reverse auctions for pes in tanzania. photo: rohit jindal · benefits (figure 12.1). for example,...
TRANSCRIPT
2 | PES In multifunctional landscapes:Assessment of socio-economic feasibility for synergy in land use
Reverse Auctions for PES in Tanzania.
Photo: Rohit Jindal
Suggested Citation:
Jindal R, Vardhan M. 2017. PES in multifunctional landscapes:
Assessment of socio-economic feasibility for synergy in land use. In:
Namirembe S, Leimona B, van Noordwijk M, Minang P, eds. Co-
investment in ecosystem services: global lessons from payment and
incentive schemes. Nairobi: World Agroforestry Centre (ICRAF).
Chapter 12 | 1
CHAPTER 12 PES in multifunctional landscapes: Assessment of socio-economic feasibility for synergy in land use
Rohit Jindal and Mamta Vardhan
Highlights • Why are multifunctional landscapes hard to manage?
• Main challenges in managing multifunctional landscapes through PES.
• Variety of methods to assess social and economic feasibility of PES.
• Case studies from the field: PES in Viet Nam, Tanzania, and Kenya.
12.1 Ecosystem services from multifunctional landscapes
From a landscape perspective, land is seen to “…simultaneously provide food security, livelihood
opportunities, maintenance of ecological functions such as species diversity, and fulfill cultural,
aesthetic, and other recreational needs”1. This holistic perspective recognizes the dynamic
nature of human-natural capital interactions, and that land use can be managed for multiple
benefits (Figure 12.1). For example, agroforestry stresses on the multi-dimensional
interactions that exist between farmers and their lands, including trees on agricultural farms,
farming in forests, and managing land to protect species diversity. This can take the form of
spatially segregated plots – each producing a different output, or integrated plots with
multiple land uses2. Irrespective of the spatial structure, each agroforestry system helps to
generate several different ecosystem services that are valued locally (erosion control,
hydrological balance, and biodiversity) and globally (biodiversity, carbon sequestration).
PES is one of the ways to conserve vital ecosystem services (ES) by aligning the interests of
land owners with service users. It involves paying cash or in-kind rewards to land owners for
voluntarily adopting land use practices that help to conserve or produce vital ecosystem
services such as carbon sequestration from the atmosphere (by planting new trees and
conserving old ones), maintaining water quality (by controlling soil erosion), and conserving
biodiversity (by protecting endangered flora and fauna). PES programs worth millions of
dollars exist in many parts of the world, and have become the key focus for promoting land
based climate change mitigation strategies3. For example, in Mozambique local communities
around Gorongosa National Park receive cash ($400-$800 per ha over 7 years) and in-kind
(infrastructure development, training) incentives for emission reduction through forest
conservation4.
2 | PES In multifunctional landscapes:Assessment of socio-economic feasibility for synergy in land use
Figure 12.1 Multifunctional Landscape in Bac Kan, Viet Nam
Some researchers like to ascribe PES as a market based approach, though many others
disagree. They point out that in many cases, PES contracts are unique either in terms of the
land unit that is contracted or the ES that is being produced5. Hence there is no real
competition amongst buyers or even sellers of the ecosystem service unit. Similarly, when
governments include PES as part of environmental regulation, participation may not be
voluntary anymore. Therefore, it may be more appropriate to consider PES as a broad set of
practices that include provision of some kind of incentive for promoting environmental
conservation.
12.2 Challenges in promoting PES in multifunctional landscapes
PES works on the principle of conditionality – the payment or reward to service providers is
dependent on them securing the desired ecosystem service6. From a theoretical perspective,
the size of payment to land owners (or service providers) should equal or exceed the
opportunity cost of changing their land use7. When this payment is made, land owners should
willingly enter into service provision contracts that require them to supply a specified level of
ecosystem services. However, in practice, economic feasibility of PES is rarely such
straightforward. Cause and effect between land use practices (such as afforestation) and their
ecological impacts may be unknown or at best uncertain. Similarly, conditionality may be
difficult to enforce, particularly where property rights are unclear or local governance systems
see the PES approach as a way to subsidize a particular kind of land use system. In the
following sections, we focus our attention on challenges pertaining to adoption of PES
approach on a landscape basis and on some possible field based methods to address these
challenges. The discussion is focused both on policy makers and field practitioners.
