Science AMA: I’m Seema Jayachandran, economist at Northwestern University. Let me tell you why paying poor farmers to not cut down forests is a cheap way to combat climate change. AMA about why small amounts of money for Ugandan farmers helped preserve endangered chimp habitat, and the atmosphere.

Abstract

Hi Reddit!

My name is Seema Jayachandran, and I’m an economics professor at Northwestern University, specializing in low-income countries.

I am affiliated with the Poverty Action Lab at MIT (J-PAL), which has championed the use of randomized controlled trials to study the effectiveness of social/economic policies. I am also affiliated with Innovations for Poverty Action, who was our partner for data collection in Uganda for the research I am here to talk about.

My collaborators and I just published a paper in Science, short summary here, that evaluates a program in Uganda that paid individuals to keep their forest intact. Most of the forest is owned by poor farmers who have been cutting trees to sell to timber or charcoal dealers as an extra source of income, or to use the cleared land for growing crops. As a result, the forest is disappearing at one of the fastest rates seen anywhere in the world. The Ugandan government wanted to protect the forest to save chimpanzees and other endangered species, whose habitat is dwindling.

Preserving forests has another big benefit for all of us: It keeps CO2 out of the atmosphere. Trees naturally absorb and sequester CO2 from the atmosphere as part of photosynthesis. The carbon they are storing is emitted into the atmosphere when they are burned or decompose. Paying forest owners to keep their forests intact is thus one way we can reduce global CO2 emissions. Furthermore, offering a payment and making the program voluntary means that, unlike under a ban, we are not making poor people worse off. This approach (called “Payments for Ecosystem Services” or PES) has been used in Costa Rica and elsewhere, but there has been a lot of skepticism about whether it actually works (for reasons I’m happy to discuss).

We decided to rigorously test how well PES works using a randomized trial; some villages got the program, and some didn’t. A Ugandan conservation non-profit called CSWCT ran the program, and we evaluated the program’s impacts. We compared the amount of deforestation in villages with the program (treatment group) to the ones without it (control group) using satellite imagery. This is the first time PES has been tested with the randomized controlled trial method.

Bottom-line finding: The program saved a lot of forest. We converted that gain in forest into a quantitative dollar benefit to the world from the delayed CO2 emissions (I’m happy to explain more about how we did that). The climate-change benefits were more than twice the program costs. Our findings don’t mean PES will work always and everywhere, but they should make us more bullish on it. IMO, rich countries should be upping their funding for programs that pay people in poor countries to preserve forests. We need to reduce CO2 emissions, and this seems like a bargain way to do it.

The study was widely covered, including by the NYT, the Atlantic, InsideClimateNews, and Popular Science. Northwestern was kind (or mean) enough to post a short video interview with me as well.

TL;DR In a first-of-its-kind controlled experiment, paying poor Ugandans not to cut down their forests created twice the value in avoided climate costs as was spent on the program. We should do it more.

I’ll be back at ~12:00 ET to answer questions!

Edit #1: Thanks for the insightful questions. This was fun. The allotted time is up, and I am signing off, but will check back later to answer a few more questions. Thanks again for your interest! sj

Edit #2 (4 pm ET): I posted a few more replies. I'll check back in again this evening, so upvote any particular posts that I overlooked but you'd like to see answered!

Edit #3 (6:30 pm ET): There were some great new questions posted, and I posted some answers. Thanks again for your interest in the topic. This was fun! Read the full study if you want more details, and if you want to help support conservation projects like this one, our partner in Uganda is hoping to raise money to continue and scale up the program. There is a bunch of other good conservation work being done in Uganda and elsewhere, too. It's a wrap!

Hi Seema, and thank you for doing this AMA.

A worry I have about these PES-type programs is that they may disproportionately benefit landowners at the expense of laborers and other farmhands. That is, because the land owner is being paid to not clear the land for farming, there is now less employment opportunity within the community for non-landowners. Can you comment on the extent to which this played out in your study? How do you think it would impact PES programs if they wanted to scale-up, and have to include larger and larger farms.

SirT6

This is an important question. PES programs for landowners are not reaching the poorest of the poor within their communities. The forest owners are far poorer than me and most of you, but within the village, they are fortunate to own forest.

Western Uganda is a bit different than some other places where there is hired-in land. Most people work their own land, and there is not too much “digging” on others' land. Some of the tree-cutting labor is done by timber dealers who come from outside the village. So the typical forest owner is not generating a lot of employment for others.

