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Monetary Incentives to Reduce Open-Field Rice-Straw Burning in the Plains of Nepal

Krishna Prasad Pant

No 81, Working papers from The South Asian Network for Development and Environmental Economics

Abstract: In southern Nepal, rice straw burning in open fields is common practice. This is problematic because biomass burning contributes to smoke, black carbon and greenhouse gases. While some studies have examined the reasons for burning, few have tried to identify incentives that might stop farmers from burning. In this study, we use a uniform price unitsupply reverse auction, followed by an actual payment, in order to measure the amount of incentive required to stop smallholder farmers from burning rice straw. 317 farmers from 18 villages in Rupandehi and Kapilvastu districts participated in the reverse auction and signed an agreement to avoid burning for a payment. About 86 percent of the farmers fully complied with the agreement for a median payment of NPR 5,610 per ha (USD 78/ha). We also assessed the factors affecting the bid amount and compliance with the agreement. The supply of ecosystem services by the farmers through avoided burning is unit elastic, indicating that there is a linear relationship between monetary incentives and avoided burning.

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