Practical Alternatives to Estimate Opportunity Costs of Forest Conservation

Numerous studies have shown the merits of targeting the costs of conservation besides environmental benefits and aligning payments for ecosystem services with incurred costs. However, cost-effective and precise estimation of site specific opportunity costs is a major challenge. In this paper we test two approaches to estimate opportunity costs of conservation: One approach derives opportunity costs from annual land rents, and the other models regresses opportunity costs on easily obtainable and difficult to manipulate spatial and socio-economic independent variables such as soil quality. None of these approaches appeared to estimate opportunity costs sufficiently well. But since this judgment is based on how well the estimates compare to the reference opportunity costs, which were computed from farm budgets, we also considered potential flaws in the reference data and tested their plausibility. The tests confirmed the plausibility of data. Based on the results presented in this paper none of the two cost estimation approaches can be recommended for practical application in conservation programs. Yet, further research is necessary to confirm these findings giving special attention to the techniques that are applied to deliver reference point data on opportunity costs.Resource /Energy Economics and Policy,

Paper Tigers, Fences-&-Fines or Co-Management? Community conservation agreements in Indonesia's Lore Lindu National Park

Protected areas may be established and maintained at the expense of local communities ('fences & fines'), although attempts to block local land use can be fruitless ('paper tigers'). Innovation in protected area policy has led to the involvement of communities in protected-area management ('co-management'). This paper aims to predict and study the emergence of such negotiated agreements to share the management of as well as the benefits from forest. First, we develop a conceptual framework for understanding roles of co-management interventions. Second, we bring to our derived hypotheses unique panel data collected from a co-management policy implemented in Lore Lindu National Park, Indonesia. The results broadly support our model predictions, although there is mixed evidence in some cases, possibly due to the fact that our relatively rough data proxies often correlate with several model parameters. --forest,protected area,park,community,property right,Indonesia

Opportunity Costs as a Determinant of Participation in Payments for Ecosystem Service Schemes

Landholders are generally assumed to be willing to participate in payments for ecosystem service (PES) schemes if the offered payment exceeds the opportunity cost of participation. The calculation of opportunity costs is often based on historic financial data such as net returns of the formerly practiced land use. Reliable estimates of opportunity costs are required especially in flexible, cost-aligned payment schemes with differentiated payments at the farm scale. We question whether opportunity cost estimates that do not consider personal landholder characteristics such as risk considerations, information access and non-monetary personal preferences (e.g. for traditional land use practices) are sufficient to explain a landholder's decision to enrol land in PES. To test these assumptions, a PES adoption model was developed for hypothetical adoption decisions by 178 landholders in Costa Rica. The model explained up to 73.5% (Nagelkerkes pseudo R2) of adoption variance. The results confirm that adoption is not determined by financial costs alone. Trust in state institutions, for example, was highly significant. The results call for more integrated methods of opportunity cost estimation such as inverse auctions. Their strength lies, among others, in that all adoption determinants are potentially expressed in the landholder's bid.Resource /Energy Economics and Policy,

Outcomes and Determinants of Success of a Performance Payment Scheme for Carnivore Conservation

This paper presents a first empirical assessment of the outcomes and determinants of carnivore conservation success in Sweden’s pioneer performance payment scheme. Carnivores in northern Sweden depend on reindeer as prey which causes conflicts with reindeer herders. As compensation and conservation incentive, the government issues performance payments to reindeer herder villages based on the number of carnivore offspring certified on their land. The villages decide on the internal use and distribution of the payments. In the literature, it is generally assumed that benefit distribution rules are exogenously given. We extend the literature by developing a model to investigate such rules as endogenous decision. We hypothesize that conservation success is determined by natural geographical factors and each village’s capability to engage in collective action to manage the internal payments so that conserving rather than hunting carnivores becomes villagers’ optimal strategy. The hypotheses developed are tested with empirical village and household-level data from Sweden. The paper concludes that if limited hunting is legal, conservation success strongly depends on villages’ potential for collective action and their payment distribution rule. In cases without legal hunting, performance payments together with penalties on poaching provide sufficient incentives for herders to refrain from illicit hunting. Furthermore, the data reveals that villages’ group size has a direct negative effect on conservation outcomes as predicted by collective action theory. However, there is also an indirect effect which positively impacts conservation outcomes through the payment distribution rule. This result, at least in part, revises the general collective action hypothesis on purely negative effects of group size and highlights the importance of investigating factors driving groups’ internal benefit distribution rules.Conservation performance payments; wildlife conservation; collective action; empirical policy assessment; Sweden

