this paper learns a lesson from the Payment for the Environment or Ecosystem Services （PES） program, and compensates peasants for the " additional” GHG mitigation due to their efforts. According to the PES program, this paper further divides the existing payment or compensation into two major forms. The form is mainly market-based. It includes the " cap and trade” market and some local ones for tradable carbon-sink programs that are not allowed to enter the cap and trade market, but meet needs of the Kyoto Protocol. The latter is government-driven. It is mainly composed of environmental or ecological protection programs advocated and sponsored by the government. Due to the absence of the appropriate carbon trading market and the difficulty in estimating the economic value, the planned government-driven program could take marginal abatement costs as prices of the payment for the GHG mitigation. As the base of permits prices for the cap and trade market or the reference for the environmental taxation, the shadow price is often used to measure marginal abatement costs of undesirable outputs. So, this paper applies the parametric directional output distance function estimated by the linear programming method to calculate shadow prices CO2 caused by agriculture for 31 provinces, municipalities and autonomous regions in China from 1997 to 2014. Based on the trend of shadow prices since 2011, this paper estimates the average price of the payment will be no less than RMB 24 148.99 yuan per ton nationwide. Meanwhile, there exist huge discrepancies among prices of the payment for different provincial regions. The highest price of the payment for Shandong （95 079.17 yuan per ton） is ten times more than the lowest one for Tibet （8 052.59 yuan per ton）. Moreover, given the goal that the national intensity of CO2 emission falls by 3.1% in 2015, this paper finds the amount of the payment for animal husbandry is much higher than that for farming in the scope of the whole country or provincial regions. Last but not least, this paper discusses the relationship between prices of the payment and the emission of CO2. It shows that prices of the payment will rise with more CO2, but decline with less CO2. This potential relationship is confirmed by results of the robustness check, that prices of the payment will rise （decline） with the more （less） application of production technologies and management modes （the use of the N-fertilizer） triggering the emission of CO2, while they will decline （rise） with the more （less） application of those technologies and modes （conservation tillage and deep fertilization by machine） leading to the mitigation of CO2. According to the findings mentioned above, this paper puts forward three main suggestions for the government-driven program. First, the program should be planned and implemented as soon as possible. If the emission of CO2 from agriculture keeps rising, the government will bear more financial burden for the mitigation in the future. Second, as the dominator and payer, the government should undertake the main responsibility at the first stage of the mitigation program. Meanwhile, it should prepare for building local markets for tradable carbon sinks from agriculture that don’t meet needs of the cap and trade market. On the one hand, the market will gradually play the decisive role in the allocation of resources, which does good to the sustainable development of the low carbon agriculture, especially animal husbandry. On the other hand, the market can take its advantage in broadening sources of the compensation, sharing the financial pressure borne by the government in the development of low carbon agriculture. Third, the government should formulate a list of technologies and measures suitable for the development of low carbon agriculture in China. Technologies and measures, which are easily handled by peasants and close linked with relieving climatic and environmental problems, should be taken into the consideration first by the government.
Research on the Payment for the Government-Driven Program of Low Carbon Agriculture
Journal of Finance and Economics Vol. 44, Issue 08, pp. 46 - 60 (2018) DOI:10.16538/j.cnki.jfe.2018.08.004
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Cite this article
Wang Tianqiong, Yan Han, Gu Haiying. Research on the Payment for the Government-Driven Program of Low Carbon Agriculture[J]. Journal of Finance and Economics, 2018, 44(8): 46-60.
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