But the points still hold that (a) in other PES contexts, others’ employment might be hurt and (b) the very poorest aren't participating. One thing we state in the paper is that policy-makers out to think about pairing PES with cash transfers (or other types of transfers) that help out those people. (In our context, that would compensate them for having less access to neighbors’ forests to gather firewood, but it also applies to lost employment). It would also be interesting for someone to try pairing PES with livelihood training to encourage the enrollees to use their payment to start businesses that are employment-generating.


Your paper links both appear broken at the moment.

We converted that gain in forest into a quantitative dollar benefit to the world from the delayed CO2 emissions

Can you walk us through the math here? I'm curious about how this is done because the benefit is so distributed.

kyled85

Thanks for pointing out about the links, which should be fixed now.

How do calculate the CO2 benefit? There are 2 steps to convert the amount of forest that is saved (which we measured by analyzing satellite imagery) into a dollar value of the benefit. Step #1 is we converted the hectares of forest into the amount carbon and CO2 emissions (and the time path of the CO2 emissions, because all the carbon from a tree isn't emitted the second it's felled.) We used Global Forest Watch’s data on the carbon density in western Uganda’s forest to convert hectares of trees into C and then CO2. They are a great resource on carbon density around the globe.

Step #2 is to put a dollar value on that averted CO2 emissions. Here we use the “social cost of carbon.” This comes from the US EPA, which aggregates the 3 major “Integrated Assessment Models (IAMs): ”. The IAMs model all of the damages (or benefits) to the world from climate change (e.g., changes in agricultural productivity, mortality) and come up with the net cost to the world for each extra metric ton of carbon dioxide that is put in the atmosphere. It’s about $40 per MT of CO2. So, yes, the benefits are very dispersed over time and space, and that number aims to capture all of them.

The program in Uganda was a prototype of a permanent program, but was temporary and only paused deforestation while the program was in place. So we put a $ value on that delay in CO2 emissions. Delaying climate change -- having a few more years of normal climate, unharmed agricultural productivity, etc. -- is valuable! Pushing CO2 emissions into the future, even using a pretty low discount rate, is very beneficial because it’s a lot of environmental costs that we are delaying.


Is paying farmers not to cut down trees a short term solution or a long term one to this issue?

Solaihs

This is a really important question, and one I've gotten a lot.

Let me start by saying that it's very tempting to want one-time solutions and resist perpetual programs. We want to "teach a man to fish." That's surely a lot of the appeal of microcredit; people hope it's a silver bullet that can permanently lift someone out of poverty. But economics tells us that, with externalities, there is no one-off thing we can do so that people internalize the costs and benefits they impose on or create for others.

All that's to say that our cost-benefit analysis compares the annual benefits to the annual costs of the program. If the annual benefits of sequestering carbon outweigh the annual costs of the programs, it makes sense to keep doing it long-term.

Our study was for 2 years, so I can't tell you if, if you ran the program for the long-term, you'd get the same benefits. But if you did, in each year, you should be asking yourself, "Should I continue this another year? The benefits will be a lot higher than the costs. OK, then yes."

PES is not a panacea, so there are a bunch of other things we should also be doing to reduce pressure to deforest, e.g., better access to credit so people don't cut trees as emergency cash, develop or promote alternative fuels than charcoal in urban Africa.


Hello and thank you for doing this AMA. My question is how did you ensure that the owners of said forests were the same after you began to give those incentives? Ie how did you ensure that the poor people were actually keeping those forests/ receiving money?

Because I know that UE started to give funds to Sicily's agricultural farmers (1000€/hectare) to boost this field, and that attracted non-farmers people to the agricultural business. That in Sicily usually means Mafia gangs, intimidating farmers to sell them their fields or illegally take over said lands and thus resulting in UE money boosting Sicily's Mafia.

Thank you

gavinozzo

We worked with the local village leaders to know who owned the land. When I say "we" it's important to note that the program was run not by us the researchers who evaluated it, but by a Ugandan conservation NGO called CSWCT (link in the intro text at the top). It is quite well agreed upon who owns each parcel of land; the biggest disputes were among siblings about who owned the family land, and even that was not as severe as such disagreements can be in many contexts.

CSWCT did spot checks to look for tree-cutting and assessed if someone kept the forest intact and they paid them. The broader point your question raises is that it's important the program is run fairly and people get paid if they comply and in a timely way.

