ECONOMIC VALUATION AND PAYMENT FOR ECOSYSTEM SERVICES (PES) IN SMALLHOLDER FARMERS: A CASE STUDY IN THE BATANG TORU FOREST, NORTH SUMATRA

Hamid Arrum, Harahap (2025) ECONOMIC VALUATION AND PAYMENT FOR ECOSYSTEM SERVICES (PES) IN SMALLHOLDER FARMERS: A CASE STUDY IN THE BATANG TORU FOREST, NORTH SUMATRA. S3 thesis, Universitas Andalas.

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Abstract

Hamid Arrum Harahap. Economic Valuation and Payment For Ecosystem Services (PES) In Smallholder Farmers, A Case Study In The Batang Toru Forest, North Sumatra. Supervised by Yonariza, Endrizal Ridwan, and Yuerlita. The Batang Toru forest in North Sumatra plays a crucial role in providing ecosystem services (ES) that support the livelihoods of smallholder farmers. However, these services are often undervalued, leading to inadequate investment in conservation and land management. This study evaluates the economic value of ES in the Batang Toru forest, examines smallholder farmers' perspectives on Payment for Ecosystem Services (PES), and explores Indigenous Payment for Ecosystem Services (IPES) as a sustainable conservation strategy. The research involved 125 household surveys and 30 workshop participants across five villages in the Batang Toru forest area, incorporating both quantitative economic valuation and qualitative assessments of local perspectives. The study applied the Total Economic Value (TEV) framework to estimate the economic contributions of provisioning and regulating services. The findings indicate that the Batang Toru forest generates an annual TEV of IDR 11,775,167,000 at the household level, highlighting its significant role in sustaining local economies and environmental stability. However, it is important to note that this TEV does not capture or fully reflect the entire value of the ecosystem. The estimate is limited to household-level economic benefits and does not account for broader ecological, cultural, or supporting services that contribute to the overall ecosystem’s functionality. The study revealed that monoculture farming reduces regulating services such as water retention, soil fertility, and pest control, whereas agroforestry systems enhance these services and contribute to long-term sustainability. Farmers' willingness to pay (WTP) for conservation efforts varied, with collective group-based schemes demonstrating higher participation rates and greater financial commitment than individual contributions. Socioeconomic factors, such as education level, age, and frequency visit to forest, were found to influence WTP dynamics. A key contribution of this research is the introduction of Indigenous PES (IPES), which recognizes traditional ecological governance and resource-sharing practices among local communities. The key recommendations from this study include: Promoting agroforestry as a sustainable agricultural practice to optimize regulating services and mitigate the environmental risks posed by monoculture farming, Strengthening community-based PES frameworks to enhance financial sustainability and incentivize long-term farmer participation in conservation programs, and Integrating IPES into mainstream PES policies to acknowledge the role of traditional ecological knowledge, ensuring culturally inclusive conservation strategies and improving community-led forest governance. This study contributes to the ongoing discourse on ecosystem service valuation, PES implementation, and indigenous knowledge systems, offering insights into sustainable conservation practices and economic incentives for smallholder farmers in tropical forest landscapes.

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