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Cost efficiency of smallholder payment for ecosystem services (PES) scheme in rural Kenya

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  • Benjamin, Emmanuel Olatunbosun
  • Sauer, Johannes

Abstract

Smallholder farmers in sub-Saharan Africa that sequestrate carbon through agroforestry provide ecosystem services that generate payment for ecosystem services (PES). When these farmers are inadequately compensated for the provision of additional ecosystem services they have no incentive to participate while over-compensation may lead to inefficient schemes. Stakeholders must consider farm-level interactions between agricultural production and ecosystem services’ provision when evaluating the adequate level of compensation and efficiency of PES scheme. We address this by measuring the marginal cost of ecosystem services based on farm level bio-economic interactions. A classification of the relationship between marketed agricultural output and non-marketed ecosystem services into complementary, supplementary or competitive is conducted. We use the flexible transformation function for our theoretical analysis and surveyed 120 smallholder farmers receiving PES for agroforestry carbon sequestration in Kenya. The results suggest that the joint production for a number of smallholder farms in Kenya may not be of a complementary nature. PES schemes could be designed in a more efficient manner if they would target smallholder farms based on the aforementioned classification by offering a range of contracts to encourage competitive bidding.

Suggested Citation

  • Benjamin, Emmanuel Olatunbosun & Sauer, Johannes, 2016. "Cost efficiency of smallholder payment for ecosystem services (PES) scheme in rural Kenya," 56th Annual Conference, Bonn, Germany, September 28-30, 2016 244865, German Association of Agricultural Economists (GEWISOLA).
  • Handle: RePEc:ags:gewi16:244865
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    References listed on IDEAS

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    1. Emmanuel O. Benjamin* & Matthias Blum, 2015. "Participation of smallholders in agroforestry agri-environmental scheme: A lesson from the rural mount Kenyan region," Journal of Developing Areas, Tennessee State University, College of Business, vol. 49(4), pages 127-143, September.
    2. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 31(3), pages 129-137.
    3. Johannes Sauer & Catherine J. Morrison Paul, 2013. "The empirical identification of heterogeneous technologies and technical change," Applied Economics, Taylor & Francis Journals, vol. 45(11), pages 1461-1479, April.
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    Keywords

    Environmental Economics and Policy; Farm Management; Land Economics/Use;

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