Success factors and constraints of payment and reward schemes for environmental services in Asia

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Fairly efficient or efficiently fair:
success factors and constraints of payment and reward schemes for environmental services in Asia

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  • VoluntaryES delivery not measuredPayments tied to performance of IMPsMonitoring of IMPsshows a progression from modes of support that imply government inputs but without monitoring of adoption or environmental service provision (Types 1 and 2) through schemes that make incentive payments for adoption of IMPs (Types 3 and 4),Unlike China’s other main grassland RES scheme, the GRP, the Tibet RES scheme seeks to incentivize improved management of both degraded and undegraded grasslands. The rewards are to be made conditional on maintaining sustainable stocking levels on lands to which herders have legal use rights.Most grassland conservation projects in China would be Type 2 – investments by government in inputs to improved grassland management but without enforcing links between payments and adoption of IMPs. China’s GRP, which makes payments for households participating in the scheme in theory introduces conditionality – payments are only made to households that implement the grazing prohibitions and grazing is supposedly monitored – would fit into the Type 3 category.
  • In a landscape, the community deals with three other main groups in five major ways (see arrows in Fig. 2):Private sector entities who buy marketable commodities for further processing and trade and/or use the landscape resources for added value (e.g. through hydropower or the sale of drinking water),Governments imposing rules on the private sector and their interaction with ESGovernment agencies, sometimes acting to represent international conventions, regulating what the community is allowed to do, how it has to organize its administration and how it can be part of development processes prioritized at higher levels,Consumers who buy local goods and may be interested in supporting ES as well,Consumers elsewhere in the world who opt for competitively priced goods, but also have concerns about the status of poverty indicators, natural resources and human rights in the area
  • In a landscape, the community deals with three other main groups in five major ways (see arrows in Fig. 2):Private sector entities who buy marketable commodities for further processing and trade and/or use the landscape resources for added value (e.g. through hydropower or the sale of drinking water),Governments imposing rules on the private sector and their interaction with ESGovernment agencies, sometimes acting to represent international conventions, regulating what the community is allowed to do, how it has to organize its administration and how it can be part of development processes prioritized at higher levels,Consumers who buy local goods and may be interested in supporting ES as well,Consumers elsewhere in the world who opt for competitively priced goods, but also have concerns about the status of poverty indicators, natural resources and human rights in the area
  • VoluntaryES delivery not measuredPayments tied to performance of IMPsMonitoring of IMPsshows a progression from modes of support that imply government inputs but without monitoring of adoption or environmental service provision (Types 1 and 2) through schemes that make incentive payments for adoption of IMPs (Types 3 and 4),Unlike China’s other main grassland RES scheme, the GRP, the Tibet RES scheme seeks to incentivize improved management of both degraded and undegraded grasslands. The rewards are to be made conditional on maintaining sustainable stocking levels on lands to which herders have legal use rights.Most grassland conservation projects in China would be Type 2 – investments by government in inputs to improved grassland management but without enforcing links between payments and adoption of IMPs. China’s GRP, which makes payments for households participating in the scheme in theory introduces conditionality – payments are only made to households that implement the grazing prohibitions and grazing is supposedly monitored – would fit into the Type 3 category.