In terms of whether others seized the land or forced the owner to sell, that didn't appear to happen in our setting. In our follow-up survey, we found that very few parcels of land had changed hands in the 2 years. The strong role of village leaders probably prevents outsiders from coming in, but you raise a good point that in contexts where such land take-overs are common, you'd want to make sure the program wasn't exacerbating that.


Hi Seema, thanks for doing this AMA and giving more visibility to this very interesting study! My question concerns ownership of the forests. I suppose that in many countries with rainforest, especially in developing countries, the forest is not formally owned by some well identified people. It may belong to no one, to the government or to a multinational which purchased some kind of drilling or logging rights. How are these subsidies allocated in countries where ownership is murky ? Are the neighboring owners selected? Thanks for your answer!

tkrombac

Yes, our setting had forest owned by individuals or families, and it was pretty well-defined. (I don't mean to say there are no issues with how that ownership came about a few generations ago, etc., and I know some people question the concept of property rights, but as things go, property rights were not that murky.)

But as you point out, there are often murky property rights. There are 2 separate issues -- what if it's owned by the govt or someone else instead of a family, and what if it unfair and we want to push back on that ownership.

Let me tackle the first one. The same idea could be applied to a national government. Rich countries or whomever could pay a national government in a poorer country to preserve forest. You can think of that as a PES payment where the "enrollee" is the nat'l govt of Brazil or whichever country. Then the govt has to think about what local policies to set up to achieve that, whether that's regulation, teaching forestry management, giving local communities incentives to keep the forest intact, etc.

PES is also being applied where there is community owned land. The contract is with the community. There are some tricky issues you need to sort out, e.g., is the money shared equitably. There are concerns that marginalized groups like indigenous people might suffer the most from losing access but don't share in the money. So it's certainly trickier when the ownership is not a family, and all those issues need to be taken very seriously.

But I think the broad concept generalizes: The money that people are making in many poor countries by destroying forests is small in global terms, and importantly, small relative to the damage to the environment from the emissions. If we can find a way to incentivize them -- govt, community, family -- to preserve the forest in a way that they benefit, and are financially better off as a result, that's a win-win. We are helping poor countries/villages/families, and preserving forests.


Thanks for coming to talk with us today! Have you done an analysis of how much it would cost (in direct payments and management infrastructure) to scale the program up to much larger areas? How much ideally would it be desirable to scale it?

asbruckman

We analyzed the costs for the program, but haven't done much to think about how that cost structure would change if you scaled it up. The costs were less than $1000 per village over 2 years. The payments were about half and the admin costs were the other half (marketing the program, paying "forest monitors" to do spot checks, etc). That cost (and the benefits) could rise even within a village if you got more people to enroll. I tend to think that because of fixed cause of management infrastructure, costs would scale up less than 1-for-1 when you expand villages or enrollment, but I really don't know.

I also think it will be interesting to see how technology can help here. The payments were in cash because most of the forest owners are "unbanked" and mobile money was not widely used, but those could reduce payment costs. There are pros and cons of having people do the monitoring (as in this case) versus drones or satellites, but I imagine in the long run, the latter will be more accurate and cost-effective.

(One point of clarification that sometimes confuses people; we, the researchers, used remote-sensed data to measure the impact of the program, but the local NGO used "boots on the ground" to monitor compliance and decide who got paid.)


Hello Seema! Thanks for taking the time to share your research. I am a US Peace Corps volunteer serving in rural Madagascar, a global hotspot of biodiversity as well as environmental degradation. Your study is particularly relevant to my service, where as an agro-ecologist I promote sustainable livelihoods among poor communities. My questions:

  1. Wildfires from slashing-and-burning during the hot season regularly spread out of control and lay waste to hectares upon hectares of forests owned by many stakeholders. If a poor farmer was receiving Payment for Ecosystem Services and something beyond his control such as fire (or a cyclone, or even another individual) felled his trees, would he still receive any compensation for not purposefully cutting?

  2. How has the effect of fewer farmers cutting trees impacted supply and demand for timber, charcoal, etc?

  3. Do you believe this program could be expanded to pay these farmers to be proactive as well - for example, planting fast-growing tree species for sustainable harvest?

  4. What has been the overall reception to this program by the Ugandan farmers, their communities, and overall government?

  5. What's your favorite thing to share about the study?

Thanks very much!

Red_F1VE

Thanks for participating from Madagascar!

