Adoption of climate change mitigation practices by risk-averse farmers in the Ashanti Region, Ghana

Uncertainty and risk-aversion are notably absent in the modeling of farmers' adoption of climate change mitigation practices in developing countries even though most of the agricultural mitigation practices also have effects on yield variability. The objective of this paper is to explore the implications for climate change mitigation projects of modeling farmers as risk neutral while in actuality they behave as risk-averse agents. Results indicate that when risk averse farmers are modeled as risk-neutral agents, the size of the incentives needed to induce participation to a carbon sequestration program is miscalculated with serious implications either for the success for projects that aim at compensating for climate change mitigation services or for the economic efficiency of such projects.

► We simulate the climate change mitigation potential of ten input packages. ► We simulate the effects of disregarding risk considerations using basic economic theory. ► We find that a price overestimation and underestimation are possible for several risk profiles. ► We find that risk can affect the time required for a program to achieve sustainability. ► We propose several avenues for improving the likelihood of success of programs.