  • Success factors and constraints of payment and reward schemes for environmental services in Asia

    1. 1. Fairly efficient or efficiently fair: <br />success factors and constraints of payment and reward schemes for environmental services in Asia<br />Beria Leimona<br />Co authors: Meine van Noordwijk, Laxman Joshi, <br />Rachman Pasha, Betha Lusiana,, <br />Elok Mulyoutami, Nimatul Khasanah, Andree Ekadinata <br />ICRAF Science Week <br />12-17 September 2011<br />Nairobi<br />
    2. 2. Thesis committee <br /> <br />Thesis supervisor<br /> Prof. dr. H.B.J. Leemans <br />Professor of Environmental Systems Analysis<br />Wageningen University<br /> <br /> <br />Thesis co-supervisor<br />Dr. R.S. de Groot, <br />Associate Professor<br />Environmental Systems Analysis Group<br />Wageningen University<br />Dr. M. van Noordwijk, <br />World Agroforestry Centre<br />Prof. dr. P.J. Ferraro, <br />Georgia State University, US<br />Other members<br />Prof. dr. ir. E. Bulte, <br />Wageningen University<br />Prof. dr. R. Costanza, <br />Portland State University, USA<br />Dr. L.C. Braat, <br />Wageningen University<br />Dr. R. Muradian, <br />Radboud University Nijmegen<br /> <br />This research was conducted under the auspices of <br />the Graduate School of Socio-Economic and Natural Sciences of the Environment (SENSE)<br />
    3. 3. Rewards for, Use of and Shared Investment in Pro-poor Environmental Services schemes in Asia<br />Phase 1: 2002 – 2007 <br />Phase 2: 2008 – 2012 <br />2001/2002<br />2011<br />
    4. 4. RUPES SITES IN ASIA<br />covering 12 sites in 8 countries<br />Bac Kan<br />
    5. 5. Singkarak<br /><ul><li>Community based- voluntary carbon market
    6. 6. Potential organic coffee
    7. 7. Environmental Education Centre
    8. 8. Agro-ecotourism
    9. 9. Integrated Lake Management with Ministry of Environment
    10. 10. Supported by FAO RAP – Assisted Natural Regeneration to combat Imperata grassland</li></ul>Aceh <br /><ul><li>Contributing to Green-growth economy after recovery from tsunami
    11. 11. Coordinated by UNESCAP & WWF Indonesia </li></ul>Bungo<br /><ul><li>Rubber eco-certification
    12. 12. Improving the quality of smallholder rubber production
    13. 13. Supported by Bridgestone
    14. 14. Collaborating with Indonesian Institute of Ecolabeling</li></ul>Sumberjaya<br /><ul><li>A performance-based reward for sedimentation reduction from HEP
    15. 15. Scale up to watershed level for collective financial reward
    16. 16. Selected as a best practice for a national GEF-UNDP project coordinated by MoF</li></ul>Cidanau<br /><ul><li>An activity-based reward for watershed ES from private companies
    17. 17. Financial reward for local infrastructure and smallholder business improvement
    18. 18. Extension and scaling up at provincial level
    19. 19. Supporting local intermediary: Communication Forum of Cidanau</li></li></ul><li>Kuningan<br /><ul><li>Local level rewards for watershed services
    20. 20. Supporting a local NGO: KANOPI
    21. 21. Policy advocacy RES between districts</li></ul>Lombok<br /><ul><li>Community based- forest management
    22. 22. Gender study on role of women’s knowledge in increasing the sustainable NRM
    23. 23. Supporting a local NGO to monitor an established RES for providing good water quality for urban dwellers. </li></ul>Dieng<br /><ul><li>Scoping study on RES feasibility at a horticulture-rich but severely degraded watershed
    24. 24. Food security issue on potato farming
    25. 25. Supporting Safe DiengNGO</li></ul>Kapuas Hulu<br /><ul><li>Scoping study on watershed hydrological function using RHA tool
    26. 26. Supporting the consortium WWF-CARE-IIED</li></ul>Central Sulawesi<br /><ul><li> IFAD Investment Project site with Ministry of Agriculture
    27. 27. Collaboration with Mars Symbioscience Indonesia to improve the cocoa agroforestry and promote RES scheme for smallholders. </li></ul>INDONESIA<br />
    28. 28. Bac Kan<br /><ul><li>Supporting the PDD of REALU projects
    29. 29. Developing RES scheme for forest ES
    30. 30. Improving existing ecotourism scheme </li></ul>Bakun<br /><ul><li> Collaborating with Cordillera Highlands Agriculture Resource Management Project
    31. 31. HEP royalty benefit-transfer to local indigenous group</li></ul>Kalahan<br /><ul><li>Voluntary carbon market scheme by Ikalahan indigenous group in collaboration with FAO RAP
    32. 32. Supported by Mitsubishi company in developing carbon Project Identification Note
    33. 33. Potential bundling ES with watershed and biodiversity conservation
    34. 34. A best practice site for forest protection and NTFP marketing </li></ul>Lantapan<br /><ul><li> A case study of water rights and conflicts
    35. 35. A sentinel site for Landcare
    36. 36. Supporting policy advocacy of RES , and RES design at district level </li></ul>PHILIPPINES AND VIETNAM<br />
    37. 37. Kulekhani Watershed<br /><ul><li>Hilly region watershed extends over 8 VDCs
    38. 38. Community forestry – on hill slopes, intensive agriculture on the slopes
    39. 39. Hydropower station below – reservoir based
    40. 40. 17% of hydropower in the country (92 MW)
    41. 41. Government royalty collected from Hydropower generation by NEA; 12% channeled back to the district
    42. 42. Collaboration with ICIMOD</li></ul>NEPAL<br />Tibet Plateau <br /><ul><li>Incentivizing improved management of both degraded and un-degraded grasslands.
