Breakeven price of CO2 credits driving farmers to use the area to plant forest instead of grain

Abstract

Afforestation and reforestation were the challenges the farmer can seize to plant a culture that can capture more carbon than the amount emitted for cultivation. Assuming that the land was legally rented and owned, and part of an area that had not been obtained through recent deforestation, the main questions were: “why a farmer should have preferred to reserve the area to plant trees?”; and “How much did one ton of Carbon Dioxide [CO₂] have to be rewarded to buy this opportunity?” This work had the target to estimate which was the minimum price for carbon credit so that the farmer will plant a forest instead of using the soil for grain cultivation. Based on the analysis that economic aspects and profit were the main drivers considered by the farmer to decide how to use the soil in case the area was not classified as Legal Reserve or Permanent Protection Area, seeking the usage which maximized the value per hectare. Considering a eucalyptus commercial forest planted under the premises of the current study, results showed that a price of around 24 BRL per ton of CO₂ in 2021 is enough to turn it economically feasible. Business case had been estimated with and without profit coming from the commercial use of forest, and even assuming that no wood is cut and sold, the 2021 price of 40,48 BRL per ton of CO₂ can ensure more profit than grain production over 14 years timeframe, allowing the farmer to make money beyond the usual commercial use of a forest.