Agroforest Carbon Finance Schemes in Indonesia - a Case Study in Central Sulawesi Christina Seeberg-Elverfeldt Food and Agriculture Organization of the United Nations (FAO) Rome, Italy University of Göttingen Göttingen, Germany 26 th August 2009 World Congress of Agroforestry 2009, Nairobi, Kenya

How much do you have to pay him to stop cutting the tree?

Problem statement Surroundings of Lore Lindu National Park in Central Sulawesi, Indonesia

Problem statement: Vicious cycle of poverty and deforestation Cocoa boom: 230% area increase in 20 years 30% of land acquired by clearing primary forest Poverty of local ethnic groups Encroachment & Deforestation Land sales to migrants Expenditures for ceremonial purposes

Objective Assess the i mpact of carbon payments on smallholder households Evaluate the potential of carbon credits to provide an incentive for adoption of sustainable land-use systems Assess the potential of carbon payments to contribute to the conservation of the rainforest

Assess the i mpact of carbon payments on smallholder households

Evaluate the potential of carbon credits to provide an incentive for adoption of sustainable land-use systems

Assess the potential of carbon payments to contribute to the conservation of the rainforest

4 household classes (HH I ; HH II ; HH III ; HH IV ) characterised on basis of dominant cocoa agroforestry system 4 cocoa agroforestry systems: I – II – III – IV Linear programming model, maximising farm level gross margin Methodology I III II IV Shade tree cover Management intensity Sustainability

4 household classes (HH I ; HH II ; HH III ; HH IV ) characterised on basis of dominant cocoa agroforestry system

4 cocoa agroforestry systems: I – II – III – IV

Linear programming model, maximising farm level gross margin

Characteristics of household classes Household class Attributes HH I HH II HH III HH IV Poverty Index Poorest Poor Poor Better-off Ethnicity (% migrants) 0 19 22 80

Characteristics of household classes

Results (1) Scenario 1 & 2: Impact of carbon payments on household income Total Gross Margin – Baseline Situation 1€=11,500 IDR (2006) Scenario 1: Impact of carbon credits on TGM Scenario 2:Impact of carbon credits on TGM

Scenario 1 & 2: Impact of carbon payments on household income

Results (2) Scenario 3: Incentives for environmentally friendly agroforestry systems Carbon certificates: Price premiums for shade grown, biodiversity rich & sustainable cocoa agroforestry systems I and II Household Class HH I HH II HH III HH IV M inimum credit price ( CER /tCO 2 e ) € 14 € 27 € 32 € 185

Scenario 3: Incentives for environmentally friendly agroforestry systems

Carbon certificates: Price premiums for shade grown, biodiversity rich & sustainable cocoa agroforestry systems I and II

Results (3) Scenario 4: Incentives for rainforest conservation Carbon certificates to prevent further deforestation activities (REDD) Emission reduction from reduced deforestation may be among the least-expensive mitigation options available (IPCC 2007, Stern Review 2006) Household Class HH I HH II HH III HH IV Minimum credit price (CER/ tCO 2 e avoided) € 1 € 10 € 23 € 54

Scenario 4: Incentives for rainforest conservation

Carbon certificates to prevent further deforestation activities (REDD)

Emission reduction from reduced deforestation may be among the least-expensive mitigation options available (IPCC 2007, Stern Review 2006)

Conclusions The impact of payments on households depends on the prices they obtain on the carbon markets Solution to vicious cycle of deforestation & poverty: Target carbon sequestration payments to shade intensive agroforestry systems I & II “ Win-Win-Win” situation: income of poorest, local households increased encroachment process at NP forest margin stopped environmentally friendly land-use systems (carbon sequestration, biodiversity) promoted

The impact of payments on households depends on the prices they obtain on the carbon markets

Solution to vicious cycle of deforestation & poverty: Target carbon sequestration payments to shade intensive agroforestry systems I & II

“ Win-Win-Win” situation:

income of poorest, local households increased

encroachment process at NP forest margin stopped

environmentally friendly land-use systems (carbon sequestration, biodiversity) promoted

Linear Programming Model Objective function: Maximise farm level gross margin 4 household classes (HH I – HH II - HH III - HH IV ) Data land-use systems Carbon annuity payments Agricultural activities Carbon budget cocoa & shade trees Resource endowments Carbon credits (tCER) 5 – 30 €/tCO 2 Assumptions...