Payment for environmental services (PES) is a conservation policy option that its implementation in Asian developing countries demands integrating environmental service provision and livelihood enhancement. The analysis of a payment for carbon service in Indonesia revealed that tensions between PES design rules and land managers’ practices existed. It can shed light onto PES positive and negative impacts on land managers, including their performance in accomplishing their contractual agreements with the carbon buyer. This empirical case overall emphasizes the importance of examining PES beyond conventional economic analysis, i.e. micro- and meso-analysis. Consequently, PES research from developing countries might consider the involvement of other scales targeting pico-economics, where decision making, interpretation of observations and construction of perceived causal mechanisms influence PES performances and ensure balance of tradeoff between ES provision and multidimensional poverty alleviation. Moreover, the macroeconomic context of national development and giga economic scale of global issues imply direct relevance to effectiveness and fairness of PES schemes.

1. SHARING GOOD PRACTICES AND LESSONS FROM
REWARDS FOR, USE OF AND SHARED INVESTMENT IN PRO-
POOR ENVIRONMENTAL SERVICES SCHEME (RUPES-II)
2008 – 2012
Beria Leimona and Meine van Noordwijk
ICRAF SEA – RUPES
One day Seminar
“Tree cover transitions and investment in multicolored economy:
hypothesis grounded in data”
Bogor, 13 March 2013

2. RUPES SITES IN ASIA
covering 12 sites in 8
countries
2002-2012
Bac Kan Action research sites

3. Balancing act is needed
ES Provisions
and
Environmental
Goal
Efficiency Fairness
Pro-poor
Adapted from van Noordwijk et al (2011)

4.  Poverty is a major issue –
enhancement of ES cannot be
disentangled from
development needs
 Communities depend greatly
on social contacts in
managing their landscapes
 Defining pro-poor as:
Include
 Access
 Process and decision making pro-poor approach
 Outcome
.... of the schemes to PES
....support a positive bias
toward poor stakeholders development
(Van Noorwijk & Leimona 2010)

5. 1 Access to PES scheme
 Designed and administered for fairness of farmers with low formal
education, prone to social conflicts and influenced by power
structures within their community
 Case: Conservation reverse-auction – mimicking market-based
mechanism for soil erosion
 PES contractual relationships are subject to asymmetric
information between landowners and conservation agents.
 Information asymmetries can limit the effectiveness of PES
schemes and make them expensive to implement.
 The auction for the PES programme in Indonesia was designed
using a uniform price rule for fairness reasons.
 However, uniform pricing is relatively less cost-effective compared
to the discriminative price rule.
 Different targeting scenarios: cost-efficiency vs pro-poor

6. Targeting No of No of Price per Average Erosion
scenario house- hectares hectare erosion potential
holds potential per dollar
index per
enrolled
hectare
Cost only 34 25.00 172 22.24 0.129
Cost- 31 24.00 167 23.14 0.139
efficiency
Eligibility 31 24.00 167 23.10 0.138
rule
Pro-poor 13 4.75 1,111 22.69 0.200
Source:
Jack, B. K., Leimona, B., & Ferraro, P. J. (2008). A Revealed Preference Approach to Estimating
Supply Curves for Ecosystem Services: Use of Auctions to Set Payments for Soil Control in Indonesia.
Conservation Biology, 23(2), 359-367.

7. 2 Process and decision making
 Applying multiple knowledge approach for ES
 Clarifying drivers of problems and identifying ES –
not based on perception per se
 Negotiation support system
 Nested approach to PES
 Free prior informed consent at individual level
 Why?
 Start with broader paradigm of PES: strict
conditionality generally cannot work in developing
countries
• Lack of data in connecting land use change and ES provisions
• Lack of monitoring tools, capacities and institutions