  1. The contract in the Ugandan PES program didn't have a clause for "acts of nature" but I do think provisions to still pay people in such cases seems fair. It gets very tricky, very quickly. Are there things people could have done to make the damage from "acts of nature" less severe (i.e., does it create moral hazard), can the group running the program distinguish acts of nature from other causes? You give an extreme case, but in many cases, it will be gray.

  2. Please see my answer to (I think) /u/Fitzismydog

  3. Even this program had a small tree-planting component. Tree-planting makes sense too, though it's not a substitute for preserving primary forests, which have huge biodiversity benefits too. There's a tradeoff with afforestation/reforestation between what might be the best carbon sink versus having other ecological benefits. That's not my area of expertise, but I'm flagging it, and perhaps others weigh in.

  4. Participants like it. We asked participants about their satisfaction in our follow-up survey, and it was high. People would have liked to have been paid more, but then I'd like to be paid more too! (And I'm in favor of transferring money to poor people, but rather than paying them more than is needed to induce them to preserve the forest, it'd make sense to use that extra money to give cash transfers to the very poorest in the community.) People also wish the program were continuing! The UNEP/GEF money that funded it ran out, but CSWCT is hoping that some of attention from the study will help them raise the $ to restart it!

  5. Since no one has asked about this, I'll use your question as an opportunity to give a shout-out to my coauthor Eric Lambin who is a superstar geographer/remote sensing expert. He led the part of the study that classified each pixel in the satellite images as tree-covered or not. It's pretty fancy stuff, and it was fun for me to learn the basics. One thing I really came to appreciate is the power of the high-resolution satellite imagery, where you can basically see each tree. That's very valuable for detecting thinning of trees, and not just clear-cutting. Thinning/degradation is a big contributor to the overall loss of forests in Uganda and many other places.


Hi Seema, thanks for doing this.

Please consider answering my question because I think it is something integral to the claims of your study and something that people are overlooking. You said that the benefits were more than twice the costs of the program. Could you explain how you calculated the benefit of the delayed CO2 emissions? It seems that we humans have a very loose understanding of the exact acceleration of global temperatures. If your study used data from just 15 year ago, your claims would be wildly off. How do you know our current models are so accurate? As you know, when dealing with higher derivatives like acceleration, small changes in initial slope can have a huge affect down the line. Could you explain how that was modeled, or link us to an explanation online?

biklaufiklau

I fully agree that it's very hard to quantify the effects of rising atmospheric CO2 levels. I am in awe of the researchers who develop and continuously update the integrated assessment models that tell us the social cost of carbon (SCC). In my response to /u/dladn6s, I described how we did our calculation, but I am interpreting your question to be about where the SCC comes from. If you really want to dive into the details, see William Nordhaus's manual on his IAM: http://www.econ.yale.edu/~nordhaus/homepage/documents/DICE_Manual_103113r2.pdf

Here is an op-ed in the NYT on the social cost of climate written by the people who led the EPA’s SCC working group.

Even though the SCC is hard to get exactly right, we need to use the best estimate we have to guide policy decisions.


What do you think of national-level initiatives that are in the same vein, such as the forest protection payments that Norway is making to Brazil?

aclay81

There are several national-level initiatives, e.g., Brazil, Costa Rica, Mexico. I'm not an expert on those programs, but there have been nice write-ups on them. I like a review in (I think) the Annual Review of Resource Economics by Alix-Garcia and Wolff. The penultimate version, which is ungated, is here: http://hendrikwolff.com/web/Annual_Review_PES.pdf

Probably others participating in this discussion have other suggestions for good overviews of the specific programs or thoughts on the nat'l programs?


This would imply that they can be trusted with not cutting down the forest area anyway. Is there a way you guys have ensure the farmers will not cut down the forest areas even after accepting the money? (Not immediate I mean something like a year's time)

DwasTV

This question brings up a very important point/clarification.

When calculating the benefits of the program, we absolutely did NOT assume that people keep protecting the forest after the program ends. In fact, our 2:1 benefit-to-cost ratio takes a pessimistic scenario in which participants deforest more than usual afterwards (they have a backlog of trees they can cut). Even with the pessimistic assumptions, the program is still beneficial. Why? Because postponing something harmful is beneficial. Just like you are willing to pay a price (mortgage interest payments) to pay for your house into the future rather than all right now, postponing CO2 emissions – and having a few more years without the havoc of climate change -- is beneficial.

