Farmers’ willingness to accept payments for ecosystem services on agricultural land: The case of climate-smart agroforestry in Ethiopia

Abstract

This study examines smallholder farmers’ preferences for the uptake of contractual climate-smart agroforestry, which yields economic and ecosystem benefits. A discrete choice experiment was conducted with smallholder farmers in Ethiopia to elicit their willingness to participate in a payment for ecosystem services (PES) scheme that incentivizes integrating faidherbia albida (a fertilizer tree) in their mono-cropping farming system. Attributes evaluated are “number of planted trees”, “payment amount”, “payment type”, and “contract period”. The presence of heterogeneity in the choice behavior of farmers warrants the use of the generalized multinomial logit and latent class conditional logit models to allow for farmer- and class-specific preferences, respectively. The results show that farmers derive higher utility from up-front payments. Farmers also strongly prefer food as the mode of payment than cash. Moreover, low numbers of mandatory planted trees and short-term contracts are found to be essential attributes that positively affect farmers’ decisions to take-up a contractual arrangement to grow trees on their agricultural land. Our analysis also shows the presence of heterogeneity in preferences across segments of farmers in conjunction with differences in household characteristics. These findings shed light on the considerations that must be accounted for when designing and implementing environmental policies such as PES schemes that promote large-scale adoption of climate-smart agroforestry, which would transform smallholder agriculture into a sustainable farming system.