12.2.1 Paying for ES versus land use change?
Land owners or service providers ensure the provision of an ES by taking up following specific
land use practices in their area. When these land use practices can be directly linked with the
level of ES being generated (growing trees sequestering atmospheric carbon into their
Chapter 12 | 3
biomass), and the ES is readily measurable (tons of atmospheric carbon sequestered by a
landscape), it is possible to pay land owners on the basis of ES being generated7. However,
when the relationship between land use and ES production is tenuous (maintaining
hydrological balance), or it is difficult to measure and quantify an ecosystem service (scenic
beauty), an ES based payment system becomes difficult to implement. The alternative is to
pay on the basis of the extent of recommended land use changes that local farmers have
adopted. However, the cost of monitoring such a system is much higher particularly if the land
parcels are highly fragmented across the landscape. As a result many PES programs specify
simple land use changes that are easy to monitor, but the challenge for program managers
remains in terms of linking these land uses with the ES that is of interest.
12.2.2 Complementary versus substitutable ES?
Often ecosystem goods and services produced by multifunctional landscapes are
complementary, when one is produced another is generated simultaneously6. For example,
tropical rain forests not only provide timber and fuelwood, they also conserve valuable
biodiversity and sequester significant amount of atmospheric carbon at the same time. If the
users of such services are different (or geographically segregated), the challenge is to decide
who will pay for the much higher upfront cost of setting up the system versus much lower
cost of maintaining it later. Some PES projects address this challenge by bundling the different
ES together and setting up contracts with land owners that require them to follow specific
land use practices. This practice has been followed in Costa Rica’s national PES program
where the government pays local farmers (about $43/ha or $3,000 per household with an
average ownership of 76 ha) to implement recommended land use practices which yield
different ecosystem services (carbon sequestration, scenic beauty) that are then sold in
relevant markets (carbon in international markets, scenic beauty among eco-tourists)8.
However, many ES also act as substitutes of each other. In such cases, program managers
may be tempted to promote ES that can earn higher revenue from potential users. This can
be problematic if it leads to degradation of other ecological functions that the landscape
performs. For example, while fast growing monocultures are good for yielding carbon
sequestration, such landscapes may lose their species diversity and may even have a
detrimental effect on the local hydrology. The challenge in managing landscapes that produce
such multiple ES is balancing economic considerations with ecological perspectives. One
potential alternative is to pay land owners according to ecological matrices that give
appropriate weight to different ES, as has been done in a PES project in Nicaragua9. Another
option is to ban land uses that may produce an ES but are deemed highly detrimental for the
entire landscape, for example excluding exotic monocultures from carbon projects.
12.2.3 How much to pay?
PES requires program managers to estimate how much to pay to service providers10. If the
payment is too low, land owners will remain under-compensated implying that many
potential suppliers will opt out of the project. If the payment is too high, service producers will
claim all the surplus from the transaction and the project will fail to deliver an adequate level
of environmental service. Often, program managers may also need to determine a specific
payment level because many projects either include onetime contracts or are of long duration
whereby renegotiation of the contract is costly once it has begun. Therefore, the terms of the
project, including the payment level, have to be clearly laid out ex ante in order to obtain a
long term commitment from the suppliers. If these terms are changed in the middle of the
project, land stewards may discontinue their conservation efforts.
One of the challenges of using PES approach is that in the absence of competitive markets for
many ES such as biodiversity and watershed conservation, it is hard to determine the price or
4 | PES In multifunctional landscapes:Assessment of socio-economic feasibility for synergy in land use
payment to offer to land stewards as suppliers. When markets do exist, they can be so
differentiated that there is no single price that can be paid, as is the case as with voluntary
markets for carbon sequestration credits. Moreover, it is difficult to directly transfer cost
estimates from one project to another since the cost of implementing a new land use practice
is often site (and farmer) specific. When measuring production costs is expensive, especially
on new project sites, ES providers may have little incentive in revealing their true costs. This is
because only the farmers know a large proportion of this opportunity cost (e.g. change in
labor inputs), thereby creating an information asymmetry between the farmer and the project
manager11.
