Upland Farmers and Payments for forest environmental services:

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• Upland Farmers and Payments for forest
  environmental services
• An experiment in Central Vietnam

Bui Dung The and Hong Bich Ngoc, Hue University
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OUTLINE OF THE PRESENTATION

• Introduction
• The Experimental PES Scheme
• Farmers participation
• Impact of the PES Scheme
• Conclusion and Recommendation

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1. Introduction (1)

• Forest environmental services
• Watershed protection
• Biodiversity conservation
• Carbon sequestration
• Landscape beauty

These services are external and getting scarcer!
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Problem Farmers adopt unsustainable forest
management practices
1. Introduction (2)

• Clear cut production forests
• Burnt and left the pot expose to erosion
• Soil erosion
• Loss of ground biodiversity
• Carbon emission
• LOSS OF ENVIRONMENTAL SERVICES

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Would PES, a market creation approach, work in
the local context to ensure the provision of
forest environmental services while improving
the livelihood of local people?
1. Introduction (3)
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1. Introduction (4)
How much is the WTA price a farmers willingness
to accept to adopt sustainable forest management
practices/ to provide the services?

• The Study Objectives
• To understand farmers response to PES
• To explore possible impacts of PES on livelihood
  and environment

What are the factors affecting a farmers
decision to participate in the PES scheme?
What are the socio-economic impact of the PES
scheme?
What are the environmental impacts of the PES
scheme?
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Study site and proposed forest management
practices
2. The PES scheme (1)

• SITE
• Three selected upland communes in Thua Thien Hue
  province, Central Vietnam Khe Tre, Huong Phu and
  Xuan Loc.
• DURATION
• 26 months from September 2003
• PROPOSED FOREST MANAGEMENT
• Selected cutting in three years 30, 30, 40
• Complementary planting done each year

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Eligible farmers and stakeholders
2. The PES scheme (2)

• A farmer is eligible to join the PES experiment
  if having at least 0.5 ha of forest ready for
  exploitation
• Control households
• Commune Peoples Committee of the communes
• Local forest inspection station

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WTA and price setting
2. The PES scheme (3)

• Eligible farmers underwent training on
  sustainable forest management
• Secret ballot on Willingness to Accept (WTA)
  after having been informed that lower bid would
  increase probability of being in the experiment.

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WTA a payment to adopt sustainable forest
management practice
2. The PES scheme (4)
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2. The PES scheme (5)

• 1st Batch (91 farmers)
• Range VND 80,000-320,000 ha/year
• Mean VND 147,000 ha/year
• Cut-off VND 140,000 ha/year
• 45 participant farmers

Willingness to Accept and price setting

• 2nd Batch (89 farmers)
• Range VND 90,000-400,000 ha/year
• Mean VND 156,000 ha/year
• Cut-off VND 140,000 ha/year
• 41 participant farmers

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Contract and payment
2. The PES scheme (6)

• 2003
• 45 contracts 72 hectares
• 2004
• 41 new contracts 63 hectares
• 44 renewed contract 71 hectares
• Payment to farmers
• 1st installment 50 of total value of contract
• 2nd 30 after 6 months
• 3rd 20 after 12 months

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Monitoring and sanctions
2. The PES scheme (7)

• Monitoring
• Monitoring is done by CPC, local forest
  inspection station, and researchers
• Sanctions if contract violated
• Contract cancelled
• Pay back money plus fine
• No new logging permits would be issued by Forest
  Inspection Station unless fine paid

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Estimated transaction cost of the experiment
2. The PES scheme (8)
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3. Farmer participation (1)
Determinants of participation Logit regression
results
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Socio-Economic Impact
4. Impacts of the PES scheme (1)

• Economic/income effect limited
• Average payment received VND 230,000/year
• Approx. 2 of hh income
• Enhanced awareness of PES sustainable forest
  management
• Participating despite low payment income
• Other land use alternatives were restricted
• Opportunity cost for labour is low given
  seasonality and existing under-employment
• The non-monetary benefits from training and
  knowledge provided, the experience from the
  bidding exercise, budgeting and cost-benefit
  analysis exercises.

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4. Impacts of the PES scheme (2)

• Environmental impactReduction in soil erosion
  (43ton/ha/year gt34 ton/ha/year)Reduced natural
  forest extraction

Source Field survey Note al significantly
different from respective mean of A1 at 1.5 level
or better by one tail test a2
significantly different from respective mean of
A2 at 1.5 level or better by one tail test
a3 significantly different from respective
mean of A3 at 1.5 level or better by one tail test
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5. Conclusions and recommendations (1)

• Conclusions
• The results of the experiment were quite
  promising
• Participation in the trial scheme was good
• Institutional support was already available and
  effective.
• Expected environmental impacts were also
  observed
• reduction in both soil erosion and in
  destructive natural forest extraction activities.
  

• Recommendations
• More practical policy/program trials should be
  implemented.
• Forest environmental service should be the
  priority.
• It is necessary to study the demand side of PES

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THANK YOU!