8. Singkarak Sumberjaya Kapuas Hulu Talau
Initial Deforestation at the upstream of Deforestation caused:
Forest conversion to coffee
Forest conversion to agriculture Deforestation surrounding
watershed caused floods and agroforestry gardens caused and illegal logging causing the water spring decreased
perceived decrease of the water level of the
lake, thus disturbing the
• Floods  paddy field along the river
increase of sediment yield,
thus clogging the HEP
increased of sediment yield,
thus decreasing the water
water supply from the
spring.
problem operational of hydroelectric power electricity generator and quality for drinking water
• Decrease of the water level of the
company (HEP). causing low electricity company.
production.
lake  disturbingthat operationalfrom water
Decrease of water level was caused Sedimentation mostly was Low run-off showed
the Lack of water
of
Results from
HEP watershed was still well-
by ineffective watershed buffering caused by instable geological springs dominantly was
hydrological in retaining water during rainy
season.
characteristics of the
watershed.
functioning with the current
land practices and changes.
caused by climatic changes
and ineffective watershed in
analysis with Downstream water quality was Coffee plantation less than 3 Intensive use along riparian
buffering water.
combined influenced by high domestic and
agricultural pollutants.
years, landslides (occurred in
forested area), river bank
causing river bank collapse and
river edge cutting for boat
Overconsumption and
unwise use of water from
ecological Floods were mostly caused by river
collapse, and dirt footpaths transportation were sources of the spring worsened water
were sources of sediment sediment yield. management and caused
knowledge stream diversion by HEP.
yield. conflicts.
Reforestation uses trees with low Simple sediment retention Tembawang traditional Reviving local wisdom of
Management evapotranspiration. construction and planting agroforestry system along spring water management
implication Local wisdom maintains clean
deep root trees, including
compaction of dirt path were
riparian zone helps reducing
pressures to soil erosion.
can help solving internal
conflicts.
water stream in the upstream and
from local conserving native ikan bilih.
useful to reduce surface
erosion.
perspectives
Upstream village level: maintaining Collective action to conserve Collective action to conserve Collective and individual
Management current intact environment, i.e. riparian zone involving riparian zone involving village action to promote tree-
implication for biodiversity conservation such as
organic coffee, bundled VCM and
village members along the
river.
members along the river. planting to increase
watershed buffering.
Collective action to maintain
watershed watershed services.
Individual and collective intact forest in the upper Spring water management
management Villages surrounding the Lake:
improving water quality of the
action to manage coffee
garden by applying simple
watershed as a potential for
REDD+ type schemes.
with wise consumption and
regulated extraction of
and RWS Lake and connecting river. construction and multistrata
Law enforcement on illegal
PDAM.
tree-planting.
logging and logging permits.
Source: Leimona, B., Lusiana, B., Van Noordwijk, M., Ekadinata, A., & Mulyoutami, E. (2011).
Reconciling multiple ecological knowledge for rewarding watershed services in the uplands of
Indonesia. World Agroforestry Centre

9. Singkarak Sumberjaya Kapuas Hulu Talau
Deforestation at the upstream of Forest conversion to coffee Forest conversion to agriculture Deforestation surrounding
Initial watershed caused floods and agroforestry gardens caused and illegal logging causing the water spring decreased
perceived decrease of the water level of the
lake, thus disturbing the
increase of sediment yield,
thus clogging the HEP
increased of sediment yield,
thus decreasing the water
water supply from the
spring.
problem operational of hydroelectric power electricity generator and quality for drinking water
company (HEP). causing low electricity company.
production.
• Decrease of water level  ineffective
Results from Decrease of water level was caused Sedimentation mostly was watershed buffering in retaining water water
Low run-off showed that Lack of water from
by ineffective watershed buffering caused by instable geological watershed was still well- springs dominantly was
during rainywith the current
functioning season.
hydrological in retaining water during rainy
season.
characteristics of the
watershed. land practices and changes.
caused by climatic changes
and ineffective watershed in
analysis with • Downstream water qualitybuffering water.  high
Downstream water quality was Coffee plantation less than 3 Intensive use along riparian
combined influenced by high domestic and domestic and agricultural pollutants.
years, landslides (occurred in causing river bank collapse and Overconsumption and
agricultural pollutants. forested area), river bank river edge cutting for boat unwise use of water from
ecological • Floods  river stream of the springby HEP.water
collapse, and dirt footpaths transportation were sources diversion worsened
Floods were mostly caused by river
were sources of sediment sediment yield. management and caused
knowledge stream diversion by HEP.
yield. conflicts.
Reforestation uses trees with low Simple sediment retention Tembawang traditional Reviving local wisdom of
Management evapotranspiration. construction and planting agroforestry system along spring water management
implication Local wisdom maintains clean
deep root trees, including riparian zone helps reducing
compaction of dirt path were pressures to soil erosion.
can help solving internal
conflicts.
water stream in the upstream and
from local conserving native ikan bilih.
useful to reduce surface
erosion.
perspectives
Upstream village level: maintaining Collective action to conserve Collective action to conserve Collective and individual
Management current intact environment, i.e. riparian zone involving riparian zone involving village action to promote tree-
implication for biodiversity conservation such as
organic coffee, bundled VCM and
village members along the
river.
members along the river. planting to increase
watershed buffering.
Collective action to maintain
watershed watershed services.
Individual and collective intact forest in the upper Spring water management
management Villages surrounding the Lake:
improving water quality of the
action to manage coffee
garden by applying simple
watershed as a potential for
REDD+ type schemes.
with wise consumption and
regulated extraction of
and RWS Lake and connecting river. construction and multistrata
Law enforcement on illegal
PDAM.
tree-planting.
logging and logging permits.