Another point to bring out is that our results suggest that this is a program you might want to keep running for a long time. It’s not about a one-time program that will fix the problem. The annual benefits of sequestering carbon exceed the annual costs to do so. So this is a program that you ought to run basically forever and it would be cost effective. When there are externalities, permanent programs offering subsidies are very useful. It’s extrapolating beyond what we can measure in our study, but if one continued to see the same benefits for a long-lasting program, the benefit-cost ratio skyrockets from 2:1 to over 10:1.


Hi Seema thanks for doing this!

Are there certain trees that are better at storing CO2 than others?

And: Does CO2 just stay inside our atmosphere? What I'm wondering is how much the Ugandan forests benefit a major city or area with high CO2 output on the other side of the world? I don't mean to sound flippant so I hope I'm not, I'm just not very knowledgable about this stuff and am asking from ignorance. Where I'm going I guess is: are the poor Ugandan trees (and people) paying for our sins? So to speak.

CanadianSavage

I am not a forestry expert, so I will give the short (and unhelpful) answer of "Yes" about whether some trees are better for sequestering carbon than others, but let someone else here answer about different kinds of trees.


I had a complicated emotional reaction to your program that I wasn't going to mention, except your program has to do with influencing people, behavior, and policy, so I think it's germane to the AMA.

Do you encounter moral outrage in response to the idea of paying people not to work, not to destroy a common good, with the knowledge that we may have to pay indefinitely in order to protect the thing that other people want to destroy for their own gain? It seems a lot like paying protection money, and paying protection money sticks in my craw. You could say that Uganda has the US over a barrel because it's their forest, but considering the economic sanctions the US can apply, I don't really think that's the case.

Do you think this reaction to your plan represents a significant barrier to implementation? And if so, how do you plan to deal with it?

goatcoat

There have been some good replies, but let me add a few thoughts. You can flip things around and say that people in poor countries who own forests and are keeping them intact are doing something great for us -- they are preventing global warming from being even worse (and protecting chimps, etc.) -- and isn't it moral to compensate them for that?

And to return to the concept of externalities, we could be morally outraged that people are not internalizing that when they get the flu shot, they are helping not just themselves but countless other people (many of whom they have never met). But it is still smart policy to subsidize flu shots so that people are internalizing those externalities.

We -- rich countries -- get more benefits from paying them than we pay out. We shouldn't resent that and think we are paying "protection money"; instead we should be excited about the great opportunity. In short, I understand the moral reaction, but it's good for us and good for them, and we shouldn't cut of our nose to spite our face.


Hi there, Seema! I'm a student at Northwestern and I wanted to thank you for this AMA.

If you don't mind, how do you propose to limit lumber "poaching," wherein farmers and economically disadvantaged individuals in need of additional funds simply choose to cull trees in areas for which they are not responsible?

Additionally, what is the practical scope of these payment plans? How do you propose to limit the entry of exorbitant amounts of individuals into this system, specifically those who may or may not have enforceable claims to land?

Thank you so much for your time and energy investment!

Descripteur

Great to see some other Northwestern representation here! The idea that people will just go poach trees elsewhere is one of the big concerns about PES. We didn't that happened much, e.g., you might have expected extra-high participation and compliance in villages near govt forest reserves, b/c they had an easier option for poaching. And we didn't find that.

I think a big part of why people didn't just go take trees from elsewhere is related to why people are cutting trees in this context. If they were cutting a bunch of trees to build a log cabin (there are no log cabins I've seen in western Uganda, but you get the idea that it's for their own use and needs a lot of trees) and wanted to keep their forest intact to get PES money, they might go poach.

But, here people are clearing trees to grow crops, and having a plot of land in the forest reserve isn't too attractive -- you'd have to schlep a bit and you'd also be at risk of getting caught, or someone else taking your crops. Or, people are selling the trees to a timber dealer. That's not a discreet activity, and again, you could get caught, and you are not really creating any value-add over what the timber dealer could do himself. In short, cutting trees elsewhere wasn't a fantastic substitute for cutting them on your own land in this setting. In other cases, poaching or "leakage" might be more attractive and that could limit the effectiveness of PES, or PES should be coupled with better policies in govt reserves to keep out poachers.


Who pays for it?

Phlox_carolina

If you are asking who paid for this program, it was the Global Environment Facility, via the United Nations Environment Programme.

But if you're asking the more general question, the idea is that rich countries, who largely created the problem of climate change and can more easily afford to pay to solve it, should bear the financial costs. Some of the best, most cost-effective on-the-ground projects, like protecting tropical forests, might well be in poorer countries, but the funding could come for elsewhere.

