Livelihoods in REDD+: Land tenure and PES Luca Tacconi

1. Livelihoods in REDD+: Land tenure and PES Luca Tacconi Asia Pacific Network for Environmental Governance Crawford School of Economics and Government

2. REDD+ and livelihoods Some ways in which REDD+ can affect livelihoods through: • (lack of) changes in land and/or resource tenure • direct payments for avoided emissions or sequestration through reforestation

3. Land tenure and REDD+ • Some 80% of tropical forest land is claimed de jure by States • Concerns have been raised that REDD+ might slow devolution of land tenure or even reversals in land tenure gains of communities • Land tenure reform might be preferred by some, but very difficult politically • Two questions we are addressing in Indonesia: 1. Could communities be involved in the implementation of REDD+ on State forest on the basis of the existing regulatory framework 2. Could that involvement be rewarded through PES mechanisms

4. Regulatory options for community access to forests

5. Payment options and rights

6. PES and livelihoods Significant global interest in PES i) PES as a way of supporting conservation ii) Two perspectives on PES have emerged: - Coasian (CP), based on environmental economics - so-called ‘ecological economics’ (EEP) Question • How should PES schemes be defined and designed? See: Tacconi, L Redefining payments for environmental services. Ecological Economics. Available online

7. Wunder’s definition of PES (CP) 1. a voluntary transaction where 2. a well-defined ES [environmental service] (or a land-use likely to secure that service) 3. is being ‘bought’ by a (minimum one) ES buyer 4. from a (minimum one) ES provider 5. if and only if the ES provider secures ES provision (conditionality) (Wunder 2005, p3)

8. EEP’s criticism of the Coasian view • Transaction costs affect the applicability of the Coase Theorem to PES schemes • Coase Theorem has limited applicability because the allocation of property rights has considerable distributional implications • Intermediaries can affect PES schemes: i) set the price for ES; ii) limit the voluntary nature of the involvement of ES users • CP focuses on efficiency and equity is secondary

9. EEP view on PES Definition of PES: ‘transfer of resources between social actors, which aims to create incentives to align individual and/or collective land use decisions with the social interest in the management of natural resources’ (Muradian et al. 2010) Three principles to characterise PES: • whether economic incentives are a driver of conservation or not • the extent of the mediation present between the ES providers and the ultimate users ES • the clarity with which the ES can be assessed and acquired in measurable quantities

10. Some problems with EEP • EEP proposal to pay even if the ES is provided anyway not appropriate on cost-effectiveness and equity aspects • Payments unlikely to diminish intrinsic motivations for conservation as stated by EEP, given that egoistic values dominate when there are high personal costs from conservation (envl psychology lit)

11. Measuring and monitoring ES • The EEP’s third principle – well defined ES or not – implies that PES schemes might be implemented even if the ES cannot be clearly defined • This could lead to waste of scarce conservation funding • PES to be implemented only when ES or proxy can be measured and monitored

12. Voluntary nature of transactions • CP’s definition of PES stresses the voluntary nature of PES • EEP points out that involvement of intermediaries may result in involuntary involvement of the final ES users • There is a significant difference in the need for voluntary involvement of ES providers and users: • Provision by State of ES through PES no different to other services involving taxes, each service has relatively limited impact on users’ budgets • ES providers’ livelihoods and budgets can be significantly impacted by PES • Voluntary involvement of ES providers to be sought, good for livelihood impacts and allocative efficiency

13. Conditionality • Conditionality has a prominent position in the CP’s definition of PES, but not so in the EEP • Need for ‘strict conditionality’ questioned by EEP: i) conditional payments may crowd out the intrinsic motivations to do the right thing for society; ii) it may be expensive to enforce resulting in a substantial increase in transaction costs; But: Point (i) unlikely as noted earlier Point (ii) could lead to complete waste of resources • PES schemes need to include conditionality

14. Additionality • Additionality: contribution of a PES scheme to the provision of an ES compared to a without scheme scenario • does not have a prominent position in the CP’s definition of PES, but considered a fundamental principle. Not the case with the EEP • Lack of additionality implies that resources invested would be wasted • But some PES schemes do not seem to be delivering additionality at this stage (at least in developing countries)

15. Transparency • Transparency: timely and reliable provision of information to all relevant stakeholders • Low levels of transparency in negotiations of PES contracts and corruption have been observed • Transparency measures: publicizing information on the process of selection of areas targeted for the provision of the ES, the valuation rules for the ES, the process to select participants and the benefits paid

16. Efficiency, equity and livelihoods 1. • EEP criticises the CP for giving priority to efficiency over equity • Using the EEP’s maxi-min criterion (i.e. maximise benefits to poorest) would transform PES in ‘poverty reduction’ schemes • Poverty reduction best addressed with real poverty reduction schemes, which are more likely to effectively address poverty

17. Efficiency, equity and livelihoods 2. • Poverty reduction best addressed with real poverty reduction schemes • PES should be used, to achieve cost-effective provision of ES, and focus on best practice design for livelihood impacts • Reduced focus on cost-effectiveness would: • Negatively impact on the amount of ES provided • Negatively impact on the number of participants that could be allowed into PES, ie negative distributional impact • Negatively affect future generations through reduced supply of ES (if they valued the ES in question)

18. In summary • Very few, true Coasian PES schemes will emerge and are unlikely to lead to efficient outcomes (CP) • The characterization of PES proposed by the Ecological Economics perspective is too broad • PES schemes should focus on cost-effectiveness and best practice for positive livelihood impacts Revised definition of PES a transparent system for the additional provision of environmental services through conditional payments to voluntary providers

19. luca.tacconi@anu.edu.au Funded by Australian Research Council (LP 0989909) Australian Agency for International Development (EFCC 082) Australian Centre for International Agricultural Research (FST/2007/052)