Mourato and Smith (2002) estimated the environmental benefits and finan-
cial costs of adopting agroforestry systems for slash-and-burn farmers in the
Peruvian Amazon.
Satellite images from 1993 show that 70 percent of the study area in the
Peruvian Amazon (the District of Campo Verde) was deforested (Fujisaka
1996). Multistrata agroforestry combines crops with useful tree species that
mimic natural succession (Nair 1993). Thus, by reducing deforestation and
encouraging tree planting, agroforestry systems could generate significant ben-
efits locally and even globally: timber and nontimber forest products; increases
in soil fertility, watershed protection, and local climate regulation; provision
of carbon sequestration services and biodiversity protection; and existence and
bequest values.
Data from the Peruvian Amazon show that under controlled experimental
conditions, slash-and-burn agriculture gives a net present value of –$2,176 per
hectare over a time horizon of 10 years (Labarta 1996). By contrast, for the
same time horizon, multistrata agroforestry gives a net present value of $1,137
per hectare at a discount rate of 25 percent, considered to be appropriate for
smallholders (Cuesta et al. 1997). However, only about a fifth of the local
farmers practice agroforestry in a small area (0.5 ha on average) of their farms
(around 30 ha on average). Farmers pointed out that this was because only
returns in the first few years were relevant for their decision making. Adjust-
ing the data to a time horizon of 2 years and lowering yields for annual and
semiperennial crops in agroforestry to reflect agronomic conditions in farm-
ers’ fields show that agroforestry gives lower returns than slash-and-burn
(Table 4.3). In addition to these financial considerations, other studies have
shown that seasonal labor constraints, market risk, lack of technical knowledge
about trees, and abundance of natural forest products also impede the adop-
tion of agroforestry (Current et al. 1985).
These results show that farmers are unlikely to change environmentally
damaging agricultural practices without external incentives. In this context,
Mourato and Smith (2002) used the contingent valuation method to elicit the
compensation required by Peruvian farmers to switch from slash-and-burn
agriculture to agroforestry. A questionnaire was administered to 214 farmers,
presenting them with a possible future project in which utility companies in
developed countries, driven by the possibility of emission reduction legisla-
tion, were willing to compensate farmers who adopted multistrata agroforestry
systems. A fixed annual payment would be made for each hectare of agro-
forestry (payments would cease if the agroforestry area was cleared for slash-
and-burn). Farmers were then asked for their minimum annual WTA com-
pensation to convert 1 ha of land from slash-and-burn agriculture to
multistrata agroforestry, taking into consideration the potential financial
impacts of the proposed land use change in terms of investment, labor, yields,
and available products. Results show that the average compensation requested
- The Economic Valuation of Agroforestry’s Environmental Services 81