    43. 43. Conditional on maintaining sustainable stocking levels on lands to which herders have legal use rights.</li></ul>Shivapuri-Nagargun National Park (SNNP)<br />Managed by Department of National Parks and Wildlife Conservation (DNPWC)<br />a major source of drinking water in Kathmandu (around 21% of piped water) other services: HEP plant, irrigation, tourism<br />Two villages inside the parkPark-people conflict (wildlife, no access to forests)<br />Collaboration with ICIMOD<br />Loktak Lake <br /><ul><li>Floodplain wetlands with unique floating lands called phumdis i.e. thick mats of vegetation intermixed sediments
    44. 44. Presence of KeibulLamjao National Park for globally threathened species of Brow Antlered Deer
    45. 45. Construction of Ithai barrage of HEP converted a naturally fluctuating lake into a reservoir
    46. 46. Wetlands India and Loktak Development Authority : restoration strategies</li></li></ul><li>Environmental degradation<br />“vicious circle”<br />(Reardon and Vosti 1995)<br />Poverty <br />
    47. 47. Introduction: Sustainable Development and PES<br />70’s: Club of Rome (Tinbergen 1976)<br /><ul><li>Eyes opening on the environment-poverty linkage
    48. 48. Stimulating the concept of sustainable development</li></ul>90’s: Rio Declaration on Environment and Development<br /><ul><li>Synergy between environmental and economic development
    49. 49. Environmental economics concepts: internalization of envt. cost, polluters-pay principle and compensation for victims
    50. 50. Market-based instruments as alternatives to complement non-market based policy</li></li></ul><li>Introduction: Sustainable Development and PES<br />2005: Millennium Ecosystem Assessment: ecosystem (environmental) services (ES) introduced<br />Application of the principle of market-based instruments to ecosystem services<br />Main reason: the real value of ES to human well being is not or only partially included in market economics  market failures<br />Monetization and commoditization of ecosystem services  Payment for ES<br />Introduction of strict and normative definition of PES<br />Emphasizing in effectiveness and efficiency of PES in providing ES<br />Excluding the poverty alleviation issue<br />2010: case studies showing the application of strict conditionality of PES not working<br />
    51. 51. Elements of efficiency and fairness within a reward for environmental service scheme<br />
    52. 52. Stages in RES development and its links with efficiency-fairness<br />Effective ES provision <br />Implementation <br />and <br />Monitoring, Reporting & Verifying<br />Implementation & MRV cost<br />Efficiency<br /> 1 Commoditized & compensation for ES<br />6 Livelihood assessment<br />Contract accomplishment<br />Signed contract<br />5 Reverse auction<br />External investors and regulators<br />Fairness<br />Negotiation<br />4 Rapid Hydrological Assessment <br />Opportunity cost<br />Scoping and<br />Stakeholder analysis<br />Transaction cost<br />1 Co-investment for ES<br />Initial interest<br />2-3 Pro-poor assessment<br />Local stakeholders of land practice and behaviour change<br />Adapted from van Noordwijk et al (2011)<br />
    53. 53. 1<br />Preconditions for application of the PES concept with strict conditionality are not met in many developing countries’ contexts and a wider PES interpretation is needed. <br />
    54. 54. Principles of Fairness and EfficiencyPayment, Compensation or Co-investment? <br /><ul><li>Is the strict definition of PES still relevant?
