Supplemental Material – Detailed Results

Supplement to: SEEING THE TREES FOR THE CARBON: AGROFORESTRY FOR DEVELOPMENT AND CARBON MITIGATION

Emily Andersona and Hisham Zerriffib

a (corresponding) Institute for Resources, Environment and Sustainability, The University of British Columbia, 411-2202 Main Mall, Vancouver, BC, Canada, V6T 1Z4

Phone: 778.866.4947

Fax: 604.822.9250

b Liu Institute for Global Issues, The University of British Columbia, 101-6476 NW Marine Dr., Vancouver, BC, Canada, V6T 1Z2

3. Synergies and Tensions When Attempting Co-Benefits

Table 3: Predicted tensions and synergies in project characteristics when agroforestry is attempted for co-benefits for climate and development. (Sources: Albrecht and Kandji 2003; Appiah et al. 2009; Ashley and Carney 1999; Bognetteau et al. 2007; Boyd et al. 2007; Bull et al. 2008; Chivinge 2006; Current and Scherr 1995; Dixon 1995; Dixon et al. 1994; Dolan 2006; Fischer and Vasseur 2000, 2002; Garrity 2004; Harris 2007; Jama et al. 2006; Lal 2004a, 2004b; Leakey et al. 2005; Macqueen 2009; Makundi and Okiting’ati 1995; Milne and Arroyo 2003; Montagnini and Nair 2004; Mutuo et al. 2005; Nair et al. 2009; Nelson and de Jong 2003; Niles et al. 2002; Noble and Dirzo 1997; Oelbermann et al. 2004; Palm et al. 2004; Pandey 2007; Roshetko et al. 2007; Rudebjer et al. 2006; Sanchez 1995; Sathaye et al. 2001; Schroeder 1994; Seeberg-Elverfeldt et al. 2009; Shiferaw et al. 2009; Watson et al. 2000)

/ Development / Carbon / Tensions and Synergies in Realizing Co-Benefits /
Enabling Conditions / Supportive government, policy and socioeconomic environments; emphasis on secure land and tree tenure and sufficient resources to support land-use change / Supportive government, policy and socioeconomic environments; emphasis on secure land and tree tenure and sufficient resources to support land-use change / Alignment
Substantive Project Characteristics / Participants and Partnerships: Social NGOs, Multi-stakeholder partnerships / Participants and Partnerships: Technical NGOs / Likely Tension: Contract length and flexibility; Project and farm size; Transaction costs; Provision of on-going education, training and technical support
Possible Tension: Participants and partnerships; Project length; Timing of payments; Monitoring; Fund allocation; Agroforestry practices; End products
Alignment: Monitoring; Agroforestry practices
Synergy: Time to returns; Carbon finance; Agroforestry practices; End products
Project Timeline: Longer term projects; Shorter term or flexible contracts; Short-term returns to farmers / Project Timeline: Longer-term projects; longer, rigid contract terms to meet certification requirements; Short-term returns to investors and payment upon delivery of services
Project Size: Small scale, small farm size / Project Size: Large scale, large farm size
Project Economics: Mainly donor funds; Farmers need access to upfront financial incentives or markets; High costs in smallholder projects; Involve community to lower monitoring costs / Project Economics: Carbon finance available; High transaction costs associated with generating carbon credits; Expensive monitoring - involve community to lower costs
Substantive Project Characteristics / Agroforestry Practices: Mixed species, context-matched agroforestry practices / Agroforestry Practices: High carbon systems
End Product: Tangible products for household use or local and regional sale / End Product: Intangible carbon credits for sale on primarily on international markets
Monitoring: Involve community to lower costs / Monitoring: Extensive monitoring to ensure credit validity
Education, Training and Technical Support: Capacity-building emphasized / Education, Training and Technical Support: Minimized except where reduces transaction costs
/ Development / Climate / Tensions and Synergies in Realizing Co-Benefits /
Process Project Characteristics / Preliminary Site Assessments: Important for site suitability and adaptation to local conditions
Interaction with Project Context/Integration with other Activities: Extensive, active
Flexibility of Project Design & Implementation: Contracts non-existent or flexible, adaptive programming.
Community Participation: Involvement in all stages recommended; Participatory, bottom-up decision-making.
Demonstration of Benefits: Emphasized, through demo farms / Preliminary Site Assessments: Not emphasized
Interaction with Project Context/Integration with other Activities: Less common.
Flexibility of Project Design & Implementation: Standardized and rigid project designs
Community Participation: Minimized except where can reduce transaction costs; Top-down decision-making.
Demonstration of Benefits: Not included / Likely Tension: Flexibility of project design and implementation; Community participation; Facilitating market access
Possible tension: Preliminary site assessments; Interaction with project context and integrating with other activities; Demonstration of benefits
Alignment: Community participation that reduces transaction costs
Synergy: Integrating with other development activities to diversify funding
/ Development / Climate / Tensions and Synergies in Realizing Co-Benefits /
Process Project Characteristics / Market Availability and Access: Market access not needed where end projects targeted are for home consumption; Direct access to local markets by local farmers or farm organizations / Market Availability and Access: Access to global markets through intermediaries and brokers

