Payment for Ecosystem Services to foster innovative agribusiness

Indonesia has been working towards improving the standard of living, promoting gender equality, eliminating hunger, and achieving food security in recent years. Despite the progresses made on increasing the quality of life, the irresponsible exploitation of natural resources, on the other hand has taken its toll on the environment leading to rapid land degradation and deforestation.

Driven by the high demand of timber for domestic consumption and the international market, more than 70 million hectares of primary forest areas have been logged in the country since the 1970s. Large areas of forest that have been transformed into industrial plantations, while smallholder farmers resort to uncontrolled slash and burn techniques to expand their farms, further contributing to the loss of forest areas. Eventually these actions have not only decreased Indonesia’s primary forest area, it has also made the country the third largest carbon emitter in the world, behind China and the United States.

One of the heavily deforested regions in the country is the province of Jambi which is located on the eastern coast of the island of Sumatra. Jambi is unique from an environmental and ecological point of view because it is home to four national parks which are rich in biodiversity. These national parks are also home to indigenous forest communities known as the Anak Dalam tribe that have dwelled and depended on the forest to sustain their livelihoods for generations.

However, the inconvenient truth enshrouding the province which has a total area size of 53,435.72 square kilometers, is the alarming rate of deforestation. Studies on deforestation trends and patterns in the region conducted by environmental organizations in the last five years indicated that at least one million hectares of primary forest area has been destroyed or transformed into farms and plantations. One study that surfaced in 2016 even indicated that forest areas the size of football fields are being cleared every day.

While the loss of primary forest areas in Jambi is a setback to environmental and conservation efforts, the underlying causes of deforestation linked to agricultural activities is a development dilemma. The agriculture sector alone contributes to 53 percent of Jambi’s provincial income and creates employment opportunities for around 45 percent of its three million inhabitants. In the case of smallholder farmers, as the need for higher yields becomes increasingly important, more forests are encroached to open up new farmlands. As the remaining primary forests in Jambi are located in areas surrounding national parks, increased farmland expansion is slowly creeping the last bastions of biodiversity in the province.

In hindsight, deforestation linked to smallholder farmers in Jambi closely resembles Garreth Hardin’s “the tragedy of the commons” theory. Actions by individual farmers in opening new lands from forest areas might not present a significant threat to the environment, however when done collectively the results can be destructive.

To avoid this “tragedy”, simply telling farmers to stop cutting down forest is not enough. Developing good agricultural practices to increase productivity without expanding the area of farmlands combined with promoting alternative sustainable livelihoods are approaches that could answer the development dilemma in Jambi. Most importantly, commodities produced by smallholder farmers that contribute to preserving the environment must be recognized by providing incentives that would decrease their need to carve out more land from the forest.

Payment for ecosystem services (PES) is the fundamental starting point of the implementation of Rikolto in Indonesia’s Green Economies programme. PES is a cost-effective means to compensate indigenous communities, landowners, and/or farmers for their environmental maintenance and provision of ecosystem services. Many smallholder farmers contribute significantly to sustainable practices without being paid for their ecosystem services. For instance, a farmer who looks after agroforestry systems on a mountain range helps to diminish the potential of natural disasters such as forest fire, landslides or soil erosion. Therefore, PES emerges as the best agricultural payment method by identifying commodity chain actors, donors, and government partners who are willing to reward these services so that positive impacts such as river system restoration, wildlife protection, and sustainable agriculture practices as well as inclusive and sustainable business can be attained.

Considering Rikolto’s long-standing presence in Indonesia, there is a crucial requirement to implement a conservation initiative to ensure the sustainable source of agricultural commodities. In collaboration with farmer organisations such as Koerintji Barokah Bersama Cooperative, Tanai Sakti Alam Kerinci (TAKTIK), Rikolto carried out the initial PES programme in Kerinci Seblat National Park in Jambi, on April 2017. Specifically, the development of a cinnamon chain in Kerinci district, and coffee chain in Kerinci and Merangin districts are priority commodity chains to ensure sustainable agriculture and inclusive business.

• Encouraging sustainable agricultural practices and intercropping;
• Strengthening farmers’ business skills through business-based farmer organisations in protected forest landscapes and watershed corridors (GAP, ICS, organisational management, marketing, business, information, network management);
• Promoting the PES model through collaboration with existing partners focusing on green economy within protected forest areas while building complementary partnerships with private sector/institutions as compensation for farmers who practice sustainable agriculture;
• Promoting access to finance schemes for smallholder farmers; and
• Supporting national commodity platforms to facilitate/mediate all commodity stakeholders to develop innovative, inclusive and profitable business model.

A business model for sustainable cinnamon farming has been put in place in 2019. The model that we call a Payment for Ecosystem Services involves TAKTIK and Tripper, and Indonesian company.

From mid-2019 to mid-2020, Tripper aims to purchase 200 tons of cinnamon from TAKTIK. To promote selective harvesting, around 42 farmers will supply cinnamon to Tripper. It is based on the assumption that one farmer will harvest half of the cinnamon garden of 1 ha. As a 'payment' for the ecosystem services provided by farmers implementing selective harvesting, Tripper will provide seeds and seedlings for intercrops to these 42 farmers.

Through this model, each party has roles as below.

TAKTIK

• Organise farmers to participate in the activities

• Provide cinnamon gardens as demonstration plots

• Provide locally-sourced organic materials to make fertilisers

• Manage data collection and Internal Control System

• Apply standards, including traceability, to supply products to Tripper

Tripper

• Provide funding for the project activities

• Provide guidance on quality standards, traceability, and data requirement

Rikolto

• Technical assistance and coaching

• Build access to information and linkage to suppliers

In 2018, we continued to promote the PES model (restoration of watershed and wildlife corridors) to various key actors, such as the Plantation Department of Kerinci and Merangin Districts, Village-Owned Enterprises (BUMDes), NGOs, FO and buyers. As a result:

• Provincial government of Jambi supported and endorsed our work in the area

• Our partner, Barokah, gave 25,000 shade tree seedlings to 250 coffee farmers. Planting shade trees around coffee trees has several benefits, including pest-control, soil improvement and water retention

• We collaborated with private sectors and local government to revive TAKTIK. Government agreed to pay the organic certification costs, while two buyers showed commitment to buy 150 tons of organic cinnamon from TAKTIK.