Rohit Jindal - Estimating payments for smallholder Agroforestry contracts in Tanzania - August 2009


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Estimating payments for smallholder Agroforestry contracts in Tanzania

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Rohit Jindal - Estimating payments for smallholder Agroforestry contracts in Tanzania - August 2009

  1. 1. Estimating payments for smallholder Agroforestry contracts in Tanzania World Congress of Agroforestry Nairobi (Aug 23-28, 2009) By: Rohit Jindal PhD Candidate - Michigan State University
  2. 2. Significance of payment in PES <ul><li>PES: payments to service providers from service users / intermediaries for securing valuable environmental services (ES) </li></ul><ul><li>An inadequate payment will: </li></ul><ul><ul><li>underachieve program objectives </li></ul></ul><ul><ul><li>exclude poor </li></ul></ul><ul><ul><li>or be rejected outright </li></ul></ul><ul><li>But, how much to pay if ES markets don’t exist? </li></ul><ul><li> important methodological & practical question </li></ul>
  3. 3. Research site: Ulugurus, Tanzania
  4. 4. PES in Ulugurus <ul><li>Provides valuable ES: biodiversity, watershed (source of water for Dar) </li></ul><ul><li>ES threatened due to rapid deforestation </li></ul><ul><li>Focus on conservation through smallholder agroforestry – woodlots on 0.5 acre plots, carbon and other co-benefits </li></ul>
  5. 5. Stated preference method <ul><li>Survey with 400 randomly selected households </li></ul><ul><li>Covered hh demographics, labor availability and agricultural profile </li></ul><ul><li>Choice Experiments: farmers asked to choose from a set of hypothetical tree planting contracts </li></ul>
  6. 6. Choice experiments Attributes Levels Trees Khaya + Teak Mango + Avocado Khaya + Acacia Seedlings Farmers pay Free Free + upfront payment Contract duration 3 years 10 years 25 years Annual PES payment None Tsh 15,000 Tsh 45,000
  7. 7. Indicative Results <ul><li>High level of willingness to plant trees: </li></ul><ul><ul><li>Most hh already protect trees on their farms </li></ul></ul><ul><ul><li>Want to put additional 0.5 - 1 acre under trees </li></ul></ul><ul><ul><li>Only < 25% respondents said ‘no’ to planting trees </li></ul></ul><ul><ul><li>Major constraints – old age, non-availability of land </li></ul></ul>
  8. 8. Conditional Logit <ul><li>Dependent variable: choice to plant trees under a specific contract </li></ul><ul><li>Preferences for contract attributes: </li></ul><ul><ul><li>Annual payment: ++ </li></ul></ul><ul><ul><li>Timber trees: ++ </li></ul></ul><ul><ul><li>Longer duration contracts: - </li></ul></ul><ul><ul><li>Upfront payment: + </li></ul></ul><ul><li>Still working on more detailed data analysis </li></ul>
  9. 9. Revealed preference: Auction <ul><li>Stated preference methods may not resolve info asymmetry </li></ul><ul><li>In an auction, farmers bid for tree planting contracts </li></ul><ul><li>Competition ensures they reveal their true WTA </li></ul><ul><li>Bids selected as per uniform pricing with the last rejected bid setting the equilibrium price </li></ul>
  10. 10. An example <ul><li>If PES budget = $140 </li></ul><ul><ul><li>We can either get just 1 ha, or </li></ul></ul><ul><ul><li>Thro auction we select the two lowest bids and pay $60 to each of them </li></ul></ul><ul><li>If budget = $580 </li></ul><ul><ul><li>We select five lowest bids and pay $110 to each of them </li></ul></ul><ul><li> Vickrey auction: Incentive compatible as bidders reveal their true behavior </li></ul><ul><li>Bids received/ha </li></ul><ul><li>$150 </li></ul><ul><li>$140 </li></ul><ul><li>$110 </li></ul><ul><li>$95 </li></ul><ul><li>$87 </li></ul><ul><li>$60 </li></ul><ul><li>$45 </li></ul><ul><li>$30 </li></ul>
  11. 11. Field auction in the Ulugurus <ul><li>300 farmers participated </li></ul><ul><li>Two contracts from CE options offered: </li></ul><ul><ul><li>Low intensity woodlots in 0.5 acre plots </li></ul></ul><ul><ul><li>Trees to be maintained for 3 years </li></ul></ul><ul><li>3 training rounds </li></ul><ul><li>2 auction rounds: 268 valid bids received </li></ul>
  12. 12. Indicative results (n=268) <ul><li>Round 1 (Khaya + Teak): Round 2 (Khaya + Acacia): </li></ul><ul><li>Mean bid: Tsh 157,402 Mean bid: Tsh 151,631 </li></ul><ul><li>Median bid: Tsh 135,000 Median bid: Tsh 135,000 </li></ul>
  13. 13. Implications <ul><li>Maximum enrollment under a given budget – yields additionality </li></ul><ul><li>Auction bids can be compared with results from stated preference survey </li></ul><ul><li>Comparison with other opportunity cost studies </li></ul><ul><li>A general method to determine payment in PES projects </li></ul>
  14. 14. Implications for policy makers <ul><li>Targeting poor farmers: </li></ul><ul><ul><li>CE results can help in designing pro-poor PES contracts </li></ul></ul><ul><li>Targeting priority areas: </li></ul><ul><ul><li>High risk areas (riparian, steeply sloped etc.) given higher weights in the auction </li></ul></ul><ul><ul><li> Increases the probability of such lands being contracted </li></ul></ul>
  15. 15. Acknowledgements <ul><li>John Kerr, Michigan State Univ. </li></ul><ul><li>Brent Swallow, ICRAF </li></ul><ul><li>Aichi Kitalyi, ICRAF </li></ul><ul><li>Paul Ferraro, Univ. of Georgia </li></ul><ul><li>Satish Joshi, MSU </li></ul><ul><li>Mr. Sabas, TAFORI </li></ul>