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3.1 Expected Tensions: Cost at the Root of the Conflict

Table 2 highlights many project characteristics where tension can be expected when designing smallholder co-benefit agroforestry projects. Much of this tension relates to the need of co-benefit projects to generate carbon credits at a cost low enough to be competitive on carbon markets while sustaining smallholder participation to deliver development benefits. Both sustaining participation and carbon forestry projects are associated with high project transaction costs (Cacho and Lipper 2007; Cacho et al. 2002; Leach and Leach 2004; Lile et al. 1998; van Noordwijk et al. 2008).[1]

In general, both forestry and smallholder and community-based projects have high transaction costs (Boyd et al. 2007; Harris 2007; Haupt and von Lüpke 2007; Roshetko et al. 2007; Smith and Scherr 2003). Forestry projects also have delayed returns (Haupt and von Lüpke 2007). High costs on community projects are in part due to high initial costs associated with meeting local land-owners to disperse information, assessing the needs and priorities of potential participants, negotiating with individuals, and working with multiple stakeholders (Boyd et al. 2007; Cacho et al. 2005; Milne 1999). Generating carbon credits in a smallholder or forestry project adds additional costs associated with project registration[2], carbon monitoring, and credit validation (Cacho et al. 2002; Jindal et al. 2008; Leach and Leach 2004; Lile et al. 1998; Milne 1999; van Noordwijk et al. 2008). Not surprisingly, Smallholder carbon projects have higher transaction costs (Cacho et al. 2002; Roshetko et al. 2007; Smith and Scherr 2003). In the case of co-benefit projects, higher transaction costs are expected in projects generating carbon credits while delivering substantial sustained benefits to local people (Milne 1999)[3]. Many of the Process Project Characteristics (Section 3.4) that are important for sustaining participation will tend to increase costs. As a result, keeping project costs down sufficiently for carbon credits generated in co-benefit projects to be competitive with credits generated in other kinds of projects is very difficult (Nair et al. 2009). Although it is believed smallholder carbon forestry projects can be competitive in terms of the cost of carbon sequestration in these projects, transaction costs may be a sizeable barrier (Cacho et al. 2005). This challenge is at the root of many of the tensions described in sections 3.2-4.

3.2 Enabling Conditions

Enabling conditions tend to align in for realizing co-benefits for carbon and development. Conditions that facilitate the realization of both development and carbon benefits include: a supportive policy and government environment, established land and tree tenure and favourable socioeconomic conditions (Gong et al. 2010; Niles et al. 2002; Pagiola et al. 2005; Palm et al. 2004; Roshetko et al. 2007); accessible markets for tree products (Boyd et al. 2007; Palm et al. 2004); and adequate farm level livelihood assets (Palm et al. 2004). The availability of appropriate land for conversion to agroforestry is a particularly important condition. For both types of benefits, underused, low opportunity-cost and low biomass land-use systems, particularly degraded or non-productive land, is recommended (Cacho and Lipper 2007; Roshetko et al. 2007; Schroeder 1994; Torres et al. 2010). Degraded land has few competing land-use options that can deliver livelihood benefits (Cacho and Lipper 2007; Dixon 1995; Nair 2007; Schroeder 1994), and has good potential to store carbon (Dixon 1995; Lal 2004b; Montagnini and Nair 2004; Niles et al. 2002; Roshetko et al. 2007; Van Vliet et al. 2003).

3.3 Substantive Project Characteristics

3.3.1 Participants and Partnerships

This is an area of possible tension in co-benefit projects. For development benefits, there is emphasis on the intentional building of good, flexible, transparent relationships with equality, good communication and trust between multiple partners, including funders and industrial partners (Appiah et al. 2009; Bognetteau et al. 2007; Boyd et al. 2007; Bull et al. 2008; Fischer and Vasseur 2002; Garrity 2004; Leakey et al. 2005; Macqueen 2009; Milne and Arroyo 2003; Niles et al. 2002; Noble and Dirzo 1997; Roshetko et al. 2007; Rudebjer et al. 2006; Shiferaw et al. 2009). Communication and intentional relationship-building are not emphasized for realizing carbon benefits, possibly because of the potential additional costs these imply. Higher costs associated with working with multiple stakeholders could also be a deterrent in carbon projects, where transaction costs are already high (Boyd et al. 2007; Cacho et al. 2002).

