C06 - Acceptance and policing costs of ISPO and RSPO certification for oil palm farmers in Indonesia under consideration of uncertainty

In the first phase, subproject (SP) C06 was mainly concerned with two work packages (WP). In the first WP, we were comparing experimentally measured risk attitudes with the risk behaviour in real-life production decisions. This is important for analysing the relationship of Indonesian small-scale farmers` risk attitudes with production and investment decisions. Moreover, it is necessary to test for the external validity of results from economic experiments. In the second WP, we experimentally tested farmers` reactions towards differently designed incentives for reducing fertilizer intensity. This allows for investigating the efficiency, effectiveness, and sustainability of such incentives in an ex-ante policy impact analysis. The advantage of an ex-ante policy impact analysis is that it allows for testing policy measures at low costs before the resources for the policy measures are spent. Therefore, the second WP is a valuable contribution for improving policy measures towards environmental protection.
In the second phase, we want to continue in these research directions. Concerning the first WP, in the literature, there is evidence that the risk attitude is biased if it is measured independently from time preferences. We will deepen the research about farmers` risk attitudes and complement it with an analysis of farmers` time preferences. Therefore, we will experimentally measure participants` time preferences. In this way, we gain a promising database which allows us to separately analyse the determinants of participants` risk attitudes and their time preferences. Moreover, we can test whether a participant`s risk attitude is time stable and investigate a possible relationship between risk attitude and time preference. This knowledge enables a deeper understanding on production and investment decisions of Indonesian farmers in Jambi Province.
For the second WP, we focus on an ex-ante evaluation of the policy measure "Indonesian sustainable palm oil (ISPO) certificate" for oil palm plantations introduced by the Indonesian government to support environmental services. This certificate will be mandatory also for small-scale farmers by 2020. Moreover, the "Roundtable on Sustainable Palm Oil (RSPO) certificate" is from a non-profit association trying to develop global standards for sustainable palm oil production. These certificates are a chance to realize a price premium on the one hand and constrain climate and environmental issues caused through palm oil production on the other hand. It is necessary to ex-ante evaluate possible impacts of the ISPO and RSPO on farmers` production and investment decisions to fully understand ecological and economic trade-offs and consequences. These analyses are closely coordinated with C04 Klasen/Lay, which investigates possible contributions to economic and ecological services of these certificates. Since we have been successful in the conduction of a business simulation game (BSG) for the ex-ante policy impact analysis of policy measures in the first phase of the CRC, we are confident that this will be again an excellent method for conducting the aforementioned analyses in the second phase. To develop a realistic framing for this BSG, we will intensively include findings from other SPs of the A, B, and C groups (e.g. A04 Kuzyakov , A05 Veldkamp/Corre , B09 Tscharntke/Grass , B11 Hölscher/Kreft/Wollni , C07 Qaim).