Behavioral Responses to Carbon Credit Timing and Risk: A Field Experiment with Cashew Farmers

Smallholder farmers’ adoption of long-term, sustainable land-use practices often lags behind their potential benefits. Agroforestry—integrating trees into existing crop systems—offers both local and global advantages, including improved soil fertility, enhanced microclimatic regulation, and increased carbon sequestration. Yet, despite these gains, many farmers underinvest in agroforestry due to behavioral constraints that shape intertemporal decision-making. In particular, present bias (the tendency to overvalue immediate rewards) and risk aversion (the preference for certain over uncertain outcomes) are thought to inhibit investment in practices whose payoffs accrue over long horizons. The importance of understanding these behavioral mechanisms is growing as carbon credit initiatives start to emerge across West Africa, where governments, NGOs, and private actors are experimenting with payment-for-ecosystem-service schemes targeting smallholders. These emerging markets create new opportunities for farmers to benefit financially from sustainable land-use practices, but their success depends critically on how farmers perceive and respond to the timing and uncertainty of carbon-related rewards. This research investigates how the structural features of hypothetical carbon payment schemes influence smallholder farmers’ investment decisions in agroforestry systems. The central objective is to disentangle the relative effects of impatience (present bias) and risk attitudes on the adoption of long-term, environmentally beneficial land-use practices. By doing so, the study aims to provide empirically grounded guidance for the design of carbon payment mechanisms that are both behaviorally sensitive and cost-effective. The study employs a behavioral framed field experiment conducted among Ghanaian cashew farmers—a sector and region where integrating timber trees represents a viable and sustainable land-use strategy. Participants take part in an incentivized decision-making game simulating a virtual farm of 25 trees. In each round, farmers decide how many trees to allocate to cashew (offering immediate, certain returns) versus timber (offering delayed benefits through productivity gains and potential “carbon bonus” payments). Farmers are randomly assigned to one of four experimental treatments, varying the timing (immediate vs. delayed) and certainty (guaranteed vs. probabilistic) of the carbon-related payments. This factorial design enables causal identification of how present bias and risk aversion jointly shape investment behavior in a realistic agricultural context. Complementary survey data on demographics, time preferences, and perceptions of climate risk will provide additional explanatory depth. The findings will offer novel, behaviorally grounded evidence on how farmers respond to alternative incentive structures in carbon payment programs. The results are expected to advance theoretical understanding of how intertemporal and probabilistic preferences interact in shaping sustainable investment choices under real-world constraints of liquidity and uncertainty. Beyond academic contributions to the fields of behavioral development economics and environmental policy, the study will generate actionable insights for policymakers, NGOs, and carbon market actors designing payment-for-ecosystem-service schemes targeting smallholders. By linking behavioral economic theory with applied field experimentation, this research seeks to illuminate how incentive timing and uncertainty affect the willingness of smallholder farmers to adopt climate-beneficial practices. Ultimately, the project contributes to the broader goal of aligning individual decision-making with collective climate objectives through better-designed, behaviorally informed carbon payment systems.