Agroforest Carbon Finance Schemes in Indonesia

- a Case Study in Central Sulawesi

Christina Seeberg-Elverfeldt

Food and Agriculture Organization of the United Nations (FAO)Rome, Italy

University of GöttingenGöttingen, Germany

26th August 2009World Congress of Agroforestry 2009, Nairobi, Kenya

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How much do you have to pay him to stop cutting the tree?

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Problem statement

Surroundings of Lore Lindu National Park in Central Sulawesi, Indonesia

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Problem statement: Vicious cycle of poverty and

deforestation

Poverty of local

ethnic groups

Encroachment &

Deforestation

Land sales to migrants

Expenditures for

ceremonial purposes

Cocoa boom: 230% area increase in 20 years

30% of land acquired by clearing primary forest

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Objective• Assess the impact of

carbon payments on smallholder households

• Evaluate the potential of carbon credits to provide an incentive for adoption of sustainable land-use systems

• Assess the potential of carbon payments to contribute to the conservation of the rainforest

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• 4 household classes (HHI ; HHII ; HHIII ; HHIV) characterised on basis of dominant cocoa agroforestry system

• 4 cocoa agroforestry systems: I – II – III – IV

• Linear programming model, maximising farm level gross margin

I III

II IVShade tree cover

Management intensity

Sustainability

Methodology

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Characteristics of household classes

Household class

Attributes HHI HHII HHIII HHIV

Poverty Index Poorest Poor PoorBetter-

off

Ethnicity (% migrants)

0 19 22 80

8

0

5.000

10.000

15.000

20.000

25.000

30.000

35.000

HH I HH II HH III HH IV

TG

M (

IDR

(000

)/yr

)

Results (1)

Scenario 1 & 2: Impact of carbon payments on household income

Total Gross Margin – Baseline Situation

1€=11,500 IDR (2006)

Scenario 1: Impact of carbon credits on TGM

0

2

4

6

8

10

12

14

16

18

20

HH I HH II HH III HH IV

Pe

rce

nta

ge

im

pa

ct

on

TG

M

Scenario 1CER €5

Scenario 2CER €25

Scenario 2:Impact of carbon credits on TGM

0

2

4

6

8

10

12

14

16

18

20

HH I HH II HH III HH IV

Pe

rce

nta

ge

im

pa

ct

on

TG

M

Scenario 1CER €5

Scenario 2CER €25

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Results (2)

Scenario 3: Incentives for environmentally friendly agroforestry systems

Carbon certificates: Price premiums for shade grown, biodiversity rich & sustainable cocoa agroforestry systems I and II

Household Class

HHI HHII HHIII HHIV

Minimum credit price (CER/tCO2e) € 14 € 27 € 32 €185

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Results (3)

Scenario 4: Incentives for rainforest conservation

Carbon certificates to prevent further deforestation activities (REDD)

Emission reduction from reduced deforestation may be among the least-expensive mitigation options available (IPCC 2007, Stern Review 2006)

Household Class

HHI HHII HHIII HHIV

Minimum credit price (CER/tCO2e avoided) € 1 € 10 € 23 € 54

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Conclusions

• The impact of payments on households depends on the prices they obtain on the carbon markets

• Solution to vicious cycle of deforestation & poverty: Target carbon sequestration payments to shade intensive agroforestry systems I & II

“Win-Win-Win” situation:– income of poorest, local households increased – encroachment process at NP forest margin

stopped– environmentally friendly land-use systems

(carbon sequestration, biodiversity) promoted

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Linear Programmin

g Model

Data land-use systems

Carbon annuity

payments

Agricultural activities

Carbon budget cocoa & shade

trees

Resource endowmen

ts

Carbon credits (tCER) 5 –30

€/tCO2

Assumptions...

Objective function: Maximise farm level gross margin

4 household classes (HHI – HHII - HHIII - HHIV )