Three essays on the economics of restoring degraded land: From global to local

Restoring the productivity of the world's degraded land has become a global priority. Daily (1995) brought the idea of restoration to prominence with a publication in Science entitled 'Restoring value to the world's degraded lands', which was a call to reverse the trend of degradation by restoring degraded land for the wellbeing of humanity. Nearly twenty years later decision makers have started to act on this call by creating high-level restoration initiatives designed to catalyze restoration activities in dozens of countries across the world. So called Great Green Wall projects in China and the Sahel region of Sub-Saharan Africa are planting billions of trees on land that has been barren for decades in an effort to stop the advance of the Gobi and Sahara deserts. In Brazil, the Mata Atlantica Restoration Pact is mobilizing support to restore more than 37 million acres of deforested and degraded forest in Brazil's Atlantic Forest and the United States Forest Service, through the Collaborative Forest Landscape Restoration Program, is working with a large number of forest stakeholders to restore the ecological, economic, and social benefits created by America's forests. These projects are only the best known examples of restoration activities that are taking place across the world, but several hundred more grassroots efforts are attempting to restore the functionality of degraded ecosystems through the process of restoration.;In an effort to coordinate these activities, the Bonn Challenge, a global effort to begin restoring 150 million hectares of degraded forest and agricultural landscapes by 2020, was launched by the International Union for the Conservation of Nature and the Government of Germany in 2011. To date 12 countries have committed to restore more than 60 million hectares (148 million acres) of degraded land as part of The Bonn Challenge. This effort was reinforced in 2014 through the New York Declaration on Forests, which called for countries to begin restoring 350 million hectares (864 million acres) of degraded forest by 2030.;As global decision makers, governments, and communities join the effort to restore degraded land new questions about the economics of restoration have emerged. Critics argue that the time horizons are too long, the costs are too high, and the benefits are too few to justify public or private expenditures on restoration. At the country level, governments are questioning whether the restoration activities proposed and promoted by government officials and non-governmental organizations are likely to be adopted by the people who manage agricultural and forest landscapes. At the site level, policy makers are interested in the effects that payments for ecosystem services would have on rotational farming systems.;The objective of this dissertation is to address these questions. The specific contributions are described in detail in the body of each chapter. The work contained in the body of this manuscript reflects the combined experience and knowledge gained over four years of working with global decision makers, national governments, and local communities on restoration issues across the world and across multiple institutions.;The first chapter of this dissertation estimates the net benefit of achieving the Bonn Challenge by restoring 350 million hectares of degraded forestland. The chapter presents one estimate of the potential net benefits of fulfilling the target using a novel methodology that combines a global database of forest values with an ecological model of forest restoration. The net benefit of meeting Bonn Challenge is estimated with and without the value of public ecosystem goods and services, to argue that failures in the market for public environmental goods and services reduce the incentive for countries to invest in restoration and that fulfilling the goals of initiatives like the New York Declaration and the Bonn Challenge depend in part on internalizing these external values. In additional, the net benefit is estimated under different social discount rates, reflecting different social discounting philosophies, to show that our assumptions about the future and about how future generations will discount the future have a direct impact on how much land will be restored under the initiative. The results suggest that achieving the Bonn Challenge would generate a net benefit of between 0.7 and 9 trillion USD over a two-hundred year time horizon. The results show that restoration can create benefits that exceed its costs and that the benefits of restoration are greater when the social discount rate is lower. The social discount rate drives the predicted land restoration rate and suggests that the Bonn Challenge is only likely to be met when the benefits and costs of restoration are discounted at the lowest rate found in the literature.;The second chapter of this dissertation turns its attention to evaluating two restoration activities that have been proposed in Rwanda, a country that has committed itself to restore 2 million hectares of degraded forest and agricultural land as part of the Bonn Challenge. Agroforestry and improved woodlot management have been proposed to restore the ecological and economic productivity of agricultural and forestland in Rwanda, but the activities have not been evaluated in terms of their financial profitability, profitability risk, or ecological impacts despite being significant factors that influence the adoption decisions of smallholder landowners who occupy the majority of land in the country. The chapter presents a methodology combining enterprise budgets, biological production functions, and Monte Carlo analysis in an expected utility framework to investigate the financial profitability, financial risk, and ecological impacts of the activities in a smallholder context in four provinces of Rwanda.;The chapter accounts for financial risk by characterizing the uncertainty over financial and ecological outcomes, including profitability, erosion, and carbon storage. The distributions of net present values of each activity under market and ecological uncertainty are estimated and compared using Stochastic Dominance and certainty equivalence criteria in order to rank the activities from the perspective of risk-averse smallholders. The results show that only moderately risk-averse smallholders would be likely to adopt agroforestry and very risk-averse smallholders would prefer agriculture. Internalizing the value of public ecosystem services does not change the result. The results also show that smallholders always prefer current woodlot management practices and that risk preferences do not influence the ranking. The rankings over woodlot management practices do not change when the value of public ecosystem services are internalized from the perspective of smallholders.;The third chapter of this dissertation develops a methodology to estimate the effect of a Payment for Ecosystem Service (PES) mechanism on the incentive to enhance soil fertility on a smallholder managed cultivation-fallow system. The soil fertility on smallholder managed agricultural land in Sub-Saharan Africa is declining because smallholders are abandoning the practice of fallowing in favor of continuously cultivating land. Researchers have suggested that PES mechanisms could be an effective policy tool for encouraging smallholders to use more efficient forms of fallowing to maintain soil fertility because fallowed land provides a number of public benefits that are not accounted for in private decision-making. Yet, the effect that PES would have on a smallholder incentives for managing a cultivation-fallow system are not well understood and the ability of PES to enhance soil fertility has not been studied in the economic literature. To address this gap this chapter develops an analytic model of the cultivation-fallow system to provide some intuition behind the incentives facing smallholders managing such a system and it extends this analysis by developing a numerical model to provide further evidence on the effect PES would have on a cultivation-fallow system in a real-world setting using a case study from Zambia. The results show that payments for fallowing lead to higher soil fertility levels in all cases.