It is also important to note that existence of a price does not translate automatically into
existence of a market for ES5. For ES suppliers, the price may reflect the local cost of adopting
a new land use practice, while for ES buyers or financiers, it may reflect the monetary value of
the environmental benefit they perceive from conserving a landscape.
12.2.4 Would payments make a difference – additionality, leakage, permanence
concerns?
An important feature of PES approach is conditionality – payments or rewards are contingent
on landowners or service providers ensuring the security of an ES (or the adoption of a
specified land use). This implies that the payment should lead to a larger provision of ES from
a service provider than business as usual (BAU) – also known as additionality. Leakage, on the
other hand, refers to loss of additionality at the landscape level. In figure 12.2, the line
segment 1 represents the level of ES from an individual service provider (say to provide
carbon sequestration through afforestation), while segment 2 represents the level of ES
supply from the entire landscape. The level of ES supplied by an individual service provider
contracted under the project (line 1a) should be more than the business as usual (BAU)
scenario before the start of the project, i.e., the level of ES available if there were no PES
project (line 1b). The difference between segment 1a and segment 1b represents the net
additionality of ES created under the PES project. At the landscape level (segment 2), the level
of ES supply after the start of the project should ideally increase to line 2a, which is equal to
the additional ES created by individual landowners who have been contracted across this
landscape. However, if the level of ES from the landscape remains equal to line 2b, this implies
that even though the contracted landowners are implementing recommended conservation
practices on their private plots, some of them are involved in resource exploitation in other
parts of the landscape (say by chopping down trees on village common lands). The area L1,
which is the difference between segments 2a and 2b represents the leakage that is taking
place at the landscape level: even though landowners are increasing ES supply from their
individual plots, the buyers or service users do not experience any additional availability of ES
from the landscape. If the amount of resource exploitation at the level of landscape (line 2c) is
more than the additional ES created by individual service providers, the PES project may result
in a lower level of ES than BAU. The area L2 which is the difference between lines 2b (or the
BAU at the landscape level) and 2c represents excessive leakage at the level of the landscape –
service users are now subsidizing resource exploitation at the landscape level.
Chapter 12 | 5
Figure 12.2 Pictorial representation of Additionality and Leakage under PES
Permanence refers to the continued availability of ES even after the end of the project. In figure
12.3, the level of ES available from the landscape increases from the BAU level after the start
of the project. As the PES project ends, the level of ES from the landscape may fall back to the
BAU level (i.e. line segment 2), which implies that the ES created by the project was temporary
in nature. Thus, in case of carbon sequestration service from afforestation, all the new trees
that were established under the project are now cut, which means that the amount of carbon
sequestered from growing trees has been lost back to the atmosphere (say by burning of the
trees as firewood). However, if the level of ES available from the landscape after the end of the
project is higher than BAU, i.e. it is equal to line segment 1, this indicates that the PES project
has been able to create some level of permanence of long-term sustainability of the ES. A
project may also have a perverse effect on service providers, after the payments end, the level
of ES may be lower (line segment 3) than at the beginning of the project (BAU). This indicates
that over the long term, the PES project resulted in a net loss of ES from a landscape.
Figure 12.3 Pictorial representation of Permanence under PES
6 | PES In multifunctional landscapes:Assessment of socio-economic feasibility for synergy in land use
To ensure additionality, sufficient level of permanence, and that no leakage is taking place, the
challenge for a PES project is to not only monitor individual service providers but also the
entire landscape. This monitoring needs to be done at all stages of implementation, i.e. before
the start of the project, during implementation, and after the completion of project activities
(Table 12.1). In some cases, such kind of monitoring can be done through remote sensing
(such as carbon sequestration through afforestation and reforestation), while in others field
based monitoring is essential (biodiversity conservation).
Table 12.1 Challenges in monitoring additionality, leakage, and permanence
Before Project Status
During Project Status
After Project Status
Additionality Individual Level ES Permanence
Leakage Landscape Level ES Permanence
12.2.5 Enrolling a minimum number (threshold) of land holders for viable ES?
Another challenge with managing multifunctional landscapes is that many ecosystem services
such as erosion control and hydrological balance require sufficiently large proportion of the
local area being under a similar land use without which these services cannot be produced12.