10. Singkarak Sumberjaya Kapuas Hulu Talau
Deforestation at the upstream of Forest conversion to coffee Forest conversion to agriculture Deforestation surrounding
Initial watershed caused floods and agroforestry gardens caused and illegal logging causing the water spring decreased
perceived decrease of the water level of the
lake, thus disturbing the
increase of sediment yield,
thus clogging the HEP
increased of sediment yield,
thus decreasing the water
water supply from the
spring.
problem operational of hydroelectric power electricity generator and quality for drinking water
company (HEP). causing low electricity company.
production.
Decrease of water level was caused Sedimentation mostly was Low run-off showed that Lack of water from water
Results from by ineffective watershed buffering caused by instable geological watershed was still well- springs dominantly was
hydrological in retaining water during rainy
season.
characteristics of the
watershed.
functioning with the current
land practices and changes.
caused by climatic changes
and ineffective watershed in
analysis with Downstream water quality was Coffee plantation less than 3 Intensive use along riparian
buffering water.
 Reforestation uses trees with low
combined influenced by high domestic and
agricultural pollutants.
years, landslides (occurred in causing river bank collapse and Overconsumption and
evapotranspiration. boat
forested area), river bank river edge cutting for unwise use of water from
ecological Floods were mostly caused by river
collapse, and dirt footpaths transportation were sources of the spring worsened water
were sources of  Local wisdom maintains clean water and caused
sediment sediment yield. management
knowledge stream diversion by HEP.
yield. conflicts.
Reforestation uses trees with low
stream in the upstream and Reviving local wisdom of
Simple sediment retention Tembawang traditional
conserving
Management evapotranspiration. nativeagroforestry system along
construction and planting ikan bilih. spring water management
implication Local wisdom maintains clean
deep root trees, including riparian zone helps reducing
compaction of dirt path were pressures to soil erosion.
can help solving internal
conflicts.
water stream in the upstream and
from local conserving native ikan bilih.
useful to reduce surface
erosion.
perspectives
Upstream village level: maintaining Collective action to conserve Collective action to conserve Collective and individual
Management current intact environment, i.e. riparian zone involving riparian zone involving village action to promote tree-
implication for biodiversity conservation such as
organic coffee, bundled VCM and
village members along the
river.
members along the river. planting to increase
watershed buffering.
Collective action to maintain
watershed watershed services.
Individual and collective intact forest in the upper Spring water management
management Villages surrounding the Lake:
improving water quality of the
action to manage coffee
garden by applying simple
watershed as a potential for
REDD+ type schemes.
with wise consumption and
regulated extraction of
and RWS Lake and connecting river. construction and multistrata
Law enforcement on illegal
PDAM.
tree-planting.
logging and logging permits.