    55. 55. A‘PES-like’ term in existence
    56. 56. How to respond it positively?</li></li></ul><li>Principle and Criteria – Rewards for, Use of and Shared Investment in Pro-poor Environmental Services<br />EFFICIENCY principle<br /><ul><li>Realistic: causal pathways to enhance ES are clear; real opportunity, transaction, & implementation costs are offset, or benefits and co-benefit (financial and non-financial) outweigh the costs
    57. 57. Conditional: performance-based contracts in broad understanding (see levels of conditionality), agreed MRV (monitoring, reporting and verification) among all stakeholders</li></ul>FAIRNESS principle<br /><ul><li>Voluntary: meets the Free and Prior Informed Consent standards; willingness to accept responsibilities
    58. 58. Pro-poor: access, process, decision making and outcomes of the schemes are differentiated by wealth or gender and support a positive bias towards poor stakeholders</li></li></ul><li>Four Level of ‘conditionality’<br />van Noordwijk and Leimona (2010)<br />
    59. 59.
    60. 60.
    61. 61.
    62. 62.
    63. 63. Why should we balance between fairness and efficiency? <br />Poverty is a major issue – enhancement of ES cannot be disentangled from development needs<br />Communities depend greatly on social contacts in managing their landscapes<br />Strict conditionality generally cannot work in developing countries<br />Lack of data in connecting land use change and ES provisions<br />Lack of monitoring tools, capacities and institutions<br /><ul><li>Human interaction within a social capital follow different rationality when involving money</li></ul>Even subtle reminder of money elicit big changes in human behaviour (Vohs et al 2006) <br />
    64. 64. RUPES-I synthesis<br />***<br />CES: Commoditized Environmental Services<br /><ul><li>Direct interaction ES providers &beneficiaries
    65. 65. Recurrent monetary payments: supply and demand
    66. 66. No explicit poverty target
    67. 67. Actual ES delivery & direct marketability:
    68. 68. Conditionality Level I</li></ul>COS: Compensating for Opportunities Skipped <br /><ul><li>Paying for accepting restrictions
    69. 69. Achievement of a condition of (agro)-ecosystem or effort (or restrictions in input use).
    70. 70. Poverty target added with certain conditions
    71. 71. Conditionality Level II/III</li></ul>CIS: Co-Investment in (landscape) Stewardship<br /><ul><li>Entrust the local resource management
    72. 72. Full trust of management plan &local monitoring with high social capital level
    73. 73. A flexible contract, broad sanctions and a monitoring requirement
    74. 74. Conditionality Level IV</li></ul>Proxies,<br />recurrent<br />Plans/ACM,<br />investment<br />'Real' ES,<br />recurrent<br />Conditionality<br />van Noordwijk and Leimona (2010)<br />
    75. 75. Payment or Co-Investment for ES?<br /><ul><li>A strict interpretation of realistic, conditional and voluntary PES (paradigm CES or commoditized ES) appeared problematic in most sites and situations.
    76. 76. Monetary incentives may be counterproductive for public pro-social activities
    77. 77. undermine existing norms
    78. 78. not sufficient and/or durable enough to offset this loss of intrinsic motivation.
    79. 79. PES schemes may need to address a livelihoods approach that considers the five capital types (human, social, physical, financial and natural) in their interactions across scales.
    80. 80. Replacing the “payment” concept by “co-investment” language is an effort to appeal to both social and financial concepts. </li></ul>van Noordwijk and Leimona (2010)<br />
    81. 81. Co-Investment and Shared Responsibility<br /><ul><li>A language of CIS: “co-investment” and “shared responsibility”
    82. 82. conducive to the type of respect,
    83. 83. mutual accountability and commitment to sustainable development
    84. 84. reference to social exchange rather than financial transactions
    85. 85. opportunities for phased strategies.
