Assessing uncertainty in the profitability of prairie biomass production with ecosystem service compensation

Abstract

Compensation for ecosystem services can encourage the management of agricultural systems for a broad range of benefits beyond crop production. Here we explore how payments for carbon sequestration and phosphorus retention affect the profitability and economic competitiveness of perennial herbaceous biomass. We consider the case of converting marginal land currently in corn and soy production in southern Minnesota, United States, to native diverse prairie grown as a biofuel feedstock. We estimate the resulting changes in soil carbon storage and water quality, and the economic value of both. To test the robustness of our results, we perform Monte Carlo simulations that incorporate variability and uncertainty in our model parameters. Our analyses show that prairie biomass production on marginal lands is 22% likely to be profitable when ecosystem service compensation is included, but only 5% when it is not. This suggests that the two ecosystem services modeled here may alone be insufficient to make prairie biomass production reliably profitable. Furthermore, by using ranges of model parameters rather than point estimates, this study shows that the profitability gap between conventional row crops and prairie is too large to be closed with the two services modeled here across a range of recent economic conditions.