Quilomicrones 11

In the survey, forest owners were questioned about forestry management practices, the role of government (subsidies) and their attitudes to policies encouraging carbon sequestration. In this section, the findings of the responses are presented and discussed.

The survey shows that 4.8% of households receive a subsidy from the Government to grow their trees. The subsidy is given in the form of lower seedling prices. According to the Faustmann model (1849), this type of subsidy will help to reduce planting costs, and hence, induce a shorter rotation interval. About 73.4% of households use their own capital to invest in their forests, so lower interest rates from bank loans may not be relevant to the majority of forest households. It is likely that risk aversion prevents households from borrowing money from banks.

Harvesting decisions are 48.3% based on timber age, 28.4% on family financial status, 12.2% on timber price and the rest for other reasons. Family financial status is the second main reason to cut trees sooner than suggested by the Faustmann model. Decisions regarding tree species depend largely on the profitability of the species (48%), on family financial status (25.5%), on decisions of adjacent households (12.2%), and the rest for other reasons.

Ninety three point four percent of forest owners would delay their harvest if they were financially supported by the government with an average amount of 5.5 million VND per ha per year. The reasons for choosing that level of compensation can be explained by living costs and debt (46.2%), production costs or other

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incomes (20.6%), price and volume uncertainties (10.3%), and other reasons (22.9%). Again, family financial status plays an important role in the decision of household forest owners regarding tree cutting.

In the survey, forest owners were also asked about their willingness to participate in a pooling arrangement. Under such an arrangement, the land of several households is bundled to form a larger project size. The households must act together regarding types of dominant tree species, harvest decisions, and benefit sharing mechanisms. Besides the income from selling the timber, the participants will be given some payments for carbon sequestration. Pooling arrangement will help to reduce transactions costs significantly and can take advantage of economies of scale (Gong, Bull, & Baylis, 2010; Grieg-Gran, Porras, & Wunder, 2005).

The results show that nearly 89% of households would agree to such a carbon pooling arrangement. The reasons given are that they believe they would benefit from technical support, forest protection, and economies of scale (42.9%); have more capital to invest in their forest (5%); have environmental benefits (13.4%); and other reasons (38.7%). Regarding carbon pooling paper work, 47.3% of respondents said that a contract between households and the investor would be necessary, 21.8% needed to see more information on the rules of the project, and 31% had no ideas about procedures to establish the project. When asked if they could foresee any obstacles to a carbon pooling agreement, 22.9% of the forest owners said they saw no obstacles, 15.9% worried about catastrophic risks and price uncertainty, 8.1% were afraid of the investors going bankrupt, 4.8 % of them answered that poor households may cut trees earlier, 5.9 % gave other obstacles, and 42.4% had no ideas (whether obstacles would occur).

While illegal logging still remains a major challenge to many countries in Asia (Lawson & MacFaul, 2010) it is an issue for natural forests, not for planted forests with short rotation ages which are the focus of this research. A survey of

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households in a province with high rates of illegal logging in Vietnam shows that only 2% of the households who committed illegal logging got timber revenues from these logs, and the rest of the households did that for medicine, religious, and house building purposes (McElwee, 2004). As planted forests are not rich sources of non-timber forest products and their timber is not suitable for religious purposes, illegal logging is not a big issue in planted forests. My survey in Yen Bai province indicates that households do not have to pay for protection costs of their forests. The reasons are that timber from planted forests is of low value and heavy (hence transportation cost is a large proportion of total revenue). Therefore, people who commit illegal logging in planted forests normally live within the region. In Yen Bai province, as in many rural parts of Vietnam, people in the region know each other well, and the majority of them have planted forests. Hence, they do not steal trees from their neighbours’ planted forests. Illegal logging may be a problem with forest enterprises, however, my analyses and policy implications focus on households, not on forest enterprises (since there is no forest-level model for enterprises because their planting costs are predetermined by the Government). Therefore, illegal logging is not a potential problem to my study. To say it differently, I assumed there is no illegal logging in household planted forests.

4.2.4 Payment for carbon sequestration

To encourage forest owners to adopt the optimal rotation length when carbon sequestration has a value, payment for carbon sequestration needs to consider the preferences of the local forest owners. The survey obtained the opinions of the household forest owners with regard to carbon payment schemes. The findings of the survey with regard to two schemes, annual and upfront carbon payments, are presented next.

The two proposed carbon payment schemes, annual versus upfront payments, are weighted by the respondents, 51.7% and 48.3% respectively. For the annual payment scheme, forest farmers would be given annual carbon service payments

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from forest canopy closure or from year 4 onwards until forest harvesting. For the upfront payment scheme, forest farmers would be paid for carbon service in full at forest establishment and they would have to sign a pledge to keep their forests until they reach a certain age. The survey results show that forest owners would want an average amount of 21.4 million VND per ha per rotation from carbon benefit for them to keep their trees till age 11 years on average.

A cross tabs analysis, to understand the characteristics of forest households in the annual and upfront payment groups, shows that households who chose the annual payment belong to a low income group, are more dependent on income from planted forests, more concerned about money for their living, and less interested in a carbon pooling project. The characteristics are analysed in more details as follows.

With regard to income levels, the data show that households in the annual payment group earn less income in total compared to those of the upfront payment group. Households that chose the annual payment also use more household labour and provide more outside labour (work for other individuals or institutions) compared to households preferring the upfront payment. A majority of the respondents who belong to minority communities, which are recognized as poorer in comparison to the Kinh group, also chose annual payment.

Further, the annual payment group gets more of their income from productive forests and less income from other sources; even though they provide more outside labour. This is because the outside job of the annual payment group are low skilled, and thus, are paid less compared to the upfront group. This result follows from the fact that the level of education in the annual payment group, on average, is lower than that in the upfront payment group (7.34 and 7.95 over the scale of 12, respectively). The data imply that the annual payment households are more dependent on planted forests, and that this is likely the major reason why they selected annual payments from planted forests to secure a constant source of

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income for their living. The reasons given for harvesting decisions made by households also clearly support this hypothesis. Thirty one percent of households who preferred payment annually stated that they cut their trees because of financial reasons, i.e. lack of money for their everyday basic needs, compared to 24% in the other group.

The next characteristic of forest households who chose annual payment is that they seem to be more worried about money for living than the other group. In particular, the majority of the respondents would agree to delay harvest if they were subsidized by the Government, especially those in the annual payment group. When being asked why they were willing to delay harvesting if subsidized by the Government, 47% of the annual group related their answers to financial ability, living costs and debts, compared to 42% of the upfront payment group. Again, in the expression of households’ opinions about the carbon pooling project, the respondents who preferred the annual payment were much more concerned about capital and money (10%) than those who chose the upfront payment (4.6%).

Households in the upfront payment group seem to be more optimistic than those in the other group. This is also shown by more of the upfront payment people being willing to engage in the carbon pooling project compared to the other group. Further, when the interviewers asked if the respondents anticipated any difficulties in the implementation of the carbon pooling project, 30% of the respondents in the upfront payment group believed there would be no obstacles while only 18% of those in the other group had that belief.

In conclusion, households who preferred the annual payment seem to be poorer, more vulnerable (that is more dependent on planted forest income), and less sure about the success of the carbon pooling project. It is likely that this group of households did not choose the upfront payment with a commitment because they

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are afraid the commitment might bring inflexibility in times when they need to sell their trees for everyday basic needs or living costs.