Brent Swallow, World Agroforestry Centre, Nairobi, Kenya

1. Bundling payments for environmental services:  Using conjoint analysis to assess farmers’ preferences over different payment types and conditionalities in Sumatra, Indonesia Brent Swallow, World Agroforestry Centre, Nairobi, Kenya Approach, update on progress and future plans 12 April 2005

2. Seminar outline: • Motivation for a “bundle” approach to the design of environmental service mechanisms • Briefly introduce the conjoint analysis method • Describe study design for the Sumber Jaya case and invite comment on proposed next steps

3. Environmental Service Mechanisms Public sector approach: promote general social interest through state regulations, subsides, investments and taxes … trend to decentralize Community approach: Local regulations & customary norms for local benefit will also promote general interest Co-management

4. Public sector approach: promote general social interest through state regulations, subsides and taxes … trend to decentralize Community approach:Local regulations & customary norms for local benefit will also promote general social interest Payment for environmental service: Conditional payments from specific demanders to specific individuals or communities for specific environmental services

5. Public sector approach: Community approach: Bundled approaches: contracts with credible local groups, with stable individual membership; incentives including secure tenure, extension, public services, market assistance, conditional on ES inputs or outputs Payment for environmental service:

6. Example 1 of bundled approach: The case of the ProAmbiente Programme In the Brazilian Amazon PROAMBIENTE began in 2000 to improve social and environmental policy for the Amazon, as a proposal designed by social movements and NGOs (eg Federations of agricultural workers in the Amazon, Fishermen National Movement, Coordination of Indigenous Nations in the Brazilian Amazon). Adopted in 2003 by the federal government as a priority intervention for the Amazon

7. Components of Pro-Ambiente • LAND USE PLANNING (PLOT AND LANDSCAPE) • TECHNICAL ASSISTANCE / RURAL EXTENSION • SOCIAL ORGANIZATION • REWARDING PRODUCERS FOR ENVIRONMENTAL SERVICES • CERTIFICATION • CREDIT (OPTIONAL)

8. PROAMBIENTE SITES (“poles”) 6 8 12 10 • Acre: Alto Rio Acre • Rondonia: Ouro Preto d’Oeste • Mato Grosso: Noroeste • Tocantins: Bico do Papagaio • Para: Rio Capim • Roraima: Apiau • Para 2: Transamazon • Amapa: Laranjal do Jari • Amazonas: Manaus • Para 3 (Fishermen): Marajo • Marahao: Cocais • Amazonas 2 (Indigenous): São Gabriel da Cachoeira 5 9 7 11 1 4 2 3 500 households in each pole, selected by local organizations

9. Example 2 of bundled approach: The case of the HKm social forestry contracts in (watershed) protection forests, Lampung, Indonesia

10. Property rights, environmental services and poverty – affiliated project of RUPES Funded by USAID through BASIS CRSP Partners: Michigan State University, ICRAF, IFPRI Lampung University • Questions for BASIS CRSP project: • What distribution of impacts? • How do people weigh off these explicit / implicit components? – using conjoint analysis

11. Strands in the bundle of Social Forestry Contracts Explicit: Leasehold tenure security Variable fees Conditionality based on inputs thought to effect watershed function (density & types of trees; local organization to enforce rules; protection of forests) Implicit: Forestry / agroforestry extension Food security programmes Roads Other possibilities: Conditionality of tenure based on watershed outputs (eg water quality; stream flow) Implicit components made conditional

12. Policy Question: Are there different ways that the social forestry contracts could be configured to be more efficient for society and attractive to farmers? Research Question: How do farmers’ evaluate tradeoffs among the various strands in the bundle of Environmental Service “Payments”?

13. Analytical approach: Question: What is similar about: Cows in Burkina Faso Round-trip airline tickets from Bandar Lampung to Jakarta HKm agreements in Sumber Jaya??

14. An answer: They are all composed of several attributes that people value, but cannot easily express those values through normal market mechanisms.

15. Conjoint analysis: • A method for quantifying the part-worth of different levels of the valuable attributes of a good or service. • Assumes that a product may be defined using an aggregate of attributes that take certain levels. • Different levels of the attributes define different versions of the product under consideration. • During the decision-making process, individuals appraise the worth of each combination, and their choice demonstrates prioritization among the different combinations of features. • The total worth of a particular product is determined by the different partworths of each attribute level (Sayadi et al., 2004).

16. Key components of conjoint studies are: • identification of key product attributes for study • Identify relevant levels of those attributes • construction of products with different “bundles” of attributes – tradeoffs between concern with the main effects of several attributes or interaction effects of a few attributes • identify the population and important sub-populations or strata • represent the attributes and bundles of attributes in ways that respondents can easily understand

17. eliciting preferences using rating, ranking or comparison to status quo • analysis • interpretation

18. Back to HKm Social Forestry Contracts in protection forests in Sumber Jaya, Indonesia

21. Implications and observations from the pre-test

22. The possibility of different terms is new to many Respondents. Explicitly incorporate negotiation training into design (how?)

23. Proposal for revised set of attributes and levels (1/2): • Drop relatively unimportant attributes: • length of initial contract (already set for respondents) • government credit (not important in project area) • right to transfer (second generation issue)

24. Proposal for revised set of attributes and levels (2/2): Offer different conditionalities: Input-based attributes monitored for group & individual (tree density, composition, soil conservation?) Input-based attributes monitored for group: (tree density or increasing tree biomass?) Output-based attributes monitored for group: (maintain or improve water quality or reduce variation in stream flow) Output-based attributes monitored for individual: (??)

25. Analysis of ticket experiment in Lampung University Logistical regression: Attribute Odds-ratio Sig Price 0.364 .000 Lunch service 1.477 .040 Queue time 1.249 .273 On-time departures 1.150 .533 Reputation for safety 2.675 .000