11. Singkarak Sumberjaya Kapuas Hulu Talau
Deforestation at the upstream of Forest conversion to coffee Forest conversion to agriculture Deforestation surrounding
Initial watershed caused floods and agroforestry gardens caused and illegal logging causing the water spring decreased
perceived decrease of the water level of the
lake, thus disturbing the
increase of sediment yield,
thus clogging the HEP
increased of sediment yield,
thus decreasing the water
water supply from the
spring.
problem operational of hydroelectric power electricity generator and quality for drinking water
company (HEP). causing low electricity company.
production.
Decrease of water level was caused Sedimentation mostly was Low run-off showed that Lack of water from water
Results from by ineffective watershed buffering caused by instable geological watershed was still well- springs dominantly was
hydrological in retaining water during rainy
season.
characteristics1. of the
watershed.
functioning with the current
land practices and changes.
caused by climatic changes
and ineffective watershed in
analysis with Downstream water quality was 1. Upstream village level
Coffee plantation less than 3 Intensive use along riparian : buffering water.
combined influenced by high domestic and
agricultural pollutants.
years, landslides (occurred in causing river bank collapse and Overconsumption and
maintaining current boat
forested area), river bank river edge cutting for
intact environment from
unwise use of water
ecological Floods were mostly caused by river
collapse, and dirt footpaths
•
transportation were sources of the spring worsened water
biodiversity conservation such as caused
were sources of sediment sediment yield. management and
knowledge stream diversion by HEP.
yield. organic coffee conflicts.
Reforestation uses trees with low Simple sediment retention Tembawang traditional Reviving local wisdom of
Management evapotranspiration. construction and planting• bundled system along watershed management
agroforestry VCM and spring water
implication Local wisdom maintains clean
deep root trees, including riparian zone helps reducing
compaction of dirt path were services soil erosion.
pressures to
can help solving internal
conflicts.
water stream in the upstream and
from local useful to reduce surface
conserving native ikan bilih.
erosion. 2. Villages surrounding the Lake :
perspectives
Upstream village level: maintaining
improving water quality of the Lake individual
Collective action to conserve Collective action to conserve
Collective and
Management current intact environment, i.e. riparian zone involvingand connecting river.village
riparian zone involving action to promote tree-
implication for biodiversity conservation such as
organic coffee, bundled VCM and
village members along the
river.
members along the river. planting to increase
watershed buffering.
Collective action to maintain
watershed watershed services.
Individual and collective intact forest in the upper Spring water management
management Villages surrounding the Lake:
improving water quality of the
action to manage coffee
garden by applying simple
watershed as a potential for
REDD+ type schemes.
with wise consumption and
regulated extraction of
and RWS Lake and connecting river. construction and multistrata
Law enforcement on illegal
PDAM.
tree-planting.
logging and logging permits.

12. Financial capital
Emotion, intuition
Macro economic Human Social Risk & .
development buffering
capital Pico capital
economics
sermons
Ratio Social norms
Infra- Natural
structure Spatial planning & LU rights capital
Giga economic green development
Source: van Noordwijk, M., Leimona, B., Jindal, R., Villamor, G. B., Vardhan, M.,
Namirembe, S., et al. (2012). Payments for Environmental Services: Evolution Toward
Efficient and Fair Incentives for Multifunctional Landscapes. Annual Review of
Environment and Resources, 37(1), 389-420.

13. Four Level of ‘conditionality’
Co-investment in
Level IV
ES stewardship
Compensation
for more
Level II / III
beneficial land
practices
Commoditized
Level I
ES
Source: Van Noordwijk, M., & Leimona, B. (2010). Principles for fairness and efficiency in enhancing environmental services
in Asia: payments, compensation, or co-investment? Ecology and Society, 15(4).

14. 3 Outcome of PES scheme
 Recognizing multi-dimension of poverty
 Benefits were mostly non-
financial:
 expanded social networks with external
stakeholders;
 knowledge and capacity of the community;
and
 small-scale public infrastructure investments.