Outcomes and Determinants of Success of a Performance Payment Scheme for Carnivore Conservation

This paper presents a first empirical assessment of carnivore conservation under a performance payment scheme. The Swedish government issues payments to reindeer herder villages based on the number of carnivore offspring certified on their pastures. The villages decide on the internal use and distribution of the payments. It is generally assumed that benefit distribution rules are exogenously given. We develop a model to investigate such rules as endogenous decision. The empirical data reveals that villages’ group size has a direct negative effect on conservation outcomes. However, there is also an indirect positive effect which impacts conservation outcomes through the benefit distribution rule. This result revises the general collective action hypothesis on purely negative effects of group size. The paper concludes that if limited hunting is legal, conservation success strongly depends on villages’ potential for collective action and the benefit distribution rule they choose.Conservation performance payments, Wildlife conservation, Collective action, Empirical policy assessment, Sweden, Resource /Energy Economics and Policy,

Ethanol Production, Food and Forests

This paper investigates the direct and indirect impacts of ethanol production on land use, deforestation and food production. A partial equilibrium model of a national economy with two sectors and two regions, one of which includes a residual forest, is developed. It analyses how an exogenous increase in the ethanol price affects input allocation (land and labor) between sectors (energy crop and food). Three potential effects are identified. First, the standard and well-documented effect of direct land competition between rival uses increases deforestation and decreases food production. Second, an indirect displacement of food production across regions, provoked by a shift in the price of food, increases deforestation and reduces the total output of the food sector. Finally, labor mobility between sectors and regions tends to decrease food production but also deforestation. The overall impact of ethanol production on forest conversion is ambiguous, providing a number of interesting pointers to further, empirical research. --Ethanol,Deforestation,Indirect impacts,Land use,Migration

Comparing Conventional and New Policy Approaches for Carnivore Conservation – Theoretical Results and Application to Tiger Conservation

New policy approaches to facilitate the co-existence of wildlife and livestock are increasingly being sought-after as human sprawl increases and carnivore populations decrease. In this paper, models are developed to assess how alternative policy approaches can provide a livestock herder with incentives to sustain the socially optimal carnivore population. The wellestablished policy ex-post compensation is analyzed and compared to the innovative conservation performance payment approach. An empirical analysis of the model with data from tiger-livestock conflicts in India is presented.

Improved water supply in the Ghanaian Volta Basin: who uses it and who participates in community decision-making?

"We examine access to, use of, and participation in decisions on improved water supply in the Volta basin of Ghana, one of the first countries to introduce a community-based approach to rural water supply on a large scale. While 71 percent of the households interviewed have access to improved water, 43 percent of these continue to use unsafe sources as their main domestic water source. Our results indicate that quality perceptions and opportunity costs play an important role in households' choice of water source. The effect of prices and income levels on this choice differs according to the pricing system used. Given that supply characteristics such as the location and pricing system affect household decisions to use the improved source, households may try to influence these characteristics in their favor during the community decision-making process for the improved source. However, less than 40 percent of the households interviewed participated in decisions on location or technology. We argue that the decision whether to participate depends on three main factors: (i) the household's bargaining power, (ii) the potential benefits from influencing outcomes, and (iii) the cost of participation, (mainly opportunity cost of time). Our results indicate that bargaining power matters more than potential benefits. Moreover, we find an extremes effect: the poorest, uneducated and the richest, highly educated segments of the community are more likely to participate in decision-making for improved domestic water supply than the middle class. We conclude with policy implications and needs for further research." Authors' AbstractWater resource allocation, Community participation, Community-based resource management,

Exploiting common resources with capital-intensive technologies: the role of external forces

This paper focuses on the interactions between local communities having at least some degree of informal claims over natural resources and firms interested in commercially exploiting such resources, explicitly allowing for interventions by third parties interested in community welfare and environmental outcomes. Integrating conflict and bargaining theories, we develop a bargaining model with endogenous inside and outside options, in which the feasibility and outcomes of a potential bargaining game depend on the unraveling of a conflict stage and vice versa. The model implies that, contrary to the conventional bargaining model, distribution and efficiency cease to be separable. We show that certain third-party interventions in the bargaining process may have unexpected and counterproductive effect