It seems likely that, with the Paris Agreement, countries could meet their emissions targets by funding projects that protect the world’s forests. This approach would give us a better shot of meeting the global targets for reducing carbon emissions, and have the added benefit that richer countries would be transferring money to poorer countries.

One reason that forest preservation was not included in the Clean Development Mechanism, through which countries could meet their Kyoto Protocol emissions targets through projects in poor countries, is the challenge of measuring the impact you have. Our study is a step toward showing that you can measure the "additionality" of forest conservation.

TL;DR: Richer countries could pay for these programs and get credit toward their emissions targets.


Hi Seema, Thank you for taking the time to speak with us.

Can you comment on the external validity of your study, not just across other geographic locations but across time?

I'm curious whether or not a transfer value that's set at one point in the year will still impact farmers' behavior in coming years when the price for meat will perhaps rise more steeply throughout the year & therefore provide larger incentives for deforesting later in the year.

beveridgecurve101

You are exactly right that the payment level, for a long-term program, needs to keep up with opportunity costs, perhaps by being indexed to price of timber. The payments would likely have to rise in real and not just nominal terms (if agricultural productivity is rising, the foregone income from not clearing land for agriculture is rising), but the social cost of carbon is also rising. It’s anyone’s guess which will outpace the other, and whether the benefit-cost ratio will rise or fall over time.

In terms of external validity more generally, every context is so different! We’ve talked about some dimensions of it today like whether families or communities own forest, or whether the trees are for own use or sold into a market. And of course the level of income people earn from cutting trees is crucial for whether a payment that compensates them for their opportunity costs is still a good deal in terms of CO2 benefits.

The keys to the success of this program, in a very generic sense, were that (1) it wasn’t just the would-be conservationists who signed up and (2) there wasn’t just shifting of deforestation elsewhere. That helps us think a bit about generalizability. Forest owners here were not planning out their deforestation and selecting into sign-up in the uber-strategic way economists tend to think about things. That’s probably true of a lot of small landholders for whom selling trees is supplemental money and owning this forest that can now so easily be monetized is something that fell into their laps rather than something they actively sought out thinking like the owner of a firm. On (2), the fact that people weren’t using the trees themselves helps us understand why there weren’t super big incentives to poach from elsewhere. The more other settings resemble ours along these 2 dimensions, the more I’d feel comfortable extrapolating. The key is to be thoughtful about generalizing beyond the study setting. (But, yes, I used to study physics, and I sometimes miss the easy external validity of, say, measuring the speed of light…)

I also hope our study has some “methodological” external validity, to abuse the terminology, and inspires more randomized experiments of conservation projects. That’s another way in which our study’s impact (I hope) goes beyond quantifying what happened in this 1 place at this 1 time.


What about unintended consequences?

For example, the US pays corn-growers to grow much more corn than the market actually demands. As a result, corn is almost free. Because it's cheaper than grasses, farmers discovered that it's cheaper to feed ruminants corn and then fill them with antibiotics when they run into trouble because they never evolved to be able to digest that corn.

In paying Ugandan land-owners to do nothing, could that have unintended consequences of its own down the road? One example might be the resource curse that frequently hits countries with a lot of oil. For example, land owners no longer need labourers to cut down trees and no longer need charcoal dealers or woodcutters or carpenters to do things with the logs. Those people no longer have jobs and can't pay teachers or doctors, so teachers and doctors leave...

Are you looking at effects to the economy of a region other than the deforestation? Are there unintended consequences you're concerned about?

immerc

Thanks for your questions. Please see my reply to /u/dlad5l7 on laborers in this context, and my reply to /u/princessfinn about "general equilibrium" or GE effects. For those not familiar with that concept or jargon, that's the idea that programs affect prices, which affect others' behavior. In our case, GE effects are negligible because the program wasn't big in relation to the Ugandan market for tree products, but when a program is scaled up, GE effects are likely to become important. It's an important area for future research to study bigger programs that could have a measurable effect on regions outside the program area and to track those effects beyond the program area.


Hello Seema! I've recently been introduced to the reality of economists playing a role in other fields (such as science and psychology) and I am glad to see a true to life example of it.