However, the actual land within these landscapes could be owned by different people as
smaller parcels with completely different land use practices. So unless these landowners
collaborate together to adopt synergy in land use, the landscape cannot produce these
services6. Even when land is commonly owned, as in the case of community owned forests in
many developing countries, the heterogeneous nature of resource users (herders interested
in grazing their animals versus households that would rather grow timber trees) makes it
difficult to agree to one particular land use. In such a case, having the same PES contract for
everyone will likely result in under-enrollment. On the other hand, having lots of different
kinds of contracts for different households will require extensive monitoring, thus making it
difficult for managers to contain project costs.
This becomes even more problematic when the opportunity costs of different landowners are
vastly different and are difficult to estimate for project managers. For example, different
sections of a landscape may differ by the depth of top soil, average slope, and their suitability
for new land use practices. When combined with differences among landholders in terms of
their socio-economic status, it can be difficult to determine ex ante what land use contracts
would work best for the area. There is thus an information asymmetry between service
providers and service users or project managers, which can result in loss of efficiency gains for
a PES project11. In such cases, potential options include: (i) setting up a menu of contracts that
vary by requirements regarding conservation effort and potential paymenta, (ii) having a
standard contract with a uniform payment levelb, and (iii) offering agglomeration bonuses for
landholders that decide to pool their lands for enrollment in a PES project13.
a An example is a menu of contracts offered by the Nhambita Community Carbon Project in Mozambique. b However, this would result in lower cost providers being over-compensated as compared to landowners with
higher opportunity costs.
Chapter 12 | 7
12.2.6 Impact of payments on existing norms?
In many landscapes, there may already exist local norms or arrangements for resource use
and conservation. On the island of Bali for example, local landowners have developed norms
regarding use of surface runoff for irrigation on private lands. Local norms also exist around
common property resources such as forests and grasslands in many developing countries
where neighboring communities have developed institutions that regulate the amount of
timber or grass that a household can partake. When implementing PES projects across such
landscapes, an important challenge for project managers is to identify norms that already
exist in the area, and understand how best to design new incentive structures that do not
create any perverse impact.
Research from psychology and behavioral economics shows that human behavior is driven by multiple sources of motivation. Existing norms for resource management constitute what are
called as intrinsic motivators, as they provide a sense of satisfaction to local landowners for
doing the right thing for their community15. In contrast, payments under PES type
arrangements mainly act as extrinsic motivators, as they provide an economic incentive for
people to adopt a particular set of land use practices. However, there is a risk that new incentive structures such as cash payments may “crowd-out” a community’s intrinsic motivation to look-after a landscape without the need for external regulation. When this happens, the outcome may be worse after the implementation of a PES project than before it. This is indicated by the possibility of excessive leakage as shown in figure 12.2 (line 2c), or perverse outcome in figure 12.3 in the form of lower level of ES after the end of PES payments than before it (line 3). This is an evolving area of research where field evidence is still patchy. In one of the few studies that look at this phenomenon, Kerr et al. (2012)14 conducted field experiments in Mexico and Tanzania that showed that cash payments helped raise participation in community based resource conservation where people were otherwise uninterested, but in areas with strong norms towards resource management, local participation remained high irrespective of external incentives. In addition, cash payments reduced peoples’ satisfaction from contributing towards a collective resource conservation project than the satisfaction they derived in absence of external compensation. If such a phenomenon is observed in other PES projects then the long term viability of ES provision through external payments will be open to challenge. While more research is being conducted, possible alternatives include providing non-cash incentives where cash payments may lead to perverse outcomes. In case of landscapes requiring collective effort from a community, PES projects will need to focus on strengthening local institutions before instituting new incentive structures15.
12.3 Potential ways to address PES challenges
While a PES approach has several potential advantages over conventional integrated
conservation development projects6,9; the above discussion shows that project managers face
several important challenges when taking PES to the field, especially when implementing
activities with a landscape perspective. Many of these challenges pertain to informational
gaps that need to be addressed before a project can be implemented on ground. In recent
years, much research has focused on identifying methods that can help in bridging these
information gaps. These include using a production function approach to estimate cost of
supplying PES16, conducting choice experiments to identify preferences of local communities
regarding PES contracts17, and undertaking benefit-cost analysis of adopting new land use
practices18. In the following sections, we discuss three such methods that we have used in the
field to address some of the information challenges in PES.
