Land-Use Change, Carbon Sequestration and Poverty Alleviation LESLIE LIPPER Economic and Social Department Agriculture and Economic Development Analysis Division of the Food and Agriculture Organization of the United Nations Rome, Italy ROMINA CAVATASSI Economic and Social Analysis of Agricultural Development Food and Agriculture Organization of the United Nations Rome, Italy ABSTRACT / In this article, we seek to identify where the greatest potential for synergies between carbon sequestration and poverty alleviation lie and ways they can be enhanced. We assess the amount and eligibility criteria of sequestration payment sources to developing countries. Many land-use changes accessible to low-income land users are potentially competitive in a market where payments are likely to range between between $11 to $15 per carbon ton sequestered. We present a conceptual framework of land-use decision- making to assess the potential for sequestration adoption among the poor. The determinants of adoption vary according to the impact of adoption on the returns to productive factors in the absence of any payment for sequestration. Where se- questration leads to a decrease in returns, the key determi- nant is the return to sequestration and labor, which are driven by the potential sequestration supply per unit land area and labor-use requirements. When sequestration adoption leads to an increase in returns, barriers to land-use change are present, which is frequently the case for the poor. Adoption is determined by the capacity of sequestration payments to overcome constraints. Barrier removal may involve designing payments to overcome risk or investment constraints, or wider institutional reform. Sequestration values may be insufficient to cover costs of institutional reform, requiring incorporation into wider development programs. A survey of results from empiri- cal studies lend support to the analysis. We conclude with an assessment of transaction cost impacts on sequestration adoption among the poor, and how these can be addressed. Land-use change is crucial for improving rural in- comes and making a significant reduction in poverty levels globally. Over 70% of the world’s poor are lo- cated in rural areas (IFAD 2001), with land use as a major source of subsistence. Improving the productivity of land-use systems is essential for increasing incomes and food security. Land-use change is also a relatively low-cost and rapidly implementable means of climate change mitigation (Smith and Scherr 2002). To the extent that the land-use changes required for poverty alleviation coincide with those required for carbon se- questration, significant synergies can be harnessed in meeting both objectives. Payments for the adoption of land-use systems which sequester carbon have been touted as a “win–win” solution, where both environ- mental and poverty reduction goals can be attained. The primary mechanisms being developed for purchas- ing carbon emission offset credits from developing countries, such as the Clean Development Mechanism and the Biocarbon Fund under the World Bank, explic- itly require that projects meet sustainability criteria as well as emission reductions (UNFCCC 1997; World Bank 2002). Poverty alleviation is often either explicitly or implicitly included in sustainability criteria and, thus, may be an important outcome of such purchasing funds. However, land-use changes which lead to poverty reduction may also conflict with carbon sequestration or be much less efficient than other types of land use as a source of climate change mitigation. The design of optimal land-use change projects for sequestration can be very different from the optimal poverty alleviation strategy. In fact, the two objectives may be in conflict. In some cases, the adoption of carbon sequestration may actually exacerbate poverty, whereas in others, poverty- alleviating land-use change could result in increased emissions. A systematic analysis of where the synergies between land-use change and poverty alleviation are most likely to be found and the types of measure nec- essary to facilitate such opportunities is thus important for better targeting of efforts. Similarly, information on the types of trade-off the adoption of carbon sequestra- tion is likely to generate from the perspective of low- income potential participants is critical in designing sequestration payment programs that can benefit the poor. KEY WORDS: Carbon sequestration; Land use; Land-use change; Pov- erty alleviation; Technology adoption Published online March 23, 2004. DOI: 10.1007/s00267-003-9146-x Environmental Management Vol. 33, Supplement 1, pp. S374 –S387 © 2004 Springer-Verlag New York, LLC