Economics, Markets and Incentives for Livelihoods and Landscapes

“Landscapes do not exist in a vacuum, but are influenced by a wide range of external factors including policies and economic conditions generated far outside it…”

Businesses operate in the realm of markets, and this week the Sustainable Food Lab brings together many of these market actors to discuss sustainability within their supply chains. However, there is also the question of how markets can benefits small-scale producers and local communities. As part of the International Union for the Conservation of Nature (IUCN) Livelihoods and Landscapes Strategy (LLS), a paper was recently produced on Rethinking Economics, Markets and Incentives: Using Economic Tools at the Landscape Level. This cross-cutting theme of markets and incentives in the LLS project sought to examine approaches that would support both sustainable landscape management and income and livelihood security among the rural poor.

Economic forces and factors are powerful drivers of landscape and livelihood degradation – widespread poverty, unsustainable land and resource use, etc. But there is still considerable potential to use economic and financial tools to strengthen locally-controlled sustainable landscape management.

In one site that the IUCN is implementing the Livelihoods and Landscapes Strategy, Lachuá, Guatemala, farmers are benefiting from participatory approaches to natural resources management. Local landholders were resorting to agricultural and forestry practices that degraded the land, because they could not access the markets or other economic opportunities to allow them to shift to more sustainable practices. The project helped to diversify the community’s income sources – such as cardamom agroforestry, beekeeping, handicrafts, rice cultivation, ecotourism, and use of non-timber forest products – while also working to create a platform through which to collaborate with private sector and cooperation agencies, to develop the steps to allow the value chain that increase the value of those sustainable livelihood alternatives.

The case of Mount Elgon in Uganda, however, demonstrates how developing markets for products and services are not always enough to encourage sustainable management. In this situation, legal and governance reforms allowed for collaborative resource management agreements for resource use inside the national park, and local by-laws for governing land-use right outside of the forest, were of particular importance. Reducing Emissions from Deforestation and Forest Degradation (REDD+) might be a source of income, in the form of a payment for an environmental service (climate mitigation), for both these sites in the future.

These cases, among others, informed the following Key Findings and Lessons:

• Forest livelihoods and landscapes are undervalued in decision making, and economic analyses need to account for both the local-level and ecosystem benefits as well as the commercial revenues.
• Markets and prices don’t reflect the true value of sustainable forest management.
• Economic policies and instruments tend to favor environmentally destructive activities within landscapes. The report suggests removing subsidies, unfair taxes, and perverse incentives to encourage local market pariticipation.
• In addition to market solutions, rights, responsibilities, and information are needed for producers, consumers, and investors to fully participate and benefit from market incentives.

The IUCN report notes that a ‘landscape approach’ to markets and economic incentives requires a much more inclusive approach to recognizing, counting and capturing values within a landscape. In order to do this what else needs to change? How can markets and incentive change to support landscape approaches?

Read More:
Emerton, L. 2012. Rethinking economics, markets and incentives: Using economic tools at the landscape level. Gland: IUCN.