8 | PES In multifunctional landscapes:Assessment of socio-economic feasibility for synergy in land use
12.3.1 Group deliberations: Structured decision making in Bac Kan, Viet Nam
PES often requires complex decision making by stakeholder groups who may have very
different perspectives regarding resource conservation and expected outputs. Group
deliberations are helpful in highlighting these perspectives and in identifying tradeoffs that
each group may need to make in order to arrive at a common set of program activities for a
given landscape. Structured Decision Making (SDM) is a group deliberation method that helps
program managers understand specific objectives and concerns of stakeholders for effective
decision making. The method involves open-ended interviews and workshops with key
stakeholder groups to: (1) define the decision problem, (2) identify objectives from
stakeholders’ perspectives and performance measures to determine the extent of success of
a program, (3) identifying alternatives for achieving program objectives, (4) forecasting the
consequences of implementing these different alternatives, and (5) helping stakeholder
groups recognize key tradeoffs when selecting among different alternatives19.
The SDM method was used in Viet Nam to identify stakeholder preferences under the United
Nations’ REDD (UN REDD) program. The UN REDD has been piloted in Viet Nam from 2009
onwards and aims to reduce national greenhouse gas emissions through sustainable forest
management. The SDM study in Viet Nam was conducted in collaboration with ICRAF’s
country office in Hanoi. Since forest landscapes are put to multiple uses (timber logging, local
fuel wood needs, ecotourism), and are inhabited by diverse communities, it is important to
reconcile local preferences with national level priorities regarding REDD. Therefore, the study
was carried out at two levels: a series of workshops with 10 national level stakeholders
representing government agencies, research institutions, international donor organizations,
local NGOs, and representatives from the Viet Nam’s UN REDD office; and another series of
workshops with local communities from four villages in Bac Kan province. Bac Kan was one of
the provinces selected by the national policy makers for detailed REDD activities, which made
its choice really appropriate for the SDM study. The workshops with national level
stakeholders focused on management objectives regarding REDD, and related performance
measures. At the local level, the workshop facilitators helped people to state their specific
objectives and performance measures, and preferences regarding key programmatic areas.
The SDM workshops showed that national level stakeholders had four main objectives
regarding REDD: protecting valuable ecosystem services, improving local livelihoods, poverty
reduction, and climate change mitigation. Related performance measures were mostly
technical and included percent tree cover, and tons of carbon sequestered by forested
landscapes. At the village level in Bac Kan, local participants articulated three objectives that
were similar to national level stakeholders – protecting ES, improving local livelihoods, and
poverty reduction, and another fourth one related to promotion of democratic governance.
Performance measures were also mostly local in scope and included quality of relationships
between villagers, water quality, and presence of useful tree species. Program alternatives
articulated by people included a i) a preference for bottom-up design process through
collaboration between REDD officials and local participants, ii) mix of cash payments for
individuals (in the form of goods such as fertilizers, seeds, building materials), and in-kind
benefits at the community level (improved roads, school rooms, irrigation infrastructure), iii)
allowance for limited use of forests such as fuel wood, iv) local level management and
monitoring of REDD activities handled jointly by village leaders, village forest boards, and
individual participants, and v) limited conditionality so that people are not penalized for
naturally occurring calamities such as fire and flood19. The SDM method therefore helped in
understanding and articulating stakeholder preferences regarding a potential REDD program
including key elements such as management structure, payment system, and monitoring and
verification system.
Chapter 12 | 9
12.3.2 Household survey: Case study from Lake Victoria Basin, Kenya
Sediment flow into Lake Victoria due to large scale soil erosion in its catchment has several
harmful effects on water quality including reduced fish catch from the lake and escalation in
maintenance costs for hydroelectric turbines in downstream areas. The Global Environment
Facility funded Western Kenya Integrated Ecosystem Management (WKIEM) project aims to
reverse this ecological deterioration through forestry activities in the upper catchment. For
the program to have a significant effect on the amount of silt flowing into the lake, a high
proportion of farmers in the river basins needed to be willing to plant trees on their farms.
The present study aimed to assess the feasibility of such a forestry program by assessing the
impact of economic incentives on the number of farmers who would be willing to plant
additional trees on their farms20. It was conducted in collaboration with ICRAF’s Western
Kenya office, which was one of the implementing organizations for the project.
