INVESTING IN TREES AND LANDSCAPE ... - PROFOR

In Africa, farms that engaged in certified organic export production were found to be significantly
more profitable in terms of net farm income earnings than those that engaged in conventional
production (Gibbon and Bolwig 2007). This profitability gap is due to differences in gross incomes
and production costs between organic and conventional farms. However, there are wide variations
in the net profit of various crops grown using an organic approach.
Payment for Environmental Services
A major new source of financing for tree-based systems and other land restoration practices is
through payment for environmental services (PES), most notably market-based systems that reward
quantifiable sequestration of carbon through tree planting or avoided deforestation. A number
of financial mechanisms and incentives are in use to encourage farmers and investors to adopt
practices and systems that will generate carbon sequestration and other environmental benefits.
These incentives seek to align farmers’ and investors’ incentives with those of the national or global
society, and to encourage both groups to be cognizant of environmental effects when they make
agricultural/forestry production decisions. The goal is to unlock the potential of eco-friendly systems
to satisfy food production needs and provide global environmental services. The following sections
describe some examples of incentives to promote investment.
Reward mechanism for eco-friendly systems
Most eco-friendly systems are profitable over time (i.e., they have positive net present values), but
private investors often have to wait several years before they begin to realize these benefits. This
poses a challenge for farmers, especially in Africa, where the cost of capital and the discounting
factor are high. During the waiting period, investors are at their most financially vulnerable and may
need some form of support. Total Land Care in Malawi gives priority to farmers to access subsidized
farm inputs in the first couple years on the condition that these farmers have established plots
in which eco-friendly production methods are used. So far, this mechanism is primarily used to
promote conservation agriculture.
Another example is Community Markets for Conservation (COMACO) in Zambia, which targets poor
and food-insecure families. The families are organized into producer groups and sign an agreement
with COMACO that gives conservation dividends to farmers for adhering to sustainable land use
practices. As part of the incentive, COMACO buys any surplus crops grown by member farmers at
fair market prices. Reward schemes need not be monetary: The HKM program of the Indonesian
government rewards communities with increased security of tenure in exchange for environmental
stewardship.
Direct payment for carbon sequestration
Several programs of direct payments to land managers are implemented in tree and agroforestry
projects to sequester carbon. These incentives include paying the monetary equivalent of the
estimated amount of carbon that trees sequester. The Plan Vivo carbon payment scheme is in
effect in a number of African countries; other voluntary carbon credit schemes are funded by private
foundations. Some governments, such as the current Malawi government, pay farmers to plant
trees for sequestration of carbon. The first soil carbon payment program in Africa has recently been
established in western Kenya with Vi Agroforestry.
Chapter 1. TREE-BASED AND OTHER LAND MANAGEMENT TECHNOLOGIES FOR LANDSCAPE RESTORATION AND LIVELIHOOD IN AFRICA
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