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Estimating payments for smallholder Agroforestry contracts in Tanzania

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. Significance of payment in PES.

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Estimating payments for smallholder Agroforestry contracts in Tanzania

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  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. Significance of payment in PES • PES: payments to service providers from service users / intermediaries for securing valuable environmental services (ES) • An inadequate payment will: • underachieve program objectives • exclude poor • or be rejected outright • But, how much to pay if ES markets don’t exist? important methodological & practical question

  3. Research site: Ulugurus, Tanzania 3

  4. PES in Ulugurus • Provides valuable ES: biodiversity, watershed (source of water for Dar) • ES threatened due to rapid deforestation • Focus on conservation through smallholder agroforestry – woodlots on 0.5 acre plots, carbon and other co-benefits

  5. Stated preference method • Survey with 400 randomly selected households • Covered hh demographics, labor availability and agricultural profile • Choice Experiments: farmers asked to choose from a set of hypothetical tree planting contracts

  6. Choice experiments

  7. Indicative Results • High level of willingness to plant trees: • Most hh already protect trees on their farms • Want to put additional 0.5 - 1 acre under trees • Only < 25% respondents said ‘no’ to planting trees • Major constraints – old age, non-availability of land

  8. Conditional Logit • Dependent variable: choice to plant trees under a specific contract • Preferences for contract attributes: Annual payment: ++ Timber trees: ++ Longer duration contracts: - Upfront payment: + • Still working on more detailed data analysis

  9. Revealed preference: Auction • Stated preference methods may not resolve info asymmetry • In an auction, farmers bid for tree planting contracts • Competition ensures they reveal their true WTA • Bids selected as per uniform pricing with the last rejected bid setting the equilibrium price

  10. If PES budget = $140 We can either get just 1 ha, or Thro auction we select the two lowest bids and pay $60 to each of them If budget = $580 We select five lowest bids and pay $110 to each of them Vickrey auction: Incentive compatible as bidders reveal their true behavior Bids received/ha $150 $140 $110 $95 $87 $60 $45 $30 An example

  11. Field auction in the Ulugurus • 300 farmers participated • Two contracts from CE options offered: • Low intensity woodlots in 0.5 acre plots • Trees to be maintained for 3 years • 3 training rounds • 2 auction rounds: 268 valid bids received

  12. Indicative results (n=268) Round 1 (Khaya + Teak): Round 2 (Khaya + Acacia): Mean bid: Tsh 157,402 Mean bid: Tsh 151,631 Median bid: Tsh 135,000 Median bid: Tsh 135,000

  13. Implications • Maximum enrollment under a given budget – yields additionality • Auction bids can be compared with results from stated preference survey • Comparison with other opportunity cost studies • A general method to determine payment in PES projects

  14. Implications for policy makers • Targeting poor farmers: • CE results can help in designing pro-poor PES contracts • Targeting priority areas: • High risk areas (riparian, steeply sloped etc.) given higher weights in the auction  Increases the probability of such lands being contracted

  15. Acknowledgements • John Kerr, Michigan State Univ. • Brent Swallow, ICRAF • Aichi Kitalyi, ICRAF • Paul Ferraro, Univ. of Georgia • Satish Joshi, MSU • Mr. Sabas, TAFORI

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