The study took the form of a household survey in which the respondents were asked to elicit
the kinds of tree species and the number of additional trees they would be willing to plant
under a potential PES program in the area. They were given three hypothetical scenarios: one
where they would receive free seedlings, two where they had to pay 10 Ksh (Kenyan Shillings)c
per seedling, and three where they received 10 Ksh per seedling. To make these scenarios
realistic, respondents were told that payments would only be made six months after the
seedlings were planted and on the basis of the actual number of surviving seedlings.
The survey covered 277 households across Nyando and Yala river basins. Survey results
showed that when buying seedlings, farmers would plant an average of 44 seedlings per
household. Demand increased to 203 seedlings if farmers received free seedlings, and further
to 245 seedlings/household if they were paid 10 Ksh for planting each seedling. Also,
respondents in Yala River Basin were willing to plant more trees than farmers in the Nyando
River basin. These results showed that although the economic incentives had a significant
effect on farmers’ willingness to plant trees, the overall effect was low. Taking a planting
intensity of 2.5m X 2.5m, a household was willing to put less than 0.5 acres of farm land under
tree plantations even when it received a payment of 10ksh/seedling along with free seedlings.
This could be due to shortage of farmland that was already under food crops. To achieve any
meaningful impact at the level of the entire basin would therefore require rigorous targeting
and increasing the size of economic incentives for local farmers. The program could start its
activities from the Yala basin where farmers were more willing to plant trees. Finally, many
local households were interested in planting fast growing exotic trees, which was not the best
option from an ecological viewpoint. Therefore, the local NGOs needed to take up
environmental campaigns to inform people about the need for planting indigenous trees and
the program could incorporate higher incentives for farmers that were willing to plant
indigenous trees on their farms.
12.3.3 Market simulations: Reverse auctions in Uluguru Mountains, Tanzania
As discussed above, a constraint with the PES approach is the need for ex ante determination
of payment level for service providers. One possible alternative is to create market like
conditions through reverse auctions; the roles of buyers and sellers (or service providers) are
reversed in these auctions and successful bids from potential service providers are decided
on the basis of how low they are. Such an auction was used to allocate PES contracts among
local farmers in the Uluguru Mountains in Tanzania.
The Uluguru Mountains provide several valuable ES that are under threat due to rapid
deforestation. Many research organizations including ICRAF have been promoting tree
c The exchange rate at the time of the study was 75 Ksh = 1US$.
10 | PES In multifunctional landscapes:Assessment of socio-economic feasibility for synergy in land use
planting as a way to revitalize the local ecosystem. Reverse auctions were carried out in the
area in 2009 to estimate the level of payment necessary to compensate farmers to change
their land use from cash crops to trees21. Participating farmers bid for PES contracts in terms
of minimum payment they would be willing to receive for planting 80 trees over 0.5 acres, and
for protecting these trees for at least three years. There were two auction rounds, one for
planting Khaya anthoteca and Tectona grandis, and the other for Khaya anthoteca and
Faidherbia albida tree species. 251 valid bids were received in each of the two rounds. As a
result, 23 lowest bidders received three-year PES contracts – 14 winners from round one
received TSH 30,000 each, while 9 winners from round two received TSH 20,000 eachd. In all,
1,840 trees were planted on 11.5 acres of land as a result of the contracts allocated through
the auction.
The auction bids also provided cost estimate for implementing a PES project in the entire
area. For a low-enrollment target of one-third of the eligible area, a PES project would need to
pay TSH 100,000 per contract (per 0.5 acre). For the catchment as a whole, this would enroll
about 184 acres (or 368 local households) at a total cost of TSH 36,800,000 (US$28,976). For a
high-enrollment target of 80%, the project would need to pay TSH 200,000 per contracte and
491 acres of private land (982 households) would enroll at a cost of TSH 196,400,000. In terms
of participation of the poor, auction bids showed that while some poor households had low
opportunity costs (and were thus the first ones to be contracted), many others reported much
higher opportunity costs (possibly due to shortage of land that could be put under trees). This
implies additional budgetary requirements in case project managers wanted to contract poor
households.