In Naked Economics, Charles Wheelan suggests that countries who produce the most CO2/Methane/GHG output should pay for their externalities upon the rest of the world by way of contributing to a global pool of funds (presumably through the IMF or UN) generated for projects such as the one you observed in Uganda. Given the recent worldwide push towards preserving the environment (Paris Climate Accords) and the resistance towards it by certain industries and individuals who are to lose from it (not naming names, but one starts with a "t" and ends with a "rump"), what is the feasibility of encouraging leaders worldwide to pay their fair share?

plataprojectile

I’m still optimistic about the Paris Agreement, and countries reducing their emissions (notwithstanding the US in the hopefully only near term). And that reduction doesn’t have to be just through projects in the home country. It can be by funding projects like this one in Uganda. Countries wouldn’t necessarily have to pay into one global fund, but it’s still keeping with the idea you’re talking about separating who pays and where the reduction is. I haven’t listened to it (yet), but someone recommended to me this Planet money episode that is related.


Hi Seema,

Congratulations on the article, it's very strong and you address most of the possible sources of endogeneity that came to mind as I read. I have some questions about land tenure. I was surprised that, given that most land in Uganda (and SSA on the whole) is held under customary land tenure, you termed the subjects "private forest owners." Did your survey ask respondents whether they have a title to their land? I ask because of your counter-intuitive result that treated PFOs feel more secure about their ownership after the program; this runs against previous findings that suggest that clearing land for planting crops is a tactic used to secure land tenure when property rights are not well-defined or enforced. I know you tried to make sure that participants did not select into the program based on anticipated future deforestation; do you worry they selected in based on pre-program strength of their property rights? In other words, that only landowners who felt relatively secure in their land claims participated? (Maybe this issue would not be a problem since it would be correlated with levels of anticipated deforestation?)

Thanks for the great article, I am working on a PhD in political science right now, and this work is right up my alley.

undergroundsadalien

Thanks for your note. "Private forest owner" is a phrase used by the NGO running the program, and we the researchers adopted it. It is privately owned in the sense of not being communally owned, but they don't necessarily have a land title. About half have some sort of title or certificate from the govt attesting to their ownership. We did not find that whether you had a title affected enrollment or compliance.


How would paying them not to cut lumber not create perverse incentives and be an inherently unstable system?

If you pay them not to cut the timber, then people will be given incentives to settle and claim the land solely for the timber payments. Then, if the payments ever stop for whatever reason, they have land full of timber and will cut it down. Seems like you're setting up a house of cards.

Why not instead set up an NGO that buys the land itself, since the NGO will have every incentive to leave the land undeveloped? Further, why not classify the timber based upon the region where it was cut and impose prohibitive taxes and tariffs on that lumber?

Krugmanite

In Uganda, the forest is not unclaimed land. It is owned by individuals. (And some parts of the forest are govt forest reserves.) Thus, in our context, the concern about an incentive to settle and claim the land does not apply.

Why not buy it up from them? People live in the forest and their homes and farms are interspersed with the forest. It would be very disruptive to displace people.

It might be possible to re-write property right laws to decouple the property rights over the trees versus other parts of the land. In principle, that seems like a good approach. You could just buy up the trees and let people otherwise use the land. In a sense PES is like that decoupling but instead of buying the trees, the NGO is renting the trees; they pay an annual fee in exchange for being the one who gets to decide how the trees are used.

We don’t typically decouple property rights like that (but there are examples. I used to teach at Stanford and there is faculty housing where the university owns the land and the “home owner” owns the structure and has a 99-year lease on the land, or something like that.)


I have no idea who you are, but this practice sounds amazing and you are immediately one of my favorite humans!

MnkyBzns

I don’t know who you are either, but based on what little I know, I’m a fan of yours too ;) More seriously, thanks for the nice note.


Seema, thank you so much for doing this AMA, I am very much so a lurker on Reddit but this caught my eye, as I study wildlife management in college and I work in the field of native prairie restoration and TSI (Timber Stand Improvement). My question to you, Seema, is how are these stands of forests being evaluated? How are they being estimated at a cost to NOT be cut down? Are they being roughly estimated at how much labor would cost and the profit yield after the lumber is sold? And if that's the case, (because I know that is expensive) why not just allow the farmers to professionally fell a percentage of these trees that are of mid-high value (save for old growth trees that may or may not be protected in the specific countries) and foot the bill for established saplings to replace those? That way the lumber market doesn't take a huge hit, the farmers make money, and you are still saving the environment in the long run (which I am 100% for.) Thanks for taking the time to read our questions.

like10hunters

Your question bring up a very big issue about how simple or complicated to make the contract. Should it be tailored to each person or one-size-fits all? In this case, it was a pretty simple/blunt contract and the payment amount was based on guesstimating the middle of the range of how much people were earning for cutting trees. Everyone's "opportunity cost" differs, and you know you won't attract some people at a given payment level and that's OK; it wouldn't have been cost-effective to pay them to change their behavior because you'd have to pay them more than the environmental benefits are worth.

