Comparative Assessment of the Economic Efficiency of the Afforestation Project in the North-West of Russia

Natalia Nesterenko, Maria Vetrova and Evgeny Abakumov ()
Additional contact information
Natalia Nesterenko: Department of Industrial Economics and Finance, Institute of Economics and Management, The Russian State Pedagogical University, 191186 St. Petersburg, Russia
Maria Vetrova: Department of Enterprise Economics, Entrepreneurship and Innovation, Faculty of Economics, Saint Petersburg State University, 199178 St. Petersburg, Russia
Evgeny Abakumov: Department of Applied Ecology, Faculty of Biology, Saint Petersburg State University, 199178 St. Petersburg, Russia

Sustainability, 2025, vol. 17, issue 9, 1-23

Abstract: The study of carbon stocks in organic compounds within terrestrial ecosystems allows us to create a pool of potential carbon farming projects. At present, it is essential to assess the economic viability of natural-based solutions in order to develop strategies to encourage small and medium enterprises (SME) and governments to address climate change through specific measures. This article is devoted to the study of the economic efficiency of afforestation projects. The purpose of this study is to evaluate the economic efficiency of the project and, based on NPV sensitivity analysis, to identify the factors affecting economic efficiency. This will make it possible to formulate directions for stimulating the development of afforestation projects using tools to improve their economic efficiency. Based on data on the number of carbon credits issued, their price, and the costs and other revenue associated with the implementation of the afforestation project, a sensitivity analysis of economic efficiency was conducted, highlighting the most significant factors. Given that different tree species are characterized by variable seedling values, planting costs, and sequestration potentials, an afforestation project with the most carbon efficient tree species was selected as a pilot project. Black alder exhibits the most optimal proportion between the volume of carbon units released and the cost of planting trees. A sensitivity analysis of the project’s net present value was conducted in order to ascertain the factors that have the most significant impact on the project’s economic efficiency. These include the discount rate based on the cost of capital and the cost of tree planting. As a result, this article makes recommendations for improving the economic efficiency of afforestation projects for SME. The government’s role in enhancing the economic efficiency of such initiatives entails reducing the cost of capital through a reduction in the key rate or the provision of subsidies for the interest rate on bank credits. An alternative approach involves the granting of subsidies for the cost of tree planting, since the effects can be seen as a series of public goods, such as the creation of recreational areas and increased biodiversity of the ecosystem.

Keywords: carbon farming; economic efficiency; climate changes; nature-based climate solutions; forestry climate projects (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.mdpi.com/2071-1050/17/9/4007/pdf (application/pdf)
https://www.mdpi.com/2071-1050/17/9/4007/ (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:gam:jsusta:v:17:y:2025:i:9:p:4007-:d:1645631

Access Statistics for this article

Sustainability is currently edited by Ms. Alexandra Wu

More articles in Sustainability from MDPI
Bibliographic data for series maintained by MDPI Indexing Manager ().