Property rights, collective action, and PES

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

22. Sumberjaya, Indonesia

23. Sumberjaya, Indonesia • ~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 Sukhomajri Chandigarh Sukhna Lake

25. Irrigation ponds Forest

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