    86. 86. An evolutionary process …. </li></ul>After creating a basis of respect and relationships through the paradigm of CIS there may be more spacefor specific follow-upsin the paradigm of CES for actual delivery of ES to meet conservation objectives. <br />van Noordwijk and Leimona (2010)<br />
    87. 87. 2<br />Only under specific circumstances, will cash incentives from PES contribute substantially to increase disposable income and alleviate poverty of ES providers.<br />
    88. 88. A model of per capita benefits in terms of a number of dimensionless ratios<br />Population density<br />Income<br />Area<br /> <br />Total payment by downstream - TPd = Ad IdРdβd<br />Per-capita benefit received by upstream:<br />RPu = TPd (1 – αu) . (1 – T)AuIuРu-1<br />1<br />Willingness to pay<br />Fraction of opportunity cost<br />Fraction of transaction cost<br />
    89. 89. A model of per capita benefits in terms of a number of dimensionless ratios<br /> <br />RPu = (Ad Au-1) ( Id Iu-1.) (Рd Рu-1) βd (1 – αu) . (1 – T)<br />Population density<br />Area<br />Fraction of transaction cost<br />Income<br />Willingness to pay<br />Fraction of opportunity cost<br />
    90. 90. Downstream/upstream ratios of population density and areas covered by agroecosystem combinations found in Indonesia<br />Source: adapted from (Hadi and Noordwijk 2005) <br />Source: adapted from (Hadi and Noordwijk 2005) <br />
    91. 91. Ratio of downstream/upstream population density in agro-ecosystem combinations that occur in various areas of Indonesia<br />
    92. 92. Multiplying factors for targeting payment of 5 percent of upstream income<br />
    93. 93. Outcomes from scenarios on area, population density and welfare<br />
    94. 94. Does it increase disposable income by 5%?<br />RES can only have a significant effect on rural income in upstream areas that provide ES if the scheme <br />involves upstream providers who have low population density and /or a small area relative to the beneficiaries and downstream beneficiaries who have relatively higher income than the upstream providers; <br />provides highly critical and non-substitutable environmental services that are substantial and worth paying; <br />is efficient and has low opportunity and transaction costs, but high willingness and ability to pay of downstream beneficiaries. <br />
    95. 95. Does it increase disposable income by 5%?<br />Analysis of income and spatial data on agroecosystems in Indonesia indicates that this condition may be difficult to achieve given the population and income structures of downstream and upstream areas in Asia. <br />Although the Asian data shows upstream income levels tend to be lower than those in downstream/urban areas (IFAD 2002), the ratio between urban and rural income is still quite low (less than 2.0). <br />
    96. 96. 3<br />Indirect non-financial benefit at community scale contributes to reducing poverty or a common-goods PES design (Pascual et al. 2010)<br />
    97. 97. Local perspectives on factors contributing <br />to poverty (1) <br />
    98. 98. Local perspectives on factors contributing <br />to poverty (2) <br />
    99. 99. Local perspective of constraints at each RES development stage <br />
    100. 100. Expected environmental service rewards by locals (1)<br />33<br />
    101. 101. Expected environmental service rewards by locals (2)<br />
    102. 102. Assessment of people’s perspectives on factors contributing to their poverty<br />It portrays social, economic and institutional dimensions <br />Important aspect of pro-poor RES design is to identify rewards that match with people’s needs and expectations<br />Rewards in the forms of human capital, social capital and physical capital (non-financial incentives) – are very often the most preferred and possible types of rewards<br />Higher levels of social cohesion and trust within the community and its external linkages  lower transaction costs. <br />Considering constraints in designing the RES at community level. <br />
    103. 103. 4<br />Reducing discrepancies and improving synergies of ecological knowledge of all actors in PES balance efficiency and fairness of a PES scheme.<br />
    104. 104. Feedback loop influencing real drivers of behavioural and land practice changes <br />adapted from Jeanes et al. (2006)<br />
    105. 105. Application of multiple knowledge system<br />
    106. 106. Application of multiple knowledge system<br />
    107. 107. Application of multiple knowledge system<br />
    108. 108. Location of RHA sites in Indonesia<br />
    109. 109. Singkarak watershed<br /><ul><li>Area: 107 km2
    110. 110. Forest: 15%
    111. 111. Imperata grassland: 17%
    112. 112. Issue: water supply for HEP</li></ul>Bukittinggi<br />Hydro-Electric Power (HEP) Company<br />Ombilin River<br />Paninggahan<br />Padang City<br />Solok City<br />17<br />
    113. 113. Perceived watershed issues and solution<br />Reforestation of critical land will not be enough to increase water yield & may actually reduce water yield due to increase in evapotranspiration<br />Climatic variation influences the performance of PLTA more than land use change<br />Reduction of water quality will also influence the performance of PLTA (euthrophication)<br />Disappearance of ‘ikan bilih’ due to decreasing water quality and overfishing<br />
    114. 114. Management implication from local perspectives <br /><ul><li>Reforestation uses trees with low evapotranspiration.
