Agroforest Carbon Finance Schemes in Indonesia - a Case Study in Central Sulawesi Christina Seeberg-Elverfeldt Food and Agriculture Organization of the United Nations (FAO) Rome, Italy University of Göttingen Göttingen, Germany 26 th August 2009 World Congress of Agroforestry 2009, Nairobi, Kenya

2 How much do you have to pay him to stop cutting the tree?

3 Problem statement Surroundings of Lore Lindu National Park in Central Sulawesi, Indonesia

4 Problem statement: Vicious cycle of poverty and deforestation Poverty of local ethnic groups Encroachment & Deforestation Land sales to migrants Expenditures for ceremonial purposes Cocoa boom: 230% area increase in 20 years 30% of land acquired by clearing primary forest

5 Objective Assess the impact of carbon payments on smallholder households Evaluate the potential of carbon credits to provide an incentive for adoption of sustainable land-use systems Assess the potential of carbon payments to contribute to the conservation of the rainforest

6 4 household classes (HH I ; HH II ; HH III ; HH IV ) characterised on basis of dominant cocoa agroforestry system 4 cocoa agroforestry systems: I – II – III – IV Linear programming model, maximising farm level gross margin I III II IV Shade tree cover Management intensity Sustainability Methodology

7 Characteristics of household classes Household class AttributesHH I HH II HH III HH IV Poverty Index PoorestPoor Better- off Ethnicity (% migrants)

8 Results (1) Scenario 1 & 2: Impact of carbon payments on household income Total Gross Margin – Baseline Situation 1€=11,500 IDR (2006) Scenario 1: Impact of carbon credits on TGMScenario 2:Impact of carbon credits on TGM

9 Results (2) Scenario 3: Incentives for environmentally friendly agroforestry systems Carbon certificates: Price premiums for shade grown, biodiversity rich & sustainable cocoa agroforestry systems I and II Household Class HH I HH II HH III HH IV Minimum credit price (CER/tCO 2 e) € 14€ 27€ 32€185

10 Results (3) Scenario 4: Incentives for rainforest conservation Carbon certificates to prevent further deforestation activities (REDD) Emission reduction from reduced deforestation may be among the least-expensive mitigation options available (IPCC 2007, Stern Review 2006) Household Class HH I HH II HH III HH IV Minimum credit price (CER/tCO 2 e avoided) € 1€ 10€ 23€ 54

11 Conclusions The impact of payments on households depends on the prices they obtain on the carbon markets Solution to vicious cycle of deforestation & poverty: Target carbon sequestration payments to shade intensive agroforestry systems I & II “Win-Win-Win” situation: –income of poorest, local households increased –encroachment process at NP forest margin stopped –environmentally friendly land-use systems (carbon sequestration, biodiversity) promoted

12 Linear Programming Model Data land-use systems Carbon annuity payments Agricultural activities Carbon budget cocoa & shade trees Resource endowments Carbon credits (tCER) 5 –30 €/tCO 2 Assumptions... Objective function: Maximise farm level gross margin 4 household classes (HH I – HH II - HH III - HH IV )