However, broad, good quality partnerships and collaboration could compensate for higher costs by reducing costs in other areas (Boyd et al. 2007; Milne 1999). Increasing trust and engagement between partners could reduce transaction costs in payment for environmental service (PES) schemes more broadly (Vatn 2010), and have been identified as important factors in forest carbon project success (Gong et al. 2010). Partnerships with farmers’ organizations and NGOs already working in an area could reduce costs associated with negotiating participation and providing training, and may increase the quality of development benefits generated in co-benefit projects (Milne 1999; Nelson and de Jong 2003). With thoughtful project design, possible tensions in this area could be minimized or avoided.

3.3.2 Project Timeline

Project timeline describes the different phases of project development that occur from initiation to completion. There were three main aspects that were frequently discussed: total project length, contract length, and time to returns. These aspects could be sources of likely tension, alignment and synergy, depending on the context.

Total Project Length

Long-term projects, with long-term commitments by funders and stakeholders, are preferable for realizing development benefits because they allow sufficient time for building good relationships between local people and organizations and for building the local skills and capacity that facilitate long-term sustainability of benefits (Dolan 2006; Fischer and Vasseur 2002). Although assuring long-term carbon credit permanence also requires longer project lengths, uncertainty around a post-Kyoto accord has resulted in shorter carbon projects (Harris 2007). This could be a source of tension.

Contract Length

Within projects, implementing organizations and local participants may sign contracts, for example, specifying how long trees will be kept in the ground. Contract lengths could be a source of tension that is difficult to resolve. For development benefits, short, flexible contracts are favoured to allow local people to change their livelihood strategies to adapt to changing conditions and needs (Anderson and Zerriffi Unpublished Working Paper; Roshetko et al. 2007). Most carbon projects, however, use longer, more rigid contracts to meet carbon certification requirements. Standardized contracts may be used to reduce project costs (Gong et al. 2010). Contract length and flexibility have been found to be a source of tension in smallholder planting initiatives, some targeting voluntary and others compliance markets, in China, Ecuador and Uganda (Anderson and Zerriffi Unpublished Working Paper; Gong et al. 2010; Milne and Arroyo 2003).

Time to Returns

Time to returns is the amount of time it takes for a project to deliver benefits, monetary or otherwise. Time to returns could be a source of either possible tension or synergy in co-benefit projects. Trees take a long time to deliver returns compared to conventional agricultural crops. Most rural smallholders do not have sufficient resources in reserve to sustain much initial reduction in returns, even if their long-term gain would be greater (Shiferaw et al. 2009). For development benefits from tree planting, farmers need access to up-front credit, financial incentives or markets (Fischer and Vasseur 2002; Roshetko et al. 2007; Sathaye et al. 2001) and short-term economic returns to help sustain their participation (Ashley and Carney 1999; Dixon et al. 1994; Fischer and Vasseur 2002; Gong et al. 2010; Shiferaw et al. 2009; Torres et al. 2010).

In carbon markets, payment upon delivery of services (i.e. when trees are grown and carbon credits assured) is often preferable because it reduces risk to project developers and increases assurance of permanence (Harris 2007; Kossoy and Ambrosi 2007). For carbon benefits, it has also been recommended that crop cultivation be limited in the first 3 years (Roshetko et al. 2007). If farmers are substituting trees for annually harvested crops, delaying returns to farmers could be a source of tension tension, especially if they act as a disincentive to their participation by making alternative land-uses or activities that can provide earlier payments more attractive (Gong et al. 2010).

On the other hand, for farmers already using or considering tree-based land uses, the time to returns of carbon credits could be a source of synergy, allowing farmers to realize benefits from tree planting faster than they would from other tree products (Sathaye et al. 2001). This could allow farmers to participate who otherwise would not have sufficient resources to wait for the long returns from conventional tree products.[4]

3.3.3 Project Size

Small projects are well-suited to delivering development benefits because they can better-accommodate the livelihood strategies used by the rural poor, are more easily designed to be adaptable and flexible to respond to changing needs and markets, and are more easily integrated with other development activities and land-uses (Boyd et al. 2007). However, smaller projects could compromise the amount of carbon benefit realized, because transaction costs increase and profitability per hectare decreases as project size decreases (Cacho et al. 2004; Torres et al. 2010). As a result, profitability per hectare of carbon projects increases with project size. Larger scale carbon projects allow greater standardization and lower transaction costs, which lower risks to investors (Cacho and Lipper 2007; Harris 2007; Leach and Leach 2004; Skutsch 2004; Smith and Scherr 2003). It has been suggested that the carbon credit volume limit for CDM “Small Projects” may be only just enough to make these projects economically viable (Haupt and von Lüpke 2007).