    115. 115. Local wisdom maintains clean water stream in the upstream and conserving native ikanbilih. </li></ul>Management implication for watershed management and RWS<br /><ul><li>Upstream village level: maintaining current intact environment, i.e. biodiversity conservation such as organic coffee, bundled VCM and watershed services.
    116. 116. Villages surrounding the Lake: improving water quality of the Lake and connecting river. </li></li></ul><li>Conceptualization of the cross-scale exchanges in the “fairness” and “efficiency” domains of rewards for watershed services.<br />
    117. 117. Constraints in implementation of multiple knowledge<br />Strategic use of information. Intermediary may encountered situation where ‘disclosure ‘ of information is desirable to avoid reduced motivation from buyer. <br />Vested interest of donors and implementing agencies<br />“starting with easy win rather than most urgent issues’<br />Incompatible scale betwenquanatifiable ES delivery and investement in establishing ES.<br />Integration of perceptions and knowledge of stakeholders allow the development of effective and sustainable RWS scheme by providing information on what ES can be generated and how to achieve it (at various scales).<br />
    118. 118. 5<br /><ul><li>A PES procurement contract auction increases efficiency of PES contract allocation.
    119. 119. Specific elements of procurement auction have to be designed and administered for fairnessof farmers with low formal education, prone to social conflicts and influenced by power structures within their community </li></li></ul><li>Research Site: Sumberjaya District<br />Way Besai River<br />Dam<br /><ul><li>Current public investment scheme: land rehabilitation and ‘community development’ program
    120. 120. Potential mechanisms for reward transfer in near future
    121. 121. 55,000 ha sub-district coinciding with Way Besai upper watershed
    122. 122. About 40% protection forest and 10% national park
    123. 123. 2003: 82,453 people
    124. 124. Density: 150 people/km 2
    125. 125. Coffee cultivations: monoculture and multistrata
    126. 126. Community as ‘land managers’
    127. 127. Agroforestry system (shade coffee & fruit trees) could maintain watershed function</li></li></ul><li>Research Steps<br />
    128. 128. Conservation Contract<br />
    129. 129. Design of Procurement Auction<br />
    130. 130. Supply curve resulting from reverse auction<br />Jack, Leimona and Ferraro (2008)<br />
    131. 131. Results<br />Total participants from 2 villages: <br />82 farmers bidding on 70 hectares<br />Participants received contracts for soil conservation: <br />34 farmers on 25 hectares<br />Average price of contract: <br />USD 171.70 per hectare yearly <br />labor requirements of contract based on wages approximately USD 300 <br />Past investment for soil conservation activities from survey USD 225<br />
    132. 132. Final auction outcomes from 2 pilot sites<br />
    133. 133. Average village compliance within each site measured during the middle and at the end of the contract term<br />
    134. 134. Farmers’ understanding of auction design<br />
    135. 135. Farmers’ understanding of auction design<br />
    136. 136. Perspective of non-contracted and contracted farmers on <br />social impacts<br />
    137. 137. Perspective on environmental impacts from non-contracted and contracted farmers<br />Note: <br />results from 2-sided Fisher’s exact test are in parenthesis. The others are calculated from 1-sided Fisher’s exact test. <br />For the frequency column, proportion is in parenthesis <br />
    138. 138. Can it work in a rural context of development countries?<br />The auction for the PES programme in Indonesia was designed using a uniform price rule for fairness reasons. <br />uniform pricing <br />However, uniform pricing is relatively less cost-effective compared to the discriminative price rule. <br />The auction was a multiple round consisting of eight rounds with the last binding round. <br />Farmers learned from the rounds of the auction. However, the announced last round may introduce forms of strategic behaviour. <br />By announcing the last round, the benefits from farmers’ learning on the previous round and the advantages of a one-shot auction for the last round were combined. <br />
    139. 139. Discussion<br />What are factors induced a high accomplishment rate? <br />The rate of accomplishment at the final monitoring was moderate. <br />lack of leadership and coordination among farmer group members, <br />difficulty in finding grass seedlings to accomplish the contract, and <br />coincidence with coffee harvesting time. <br />In this specific case, private contract tends to be more successful compared to collective contract when leadership is lacking or “champion” among the community members does not exist. <br />Institutional aspects and contract flexibility might influence the accomplishment of conservation efforts. <br />Analysis showed that there were no significant differences in level of understanding, complexity, and competitiveness and conservation awareness between compliant and non‑compliant farmers. <br />
    140. 140. A limitation of this study is that all units of the pilot site were treated as homogeneous, with respect to their contribution to erosion and downstream sedimentation. <br />For a larger scale allocation auction, modifications such as using supply curve information resulting from this procurement auction would be more appropriate. <br />a reasonable platform for designing a scaled up fixed payment scheme, including differential rates and eligibility rules necessary for targeting participants. <br />How to make it work?<br />
    141. 141. <ul><li>The design of an experimental auction should fit the purpose of overall objectives of a conservation program.
