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


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

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Research site: Ulugurus, Tanzania
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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
4
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
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Choice experiments
Attributes
Levels
Trees
Khaya + Mango + Khaya +
Teak
Avocado Acacia
Seedlings
Farmers Free
pay
Contract
duration
3 years
10 years 25 years
Annual
PES
payment
None
Tsh
15,000
Free +
upfront
payment
Tsh
45,000
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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
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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
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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
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An example

If PES budget = $140



If budget = $580


We can either get just 1 ha, or
Thro auction we select the two lowest bids
and pay $60 to each of them
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
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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
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Indicative results (n=268)
Round 1 (Khaya + Teak):
Mean bid: Tsh 157,402
Median bid: Tsh 135,000
Round 2 (Khaya + Acacia):
Mean bid: Tsh 151,631
Median bid: Tsh 135,000
Estimating ES supply curve (Teak)
45,000
35,000
30,000
25,000
20,000
15,000
10,000
5,000
128
121
113
106
98
90.5
83
75.5
68
60.5
53
45.5
38
30.5
23
15.5
8
0
0.5
Thousands of TSH
40,000
acres
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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

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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
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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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