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 3 Research site: Ulugurus, Tanzania

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 AttributesLevels TreesKhaya + Teak Mango + Avocado Khaya + Acacia SeedlingsFarmers pay FreeFree + upfront payment Contract duration 3 years10 years25 years Annual PES payment NoneTsh 15,000 Tsh 45,000

7 Indicative Results High level of willingness to plant trees:  Most hh already protect trees on their farms  Want to put additional 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 An example 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

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

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