Some of the most violent land-use conflicts in Indonesia have occurred in Sumberjaya, a mountainous district in Sumatra. During the 1990s and the early years of this century, thousands of families migrated here to establish coffee gardens – illegally – in stateowned ‘protection forest’. Convinced that their activities threatened the health of the watersheds, the authorities frequently evicted the squatters.

In recent years, peace has descended on Sumberjaya, thanks in part to the action research conducted by the RUPES programme – the acronym stands for Rewarding the Upland Poor for Environmental Services – coordinated by the World Agroforestry Centre. Research by the Centre’s scientists established that multi-strata coffee gardens in Sumberjaya not only provide a livelihood for thousands of poor families, they help to control erosion in a similar way to natural forests. In short, when well managed, the coffee gardens pose no threat to the Department that instead of evicting the squatters they should encourage them to adopt good management practices. “Today is one of the most important days in my life,” announced Mr Darmadi, the head of a local farmers’ group, when he and 500 others were awarded community forestry permits in July 2006. “The process took more than two years, but with the assistance from the RUPES Sumberjaya team, I finally got permission to stay on the land I’ve been farming.”

The permits granted land rights to the farmers for a five-year trial period, with a possibility of extending beyond 25 years. In return for secure tenure, the farmers agreed to certain management practices. When the RUPES team began working in Sumberjaya in 2004, community forestry permits covered just 7 per cent of the protection forest; by July 2006, they had been awarded to some 6400 farmers and covered 70 per cent of the area.

“Sumberjaya should start to see measurable improvements in watershed functions as a result of these agreements,” explains Suyanto, the RUPES project site manager. “While these improvements have yet to be verified, the permits have already brought about tangible benefits for the farmers.” They have doubled land values, reduced corruption, increased income, promoted soil and water conservation measures, and given farmers good reasons for protecting the remaining natural forest. And all this has happened without the government – or downstream water users – having to make any cash payments. The permits themselves are the reward for good practice.

Since 2002, the RUPES programme has been conducting research at six sites in Asia – one in Nepal, three in Indonesia and two in the Philippines – on how the rural poor in upland areas can be rewarded for providing and protecting environmental services. The vast majority of communities living in the uplands suffer from poverty and a lack of investment, yet the land they occupy provides a range of services – clean and abundant water, biodiversity, carbon storage – that benefit the wider population. During recent years, there has been a growing interest in establishing market-based approaches to protecting environmental services by providing payments or non-financial rewards. The RUPES programme, largely supported by the International Fund for Agricultural Development (IFAD), has explored precisely how such schemes could be established, and the conditions necessary for their success, under a range of conditions. With the first phase of RUPES coming to an end, 2007 was a time to reflect on the lessons learned. In January, a workshop in Lombok, Indonesia, reviewed current knowledge about payments and rewards for environmental services. Many of the 150 scientists who attended the workshop had been closely involved with RUPES research projects, whose key findings were synthesized in two documents published during the year. The idea of developing a thematic issue of Insight:Notes from the Field, the biannual publication of Regional Community Forestry for Asia and the Pacific (RECOFTC), on payments for environmental services emerged during the Lombok workshop. The publication includes case studies from India, Indonesia, Nepal, the Philippines and Vietnam. A more detailed analysis of the criteria and indicators that can be used when establishing compensation and reward schemes is provided by the World AgroforestryCentre’s Working Paper No. 37.

Our research has found that if reward and payment schemes are to be effective, they must meet three main criteria,” explains Meine van Noordwijk, Regional Coordinator for the Centre’s Southeast Asia programme and co-author of Working Paper No. 37. “They need to be realistic, conditional and voluntary.” In addition to these criteria, the RUPES researchers believe that reward schemes should ideally favour the poor.

 Some schemes have faltered because they have failed to make a realistic assessment of the environmental and economic factors that are required to improve or maintain the provision of an environmental service. Van Noordwijk gives an example of a scheme in West Java which failed because there was no clear understanding of cause and effect. A hydropower company paid farmers in the watershed to plant trees as part of a scheme to ensure that it received reliable supplies of water. “But planting trees doesn’t create more water,” explains van Noordwijk, “and this meant that the company was effectively paying farmers to do something that didn’t deliver the services it anticipated.” For schemes to work, they must also be realistic in the sense that payments or rewards are acceptable to all involved. They must cover the operational and opportunity costs of the providers and the transaction costs of intermediaries; and buyers must be willing to pay these costs, while still receiving a net benefit in terms of the environmental services provided.

There must also be clarity about precisely what the buyers and sellers are getting, with the payments or rewards being conditional on the delivery of an agreed service. If the providers fail to deliver, then the buyer should be able to withhold payments or rewards. One example of how this can work was provided by the RiverCare programme, established by RUPES in Sumberjaya. Local farmers pledged to undertake measures to reduce the amount of sediment reaching a hydro-power reservoir below their land, this being a major concern for the electricity company. Acting as a stand-in buyer, RUPES crafted an agreement that would reward RiverCare according to its success: the greater the reduction in sedimentation, the higher the payment. In short, payment for a service must be conditional on delivery.

To be effective, schemes that involve payments and rewards for environmental services should also be voluntary. The providers of environmental services should be party to the schemes by choice, not because they are compelled by regulations. The principles of free and prior informed consent should always apply, and individuals should be able to make their views known at all times. An experimental incentive scheme designed to reduce soil erosion in Sumberjaya— which involves farmers bidding to provide their services—emphasizes the virtues of voluntary participation. (See box: Asia’s first reverse auction.)

The working paper and the Insight issue on payments for environmental services both look at how schemes could be designed to benefit the poor – and indeed, whether this should be one of their explicit purposes. The opportunities and risks for the poor seem to depend largely on the specific characteristics of the schemes and the context in which they take place. The type and location of the services being marketed, the transaction costs, the form of payments or rewards – all will have an influence in terms of their impact on the poor.

Some researchers have argued that if the focus is diverted away from environmental conservation towards poverty reduction, then the delivery of environmental services could suffer, encouraging buyers to pull out. However, even if we leave moral considerations aside, it makes sense to ensure, at the very least, that payment schemes do not make life tougher for the poor; ideally, they should make life better. In situations where existing barriers such as uncertain property rights, small land holdings, and weak political voice make it difficult for the poor to participate, positive efforts should be made to address these problems.

Further reading
21 Noordwijk M, Leimona B, Emerton L, Tomich TP, Velarde SJ, Kallesoe M, Sekher M, Swallow BM. 2007. Criteria and indicators for environmental service compensation and reward mechanisms: realistic, voluntary, conditional and pro-poor. ICRAF Working Paper 37. Nairobi: World Agroforestry Centre. http://worldagroforestry.org/downloads/publications/PDFs/WP14964.PDF

World Agroforestry Centre: Exploring Payments for Environmental Services. Insight: Notes from the Field, Issue 2. 2007. RECOFTC, World Agroforestry Centre and Winrock International India.

Suyanto S, Khususiyah N, Leimona B. 2007. Poverty and Environmental Services: Case Study in Way Besai Watershed, Lampung Province, Indonesia. Ecology and Society. 12(2):P.13. http://worldagroforestry.org/Library/listdetails.asp?id=50412

For more information,
contact Meine van Noordwijk,
m.vannoordwijk@cgiar.org