    142. 142. In this case, the challenge was to design and administer a fair auction for farmers with low formal education, prone to social conflicts, and influenced by power structures within their community. </li></ul>How to make it work?<br />
    143. 143. 6<br />PES schemes give local communities access to various types of capitals<br />
    144. 144. The sample of FGD participants<br />
    145. 145. The livelihood issues discussed in focus groups<br />
    146. 146. The stakeholders involved in the PES scheme<br />
    147. 147. The PES scheme relationship and flows of services<br />Legend: <br />FKDC = Forum Komunikasi DAS Cidanau (Communication Forum of Cidanau Watershed); <br />PDAM = state-owned drinking water company; <br />PLN = state-owned electricity company.<br />adapted from Budhi et al. (2008)<br />
    148. 148. Actual allocation of revenues by the FKDC in the first four years<br />
    149. 149. Household income sources (%)<br />
    150. 150. Type of knowledge/ capacity/skills gained by participants and non-participants after the PES implementation<br />
    151. 151. Trust among internal and external stakeholders<br />
    152. 152. How PES can benefit the communities?<br /><ul><li>The process of initiating the PES scheme and its design, and reviews the impacts of the five year scheme on local livelihoods
    153. 153. The Cidanau PES scheme has impacted the livelihood of PES participants and non-participants.
    154. 154. Benefits were mostly non-financial: expanded social networks with external stakeholders; knowledge and capacity of the community; and small-scale public infrastructure investments.
    155. 155. Direct financial benefits were limited
    156. 156. Benefits combined with recognition from the governments and external stakeholders can increase farmers’ commitment to the scheme</li></li></ul><li>Main Findings (1)<br />Broader categorization of conditionality of PES emphasizes interdependency between fairness and efficiency as opposed to a strict and prescriptive PES definition<br />In order to be pro-poor, a PES has to adapt to the local conditions, including in designing types, forms and expected level of rewards <br />Initial investment in achieving a shared understanding of multiple ecological knowledge in providing and managing ES increases efficiency and fairness of PES scheme <br />
    157. 157. Main Findings (2)<br />A competitive market-based procurement auction enhances efficiency of contract allocation but it needs refining for capturing real opportunity costs and co-benefits of participating farmers. <br />A sustainable livelihood framework enables broader analysis of local perspectives by encompassing various types of capitals<br />
    158. 158. Hi Lei,<br />I just have time to read your chapters seriously. hehe... I just have a comment on your introduction. It is the first sentence on the second page of your introduction. To the best on my knowledge in economics, we can achieve the efficiency without fairness. <br />Your sentence "efficiency cannot be achieved without fairness and social dimensions of PES firstly" might not be true, at least in my knowledge in Economics :-) but you may mean something I don't know. <br />
    159. 159. Truth is the most valuable thing we have. <br />Let us economize it (Mark Twain)<br />
    160. 160. Thank You<br />More information about RUPES<br />RUPES Program <br />Beria Leimona (LBeria@cgiar.org)<br />C/o World Agroforestry Centre<br />PO Box 161, Bogor, 16001, INDONESIA<br />Tel: +62 251 8625415<br />FAX: +62 251 8625416<br />Email: RUPES@cgiar.org<br />http://www.worldagroforestrycentre.org/sea/Networks/RUPES<br />

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