How uncertainty and risk preferences shape participation in outcome-based forest carbon PES: A discrete choice and lottery experiment in China

Payment for Ecosystem Service (PES) schemes, particularly those involving tree-planting initiatives, are increasingly recognized for their great potential to mitigate carbon emissions and address climate change. Among them, Outcome-Based Payments (also known as results-based schemes) have gained attention for their cost-effectiveness and potential to improve environmental efficiency. This study examines farmers’ preferences towards participating in an outcome-based tree planting scheme using a discrete choice experiment conducted in Yunnan, China. We explicitly incorporate uncertainty in environmental outcomes, which in turn affects payment structures. We also elicit farmers’ risk perceptions through incentivized field lottery games and examine its influence on participation decisions and marginal willingness-to-accept (WTA). Based on a sample of 340 respondents, we find that farmers’ willingness to participate is significantly influenced by contract attributes, including the subsidy level, provision of training and technical guidance, environmental performance requirements, and the degree of uncertainty involved. Our findings further highlight the role of uncertainty and risk perceptions in shaping farmers’ decision-making processes in outcome-based PES.