Sven Wunder
CIFOR
What scope for future application
of conservation auctions?
Own biases
- PES partisan, not tender background
- LDC rather developed country experience
- Selected topics in 2nd round synthesis
What are we talking about?
• Mechanism for allocating PES (or PES-like) contracts
(Uwe) – “no PES, no auctions!” – i.e. a niche tool!
• Designed to increase (…not necessarily “maximize”!)
cost efficiency through competition
• From “games” to “simulated markets“ (monopsonies)
in principal-agent setup – but not always gov’t buyers
• Should help in: “Getting the right landowners to
participate in PES at a not-too-high price”
• Evaluating env impact success of allocation (auction
or not) will depend much also on action contract (PES)
Drivers (& killers) of auctions
1. Budget scarcity (vs. abundance)
=> lots of money, no cost efficiency incentives
…EU budget crisis to play in favour of auctions?
2. Liberal ideology (vs. market skepticism, socialism)
=> political cycles determine “auction waves”
…and current winds may blow against “markets”
3. Env. concern dominates (vs. secondary to:
- ES provider poverty alleviation
- buying landholder votes
- promoting regional development
- provide farmers income support to mock WTO
=> if main objectives depend on putting rents in
farmer pockets, then auctions make little sense!
Drivers (& killers) of auctions
(cont’d)
4. Relative homogeneity of ES/ proxies (vs.
unique ES bundles) – easier for carbon mitigation
than for watershed protection
=> Need comparable ES / mgt proxy units for
market-simulated competition to make sense
Environmental efficiency vs. fairness
• Tinbergen (John + Peter): cannot achieve both with
one single tool (= auction-based PES) – do not
overload objective function, stay with env. goals!
• …but often sine qua non implementation constraint–
not only for auction, but also for subsequent PES
contracts (non-compliance, leakage, crowding out,
perverse incentives…)!
• Fairness is subjective, multi-dimensional (participants
price, compliance) varies cross-culturally – more so
in context-diverse LDCs (ex: cheating).
=> All auctions (and all PES) need to adequately
address short-term efficiency vs. fairness tradeoffs
Allocation of contracts in space
Δ EBI (i)
Targeting
cost (i)
Auctions
Maximize cost-efficient
ES provision of plot (i)
• Three dimensions (Wünscher et al. 2008):
1) Service levels (“EBI”)
2) Leverage for change -- threat, opp. (“Δ”)
3) Costs
=> From costs to additionality: when could auction
allocation positively affect effectiveness (1+2) (Kelsey),
or perhaps rather harm it (Peter)?
Variable leverage/ threats in space
Variable leverage/ threats in space
⇒ Adverse selection bias
particular to conservation PES
Of 1000 forest plots, only 3 vanish (0.3%)
=> Targeting/ cost framing prior to auction?
Typically ES come unequally in space!
=> Get high-priority areas conserved “no
matter what” (Jason) – buy out,Locatelli,
PA, PES
Imbach &
=> Maybe auctions apply best to the
larger
Wunder
residual of medium-sized EBI (2013)
plots?
Design for efficient PES:
1. Target on high-service areas
2. Target threat/ leverage areas
3. Pay acc. to customized cost levels
4. Strengthen conditionality (rules,
monitoring, sanctions)
-
If variability in 1+2 > 3, then targeting
impacts efficiency more than auctions
-
Do auctions affect outcomes of 1,2, and 4?
How to sell the auctions concept?
• Often ideologically perceived exclusively as a
neoliberal tool to squeeze landowner rents
• Can alternatively be seen as adaptive-collaborative
tool – especially if PES contracts are negotiated tool
– help aligning allocations equitably to costs (Tobias)
• Participation in markets is a way of cooperation
between actors that promotes equity (Henrich et al
2010, Science)
=> Breakdown of negative image of auctions can
reduce more irrational fears
Scaling up auction-based PES?
• Auctions need min. size for competition to work
• Few of us believed in large national-level auctions…
• …yet we have US-CRP ex (Dan). Preconditions:
a) lots of EBI info for overlay
b) plot-specific bid caps
= “competition within narrow confines”, rather than
unleashing markets’ powerful invisible hand!
=> Auctions are hard sell to national policy makers,
for political side-objectives and lack of admin ease…
Sum up: how much auctions in 10 years?
• My biggest workshop surprise: even auction
partisans half-to-full skeptics on large-scale uptake
• Relevant to a subset of PES cases: a niche market
• Probably few national ones: too complex, recipients
unpredictable => political objections
• Strategic demonstration of cost-efficiency (John)
• Strong information gathering tool, especially in
info-poor, variability-rich LDCs, to inform subsequent
price & contract discrimination (Kelsey)
=> Perhaps strongest potential for auctions as pilots
for explicit information gathering?