Economic Efficiency of Climate Smart Agriculture Technology: Case of Agrophotovoltaics

Taejun Mo, Hojune Lee, Sungeunsally Oh, Hyunji Lee and Brian H. S. Kim ()
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Taejun Mo: Department of Agricultural and Consumer Economics, University of Illinois Urbana-Champaign, Urbana, IL 61801, USA
Hojune Lee: Department of Agricultural Economic and Rural Development, Seoul National University, Gwanak-ro 1, Gwanak-gu, Seoul 08826, Republic of Korea
Sungeunsally Oh: Department of Agricultural Economic and Rural Development, Seoul National University, Gwanak-ro 1, Gwanak-gu, Seoul 08826, Republic of Korea
Hyunji Lee: Department of Agricultural Economic and Rural Development, Seoul National University, Gwanak-ro 1, Gwanak-gu, Seoul 08826, Republic of Korea
Brian H. S. Kim: Department of Agricultural Economic and Rural Development, Seoul National University, Gwanak-ro 1, Gwanak-gu, Seoul 08826, Republic of Korea

Land, 2022, vol. 12, issue 1, 1-20

Abstract: Climate change must be the most serious environmental crisis of the present human generation. While corresponding climate-smart agriculture (CSA) practices are emerging, the extent to which CSA is profitable to farmers is unclear. In this paper, we focus on agrophotovoltaics (APV), one of the CSA policies intensively pursued by the Korean government, to analyze the profitability of APV and its implications for rural sustainability. First, we consider the total profit of farms before and after APV installation by a region through generalized least squares (GLS) to verify that APV has overall profitability through the region. Additionally, we estimate farms’ productivity by region with a generalized method of moments (GMM) to compare with the results of the profitability. We predict that APV installation will be more profitable than not installing, and the regions with lower productivity will show higher profitability than other regions. The results are in line with the prediction. The profitability of APV is verified in all regions, and the order of profitability by region and productivity by region are opposite to each other. It suggests that regions with lower productivity may have a higher preference for installing APV, implying the installation of APV provides a new incentive to continue farming even in regions with low agricultural productivity. These results have an important policy implication on rural sustainability since the implementation of CSA could generate a sound and sustainable farming environment by addressing the challenges of climate change.

Keywords: climate-smart agriculture; agrophotovoltaics; generalized least square; generalized method of moments; crop productivity; rural sustainability (search for similar items in EconPapers)
JEL-codes: Q15 Q2 Q24 Q28 Q5 R14 R52 (search for similar items in EconPapers)
Date: 2022
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