The Baseline Scenario: An Analysis Of The Baseline Scenario

5.5.1 Baseline scenario
The baseline scenario (BSL) is the simulation run that represents the current situation and, in which all parameter values are taken as they are. Each model was calibrated in such way that the baseline scenario reflects the observed conditions from the survey data. This is followed by an analysis of the allocation possibilities of the available resources to production activities, which are related to the availability of the relevant inputs and expected prices and yields. Crop yields are then simulated from production decisions (crop choice, variable input levels) and resources condition, which is also affected by investment decisions. Finally, based on the simulated crop yields, the model calculates the village revenues.

The effect of the price change is then analyzed by comparing the baseline scenario (without the price change) with the alternative scenario that includes the price change while keeping all other parameters constant (ceteris paribus).
For Piura, price changes in cowpea, maize, sheep and goat meat were considered. In Campo Verde, the analysis focused on production of cassava, rice, maize, plantain, palm oil, cacao and cattle meat. These scenarios were employed in order to see what happens if the price increased or decreased. For the analysis, five levels of the factor (price change) were considered 0.5, 0.7, 1, 1.3 and 1.5.
5.5.3 Sensitivity to Wages and Yields
Household´s decision could be influence by wages for hired labor, wages for off-farm work, declines in crop yields (e.g. due to short rainy season or plant diseases) or yield increases (e.g. due to water availability, improve planting material). Therefore a sensitivity analysis is performed in order to see the household responses. For the sensitivity analysis to wages and yields, five levels of the factor were considered 0.5, 0.7, 1, 1.3 and 1.5. During the simulation run tested factor is kept constant at the initially chosen

Usually, social discount rates are lower than private discount rates because social preferences place greater value on the future generations in contrast with private preferences (Irawan, Tacconi, and Ring 2013). In the Stern Review and the Garnaut Review, the social discount rates were 1 to 2 percent. However, in some REDD+ studies, 10 percent of private discount rate is used (Ebeling and Olander 2011). Therefore, for this study a social discount rate of 3 percent was employed, which is higher than the discount rate used in the Stern and Garnaut Reviews. A positive rate could also be considered to approximate social preferences; one of the most appropriate is the yield of long-term government bonds, which is about 5 percent in case of Peru. In the case of assessment of the value of public investment, discount rates of 9 percent are used, whereas for mitigation projects 3 percent is used and 10 percent for private projects (GIZ 2013). To account for the difference between discount rates in social and business contexts in evaluating land use options, discount rates of 3, 5 and 10 percent were employed. The time considered was 40 years for the forest project in Piura and 30 years for the forest project in the Amazon