Today was another day of meetings, the last of which was on the European Union project LANDMARC, on how to do case studies on land-related greenhouse reduction technologies (Land Mitigation Technology). The discussion on risk was particularly interesting and I will summarise it here. Four possible problems with land use and the introdßuction of global technology ;-)
The economic benefits of LMT are determined by the amount of GHG reduction, the price of emissions trading at that time and the cost of implementing the Dees. The reductions and the price of trading will be relatively easy to calculate and measure in quantitative terms. If it is only the installation and operating costs within the project, this can also be calculated. The problem is that, as it relates to land use, there is a risk that there will be external costs outside the project. There are seven possible risks which, if neglected, could lead to the failure of LMT.
The first is the environmental risk of possible environmental damage. A few days ago, I wrote about how rice farming has increased water use and greenhouse gases. By occasionally draining the traditional paddy fields, we can reduce the water consumption and the emission of methane, a greenhouse gas. However, there may be ecological consequences.
Secondly, there is the risk of climate change, which could lead to a real shortage of water in the event of occasional draining.
The third risk is that if the investment does not pay for itself, the LMT will be a failure.
The fourth risk is the market risk, which is not related to the cost of the project, but to the amount of emission credits sold from the project. If the amount of carbon offsets sold per unit were to fall, the revenue would fall and the LMT could fail.
The sixth risk is the operational risk, because when you're running a business, it's not so much about the technology as it is about the operational mechanism. In fact, there are a number of biogas plants in Bali that have been left unused. This was a problem because the farmers were not properly motivated to use the biogas in the operation.
The seventh is the risk of policy and regulation. For example, I think that every country has some form of government support for agriculture. Even in Indonesia, there are companies that are using subsidies to introduce biogas. This is where I think blockchain can make a difference.