Trade-off between carbon offset and economic benefit: Potential of cocoa-based agroforestry system implemented in voluntary carbon market

Abstract

Agroforestry systems (AFS) are a viable option for the mitigation of deforestation. Thus far AFS has been recognized and financed through the Voluntary Carbon Market (VCM) program; however, analysis of the potential carbon credit payment and productivity trade-off has rarely been conducted. This study aims to analyse the potential of cocoa-based AFS in terms of the trade-off of carbon accumulation and productivity in West Sumatra, Indonesia. The trade-off is shown through 20 years of financial analysis between the two schemes: AFS without the VCM scheme (agroforestry Business as Usual-aBAU); and AFS with the VCM scheme. A comparison is made between four types of cocoa plantations in West Sumatra: (i) Cocoa-Rubber (CR), (ii) Cocoa Multi-strata (CM), (iii) Cocoa-Coconut (CC), and (iv) Monoculture practice (M). The results showed that under the aBAU scheme, CC showed the highest Net Present Value (NPV) and Benefit Cost Ratio (BCR) of $6,647 USD and 5.8 respectively, while the lowest was CR, with an NPV and BCR of $2,423 USD and 2.73, respectively. Cocoa monoculture presented the group with the fastest payback period (PP) of two years. Utilising a VCM scheme under the Plan Vivo standard with Voluntary Emission Reduction (VER) as a selling unit, cocoa farmers stand to gain NPV by 15-25% at VER prices of $8 USD MgCO₂^e-1. It is thus concluded that cocoa-based AFS could be adopted under the VCM scheme with the dual purposes of enhancing carbon-storage through AFS and greater income for farmers.