A5 - Welfare economic assessment of forest encroachment and ENSO effects in the face of Personal Capital and Social Capital dynamics

Abstract
A5 assesses marginal bet benefits along a rainforest conversion gradient. We upscale existing local data to the project area, close remaining data gaps, and take the dynamics of the economic system into account. The valuation methodology on ecosystem conversion is compatible with the standards set out by Balmford et al. (2002), which have to date been met only by two studies on rainforest conversion. The STORMA data synthesized by A5 will match or exceed data quality of the valuation study Yaron (2001) approved of by Balmford et al. (2002). This is the first such study on rainforest conversion to agroforestry systems.

Summary
It is a central insight of the CBD Ecosystem Approach that the successful design and implementation of ecosystem and biodiversity conservation strategies require sound knowledge on the economic implications of any contemplated conservation strategy. Actual data on the economic value of the Central Sulawesi rainforest ecosystems ? or of any tropical rainforest ecosystem for that matter ? are notoriously scarce. Since STORMA phase 2, the environmental economics project A5 seeks to develop the tools and to generate the data that are necessary to assess the non-market costs and benefits associated with land use change and the implementation of conservation or development strategies at the Central Sulawesi rainforest margin. A5 results from the second phase indicate that (i) the developed ecosystem services approach can be applied successfully in the project region in spite of unfamiliarity of respondents with the scientific technicalities of ecosystem functioning, (ii) materially and statistically significant WTP for several indirect use and non-use ecosystem services exists, (iii) validity tests with attitudinal and socioeconomic variables support the validity of the WTP results, (iv) preferences for environmental goods are differentially impacted by poverty, farm production requirements, as well as threat and coping appraisal of the individual households.

In the third phase, A5 will upscale and extended the results of the second phase on nonmarket values using supplemented choice experiments to close essential data gaps. Based on these non-market valuation data, the census and panel data generated by A1 and A4, the qualitative insights of A1 and A2, as well as based on the scientific results from the focus 2 and 3 experiments and observations, A5 will achieve a calculation of marginal economic net benefits of land use change along forest conversion and agroforestry intensification paths observed in the project area (see, economics objective of focus 2). Prompted by the medium-term nature of the investigation of ENSO drought effects driven by global climate change (focus 3), the analysis will account for social and personal capital dynamics. In particular, we will focus on quantifying adoption scenarios of various social and technological inventions regarding natural resource use (e.g., rattan) and cacao agroforestry.

An essential component of the dynamic net benefit calculations is the development of a land use decision-making model with a small number of stylised household types that (i) suffice to model the prevalent forms of forest conversion in consecutive intensification steps economically (forest without direct use 􀁯 forest with rattan and timber extraction 􀁯 extensive cocoa agroforestry 􀁯 intensified cocoa agroforestry 􀁯 ?sun cocoa? plantations), and (ii) that can accommodate culturally differing adaptation of several innovations. Although strict prognosis is obviously impossible, an extrapolation of observed trends and processes of social and personal capital dynamics is likely to improve the utility of marginal economic net benefit data for design and assessment of conservation and development scenarios, and promises to yield more realistic valuation results in the face of the more long-term analytic requirements regarding ENSO droughts.