1. Property rights, collective action, and PES John Kerr Michigan State University

2. Outline How property rights & collective action shape PES opportunities Effects of PES on property rights & collective action Designing PES to accommodate property rights & collective action concerns Brief case study illustrations

3. Property rights scenarios Private  public Individual  group Collective action scenarios Active cooperation  passive coordination

4. Property rights constrain and shape PES Land tenure as requirement for setting up PES – Land user must be able to commit over many years – Costa Rica national program: only land owners eligible Where property rights aren’t clear, PES design will require creativity

5. Collective action requirements may shape PES Where ES has threshold effects, collective action is required E.g. biodiversity and watershed services Must design PES to coordinate service provision – Coordination could be active or passive

6. PES affects property rights PES confers property rights – Legitimizes land user’s presence – Legitimizes the land use (if PES is voluntary) – Buyer owns the ES If PES raises land value it may reduce land access – Lose the lease or pay higher rent – Lose access to commons The wealthy and powerful encroach Govt. restricts access

7. PES affects collective action Would a group-based PES encourage or discourage collective action? – Must work together to gain payment – Will payment per se encourage or discourage collective action? Cash incentive can crowd out other sources of motivation

8. Property rights, collective action, & design of PES Conditionality Transaction costs Types of payments and rewards Individual vs. group payments/rewards

9. Conditionality The key feature of PES Suggests that payment should be: – On a regular basis, not just one time. – Directly proportional to the level of environmental service provided.

10. Transaction costs Types of transaction costs: – Search, negotiation, contracting, monitoring, enforcement, insurance High fixed costs: – Total cost/ha falls with larger contracts

11. Ways to reduce transaction costs Improved monitoring technology Institutional innovations: – Group contracts – Intermediary organizations – Build on existing local institutions – Participatory monitoring – Low cost data collection systems – Bundling services

12. Types of payments Cash Conditional land tenure security In-kind services & development support – training, employment, market access, infrastructure

13. Cash Straightforward and simple Facilitates annual payments Divisible and direct – Good for individual-based systems – Possible problem if group contract

14. Conditional land tenure security Used on illegally settled land Eviction if service not delivered It’s indivisible – useful for group PES systems Does not facilitate annual payments Challenges to conditionality: – May be difficult to revoke in long term even if ES not sustained

15. In-kind services/development support Could be a form of payment Questions about enforcing conditionality – Could it bring in-migration? – Can it be revoked? – Ethical concerns Hypothetical: bonuses and fines on a local development budget

16. Group or individual contract? Individual – Simple conceptually – High transaction costs for contracts with many small holders – Low transaction costs for large contracts

17. Group or individual contract? Group – Useful if many small landholders – Useful if threshold effects – Reduces transaction costs for buyer – Transfers transaction costs to group Monitoring, administering payment – Concern about elite capture Can avoid with indivisible, noncash payments

18. Agglomeration bonuses Useful where threshold effects with large landholders Low level coordination, avoids transaction costs Source: Goldman et. al 2007)

19. Case studies

20. TIST The International Small Group Tree Planting Program – Tanzania, Kenya, Uganda, India Carbon sequestration credits – No threshold effects  individual contracts – Simple monitoring and payment systems – Annual payment per live tree

21. Sumberjaya, Indonesia

23. ~5,200 participants divided into 18 groups covering 11,000 ha gov’t forest land Tenure security is the reward – Has teeth now, but later? – Development budget? Group internalizes some of the transaction costs Some participants not aware of program – Group arrangement facilitates participation – Sustainability?

24. Sukhomajri, India Chandigarh Sukhomajri Sukhna Lake

25. Forest Irrigation ponds

26. Sukhomajri, India Watershed protection via forest protection – Between city and village; within village Village gets irrigation water as reward Landless have water rights – They share the value of the ES they provide – Villagers came up with this idea Forest Dept. granted rights to products of protected forest – But wanted it back when it became valuable

27. Panchayat and Revenue lands in India Link community forestry programs to Chicago Climate Exchange? Government owned lands – Allows villagers to “borrow” these lands for productive purposes – But if land generates cash, govt might want it back

28. Conclusion PES arrangements must be developed with awareness of property rights conditions and collective action requirements PES can shape PR & CA PR & CA can shape PES Much still to be learned