Are the Risks and Uncertainties as Constraints to Investing in Climate-Smart Innovations a Red Herring? Financial Cost-Benefit Analysis Evidence from 11 Countries in Africa and Asia
Climate-Smart innovations have received considerable attention lately. However, questions still linger on whether these innovations are financially profitable and less risky in diverse conditions. Risks and uncertainty could be the reason why the adoption of these innovations is still low. Using data from 11 countries, cost benefit analysis was undertaken. The finding revealed that the net present value (NPV) associated with the studied innovations ranged from US$ 508 to US$ 38,793 in 2020 dollars. The IRR ranged between 20% and 490%. Sensitivity analysis confirmed that the studied innovations are financially profitable and carry negligible risks. Taking the impact of discount rates into perspective, the result shows that a reduction of the discount rate by 50% and 100% increases the NPV by an average of 20% and 35% respectively. NPV was most sensitive to changes in yield followed by the discount rate. Measures and incentives to make capital available at low or subsidized rates increase adoption. Monte Carlo simulation showed that it is worthwhile to adopt these innovations, as the risk of losing capital is low. Governments need to support ways through which risks faced by smallholder farmers could be minimized to facilitate adoption of promising CSA innovations at scale
Year of publication: |
2022
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Authors: | Nganga, Stanley Karanja ; Akinyi, Devinia Princess ; Ng’ang’a, Stanley Karanja |
Publisher: |
[S.l.] : SSRN |
Subject: | Kosten-Nutzen-Analyse | Cost-benefit analysis | Afrika | Africa | Asien | Asia |
Saved in:
freely available