15. The livelihood issues discussed in focus groups
Capital Type of information discussed
Financial Sources of income over the three periods
Human What (if any) capacity/skills/knowledge were gained
through the scheme?
Social What was the nature and degree of trust with other
stakeholders during the three periods?
What norms or standards of behavior did the community
set itself in connection with the scheme (e.g. sanctions
etc)?
What were community’s networks like during the three
periods?
Natural What benefits did they gain from the watershed and its
protection?
Physical Had any investments been made as a result of the scheme
(e.g. infrastructure)?
Source: Leimona, B., Pasha, R., & Rahadian, N. (2010). The livelihood impacts of incentive payments for watershed
management in West Java, Indonesia. In L. Tacconi, S. Mahanty & H. Suich (Eds.), Livelihoods in the REDD?: Payments for
Environmental Services, Forest Conservation and Climate Change. Cheltenham: Edward Elgar.

16. Household income sources (%)
Source of Income After PES Before PES Before PES (before
(2005- now) (2000 -2005) 2000)
P NP P NP P NP
Melinjo 26.67 28.33 23.33 31.67 15.00 16.67
Farming labor 15.00 15.00 0.00 8.33 0.00 13.33
Coconut 11.67 8.33 10.00 8.33 15.00 10.00
Clove 10.00 6.67 18.33 6.67 11.67 10.00
Coffee 10.00 10.00 15.00 10.00 16.67 18.33
Durian 6.67 3.33 13.33 8.33 23.33 11.67
Salak 5.00 8.33 5.00 5.00 3.33 0.00
Wood 5.00 6.67 8.33 0.00 0.00 0.00
Payment for ES 3.33 0.00 0.00 0.00 0.00 0.00
Banana 1.67 1.67 3.33 3.33 3.33 11.67
Cocoa 1.67 0.00 0.00 0.00 0.00 0.00
Petai 1.67 6.67 0.00 5.00 0.00 0.00
Cotton 1.67 0.00 3.33 1.67 5.00 1.67
Jengkol 0.00 0.00 0.00 0.00 5.00 0.00
Paddy 0.00 0.00 0.00 0.00 0.00 1.67
Upland paddy 0.00 1.67 0.00 5.00 1.67 0.00
Others (clove labor, livestock 0.00 3.33 0.00 6.67 0.00 5.00
labor, motorbike renting,
construction labor, trader)

17. Type of knowledge/ capacity/skills gained by participants
and non-participants after the PES implementation
Type of knowledge/capacity/skills Participant (%) Non-participant (%)
Conservation
Causes of erosion, landslides and downstream sedimentation 100 17
How to maintain clean water and to reduce air pollution 83 -
Roles of trees in conservation 67 -
Simple construction to prevent erosion 50 -
Understanding of PES concept 33 17
Institution and Governance
Ability to govern an organization 67 17
Ability to solve problems within farmer groups 67 -
Administration of farmer groups 50 17
Networking to improve local business and PES implementation 50 -
Transparent financial management 33 -
How to develop local business
Livestock 33 17
Agriculture 17 -
Fishery - -

18. Trust among internal and external stakeholders
Relationship How trust is expressed
Amongst participants Borrowing money and rice;
Sharing information;
Mortgaging (loans);
Collective labor sharing
Participants and government Making identification and family card;
Paying tax;
Receiving administrative information;
Getting cash assistance;
Maintaining security
Participants and non- Collective labor sharing;
participants Sharing information;
Borrowing money, rice, daily needs and construction materials
Participants and FKDC Delivering the payments for accomplishing the contracts;
Sharing information;
Maintaining transparency in managing the funds of organizations.
Participants and PERHUTANI Giving seedlings;
Giving information;
Giving access to manage forest and plant ally-cropping on the area of
PERHUTANI.
Participants and NGO Implementing programs;
Sharing information, especially on environmental services;
Conducting meetings.

19. Thank You
World Agroforestry Centre
PO Box 161, Bogor, 16001, INDONESIA
Tel: +62 251 8625415
FAX: +62 251 8625416
http://www.worldagroforestrycentre.org

20. George Price’s condition for intergenerational increase in
altruism:
( Individual
Gain-Loss )+( Social
cohesion )( Group
Gain-Loss )>0
Carrots Sticks