Property rights, collective action, and PES

John KerrMichigan State University

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

Property rights scenariosPrivate public

Individual group

Collective action scenariosActive cooperation passive coordination

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

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

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

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

Property rights, collective action, & design of PES

• Conditionality• Transaction costs• Types of payments and rewards• Individual vs. group payments/rewards

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.

Transaction costs

• Types of transaction costs:– Search, negotiation, contracting, monitoring,

enforcement, insurance

• High fixed costs:– Total cost/ha falls with larger contracts

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

Types of payments

• Cash• Conditional land tenure security• In-kind services & development

support– training, employment, market

access, infrastructure

Cash

• Straightforward and simple• Facilitates annual payments• Divisible and direct

– Good for individual-based systems– Possible problem if group contract

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

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

Group or individual contract?

• Individual– Simple conceptually– High transaction costs for

contracts with many small holders

– Low transaction costs for large contracts

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

Agglomeration bonuses• Useful where threshold effects with large landholders• Low level coordination, avoids transaction costs

Source: Goldman et. al 2007)

Case studies

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

Sumberjaya, Indonesia

Sumberjaya, Indonesia

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?

Sukhomajri, India

Chandigarh

Sukhomajri

Sukhna Lake

Forest

Irrigation ponds

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

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

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