A monitoring exercise in January 2011 found high rates of compliance with the terms of the
contracts. Of the 23 farmers who won the carbon contracts, 18 had duly complied with the
contract requirements, with 63% of the trees surviving on their farms almost two years after
they were planted. The contract outcomes were similar across the two sets of carbon
contracts, though the survival rates varied by tree species, (83% for Khaya anthoteca, 44% for
Tectona grandis, and 36% for Faidherbia albida). This variation was due to higher familiarity
with Khaya anthoteca than Faidherbia albida, and failure of the short rains which led to higher
mortality of Tectona grandis. In a group discussion during the monitoring visit, many farmers
said that they liked the transparent way in which the auction process had identified recipients
of the tree planting contracts. They expressed their satisfaction that unlike in other projects
with which they were familiar, prominent villagers did not receive contracts (because their
bids were too high). Farmers also expressed satisfaction with the payment they had received,
which helped them recover the cost of labor and other inputs in planting the new trees.
12.4 Conclusion
While PES has become a useful strategy to promote conservation including land based
emission reduction, this chapter identifies important constraints that need to be addressed
when designing new projects, especially when following a landscape approach. A
multifunctional landscape may help in bringing together service providers and potential
service users, but it also throws up new challenges in the form of ascertaining whether a PES
project results in additional provision of the ES being considered, and that this ES has a
desirable level of sustainability or permanence. Project managers also need to check leakage
as contracted service providers may exploit natural resources from other parts of the
d The exchange rate at the time of auctions was TSH 1270 = 1US$. e This total excludes the cost of supplying tree seedlings and other project administrative costs.
Chapter 12 | 11
landscape. Often, a landscape approach also entails contracting a high proportion of the local
households (or a certain threshold land area) for the ES to be viable. This becomes even more
difficult to manage when a landscape is inhabited by heterogeneous land owners with vastly
different opportunity costs and contract preferences. In absence of competitive markets for
most ES, it becomes paramount for project managers to identify the appropriate level of
payment that would voluntarily induce conservation behavior from local farmers. However,
recent research suggests that external incentives in the form of payments may not always
lead to conservation effort. In areas where communities have evolved their own norms for
resource management, or where cooperation among community members is essential for
managing common pool resources, PES projects need to identify additional kinds of incentives
that will work. Not all PES projects may come up against these constraints, but when aiming
for synergy in land use through a landscape approach such as in REDD, it is likely that these
constraints will need to be addressed for ensuring successful project outcomes.
Group Deliberations, Viet Nam. Photo: Rohit Jindal
Though our objective is to draw attention to these key constraints, we also identify some
potential methods that have only recently been considered for PES based scenarios. As we
show through the case study from Bac Kan, Viet Nam, group deliberation such as SDM can be
very useful in identifying and reconciling preferences of various stakeholder groups. The
method is helpful in assessing what kinds of collaborative networks already exist in the area
and what kinds of incentive structures would be most effective. Similarly, the household
survey involving demand elicitation in Lake Victoria basin in Kenya points out the approach
that can be taken to assess what proportion of local households would be willing to join a PES
program. The survey also helps in assessing the socio-economic status of the local
households for more effective PES targeting. Finally, reverse auctions create market like
conditions that have only recently been tested in developing countries. ICRAF has taken a lead
in this regard by collaborating on most of the existing auction studies involving PES projects.
As the results from the Uluguru Mountains in Tanzania reveal, auctions are not only useful in
estimating the local supply curve for providing ES (and thus the level of payment at different
levels of ES provision), they are also seen as transparent and fair by the participants. An
important strategy in this regard is to pay a uniform price to the winning bidders rather than
following discriminatory pricing. While these methods point out potential ways to address
challenges in designing effective PES programs, in the end, the choice of field method will
depend on the local context and the project team’s comfort level with a method.
12 | PES In multifunctional landscapes:Assessment of socio-economic feasibility for synergy in land use
Acknowledgements
This chapter is based on field research conducted in collaboration with ICRAF on their various
PES sites across East Africa and Asia. We wish to thank all the research teams and ICRAF
scientists who have helped us in carrying out this research. In particular, we acknowledge
Meine van Noordwijk, Brent Swallow, John Kerr, and Delia Catacutan, and an anonymous
reviewer for their support and feedback. We also acknowledge the grant support from
University of Alberta and MacEwan University (RSACAF Project Grant) in carrying out fieldwork
on some of our project sites.
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