One big lesson I learned is that simple is important. Some forest owners didn't sign up because they were nervous about signing a contract related to their land, didn't understand the contract etc. A detailed contract with a lot of legalese is going to intimidate people. Complex rules also make it harder for people to know what they are supposed to do to comply, and for an NGO or whomever to monitor compliance.

At the same time, you almost surely could improve on the contract used in this case, e.g., perhaps what you are suggesting is almost as good for the environment, but you'd have to pay people a lot less. The key will be finding those modifications that are still very easy to communicate to forest owners, easy for them to know if they are following the rules, and easy for a third party to verify that.


Do you have any book recommendations on this issue or any books that you think is important?

lot484

One place to start is a book by Frances Seymour and Jonah Busch titled, “Why Forests? Why Now?: The Science, Economics, and Politics of Tropical Forests and Climate Change.”


Why did you decide to test in Uganda as opposed to India, Bangladesh, or Cameroon?

Nairobicowboy

The Ugandan government approached the United Nations Environment Programme, wanting to protect the forest. A big part of their motivation was to protect the habitat of chimpanzees. Then UNEP and the Global Environment Facility (which have a complicated relationship that I will not pretend to understand) decided to fund the PES forest-protection efforts in Uganda + also to use the effort to test the effectiveness of the approach.


Hey Seema, thanks for the AMA.

My question is, what do the Ugandans have as an alternative to the wood from deforestation? It's good that paying people not to cut down trees has such an effect, but what happens to the chain afterwards? The charcoal dealers, the merchants, the people driving demand who use charcoal for fuel? What happens to them as a result?

princessfinn

Great question. This program was too small to make a big dent in the supply of charcoal or timber in Uganda. The trees from western Uganda feed into a national market. But it’s an important point that if we scale this up, we’d expect charcoal and timber prices to rise because supply dries up. BUT, in the jargon of economics, demand is not completely inelastic – if the price is higher, people will consume less of it. So, yes, at a higher price, higher-cost producers would enter, so total charcoal consumption would not fall 1 for 1 with the averted charcoal production from PES, but it will fall.

Most experts on climate/energy believe that almost every fuel source has a lower carbon footprint than charcoal, e.g., kerosene. Kerosene is available and would be a natural candidate for people to switch to. Thus, useful additional policies would be to make sure the markets for alternatives are there, e.g., kerosene. The same thing applies for wood used for lumber -- helping kickstart the market for less carbon-intensive building materials, until there is enough scale for it to be profitable could make sense. (I have not investigated kerosene or building-material markets, so this is just some food-for-thought.)


Will this principle of "feeding carrots if you do no harm" apply to other human affairs such as crime, business competition, gender equality, nuclear nonproliferation? Why or why not?

kbouser

Great question, and a broad one, so there's of course no simple yes or no answer. The idea is applicable if a few key pieces are in place. First, (most) people would have been engaging in the harmful behavior, absent the carrots. Otherwise, the policy will be paying people for something they wouldn’t have been doing anyway, so it’s not cost-effective. In Uganda, most forest owners were degrading their forest, absent PES. Even then, this idea of “inframarginality” in econ-speak, or additionality as its known in PES circles, was a big part of what we set out to assess in our study, because maybe the only enrollees would be the ones who would have conserved. The program attracted and changed the behavior of a lot of people who would otherwise have done harm, and that’s why the benefits>costs. You also have to be able to measure whether the harm took place, and the cost to society of that harm has to be more than the private benefits to convince them to refrain (otherwise, it's not worth it to pay them to stop.

There are programs that have applied it to gender equality, e.g., paid families not to marry off their daughters at a young age (http://www.poverty-action.org/study/empowering-girls-rural-bangladesh). Some hospitals/clinics have programs that pay those addicted to drugs to stay sober. Like anything, the idea is not universally applicable and every application has nuances, but if compensating people gets people to stop doing harm, and that is beneficial not just them but to others in society, it can be a good use of money.


Instead of paying those farmers why don't we just use that money to buy the land?

Fitzismydog

Thanks for the question. Please see my reply to a similar question by /u/Krugmanite


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