The Role of Risk, Ambiguity, and Time Preferences in Farmers Decision Making to Participate in Agroforestry Payments for Environmental Services (PES) Programs in Developing Countries

• Applicant: Dr. Hanna Ihli
• Subject Area: Agricultural Economics, Agricultural Policy, Agricultural Sociology
• Term: from 2016 to 2019
• Project identifier: Deutsche Forschungsgemeinschaft (DFG) - Project number 320162872

Agricultural production contributes significantly to greenhouse gas emissions. An important strategy for slowing anthropogenic climate change is the sequestration of carbon dioxide from the atmosphere by increasing carbon stocks of landscapes. Agroforestry, which is promoted as a climate-smart land use system, deliberately integrates tree-growing on agricultural land and offers the possibility to remove carbon dioxide from the atmosphere. One option to incentivize the adoption of agroforestry practices in developing countries is through biocarbon projects, in which farmers receive payments through international carbon markets in exchange for carbon sequestered on their land. These projects are part of a group of market-based mechanisms known as Payments for Environmental Services (PES). Participation in PES programs is voluntary, so that an effective program design needs to take into account farmers preferences. However, little is known on how farmers aversion to uncertainty, including both risk and ambiguity, might affect participation in PES programs. Farmers time preferences may also be a significant constraint in PES program participation since agroforestry is a long-term process and benefits can thus take a long time to accrue. A PES program usually combines a particular payment amount and method, specific land use requirements, and a particular contract length and conditionality to create a functional program. However, very few studies have been conducted in a developing country concerning farmers preferences for key design attributes of PES programs. Consequently no comprehensive understanding exists of how farmers may engage with such programs to contribute to environmentally beneficial land management efforts. The objectives are (1) to examine the role of risk, ambiguity, and time preferences in farmers decision making to participate in agroforestry PES programs using field experiments and (2) to quantify farmers preferences for key design attributes of agroforestry PES programs using a choice experiment. To ensure that the views of both men and women are captured and understood, gender-disaggregated data will be collected. The study will be conducted in Kenya and will be linked to the Kenya Agricultural Carbon Project. The study will contribute substantially to the research direction and the international policy debate about the appropriate design of PES schemes in a smallholder context.

• DFG Programme: Research Fellowships
• International Connection: Kenya
• Host: Dr. Fergus Sinclair