Mitigating Trade-offs between Economic and Ecological Functions and Services through Certification

Apl. Prof. Dr. Jann Lay
2016 - 2019
German Research Foundation (DFG), part of CRC 990 (project C04)
Cooperation partners

Prof. Dr. Stephan Klasen, Chair of Development Economics, University of Göttingen, Germany



Research Questions

The key aim of the project is to evaluate the possible contribution of palm oil certification to mitigating the trade-offs between production and income, on the one hand, and, ecological functions, on the other. We plan to focus on a certification scheme that is currently implemented by the Indonesian government, the so-called ISPO (Indonesian Sustainable Palm Oil) certification standard. This standard has become mandatory for plantations as of 2014 and will also be mandatory for smallholders by 2020.

Contribution to International Research

One important way to influence smallholders’ and other agents’ production decisions, especially their management practices, to achieve win-win situations is through certification initiatives. Such initiatives set standards of land use, production processes, and input use that limit damage to ecosystem function and services. In return, certification can provide an income premium for farmers, typically through a price premium.

Research Design and Methods

The impact evaluation will start with a qualitative assessment on the precise modalities of the scheme both de jure and in terms of the de facto implementation in Jambi. This will also include a comparison with other standards, in particular those of the RSPO (Roundtable for Sustainable Palm Oil), an international and more ambitious (and more costly) certification scheme that is also being implemented by some producers in Jambi. Based on the first assessment of the ISPO and RSPO modalities, we will again combine household survey data and ecological information to compare socio-economic and ecological outcomes under different regimes (certified under ISPO (RSPO), non-certified). To minimise bias in the impact estimation due to unobservable characteristics, we propose a pipeline and matched double-difference approach with binary and continuous treatment. We intend to include a randomised phase-in by villages or groups of farmers subject to practical feasibility.

Preliminary Results

We have conducted a baseline survey among oil palm smallholders in Jambi covering RSPO-certified and non-certified farmers in 2017. Preliminary evidence suggests that RSPO-certification of smallholders may not have huge impacts. Among the smallholder famers who are members in a RSPO certified cooperative, about 45 percent are not aware of this certification. If farmers do not even know that they are offering a different product, it is unlikely that there are differences in farm or plot level outcomes. There seem to be selection effects: Certified smallholders have higher educational attainments, more experience and larger land holdings; in the baseline data, however, RSPO farmers do not exhibit higher yields or price premiums.

Research Team

Research Programme