structurally vulnerable households. Households with low asset holdings have, in general fewer means to cope with shocks, e.g. few liquid assets to sell to cope with an income loss.

Finally, a diversified income portfolio can be viewed as a deliberate risk management (adaptation) strategy that aims to reduce vulnerability (e.g., Fafchamps 2003).

# **2.4 The role of environmental income in rural livelihoods**

Understanding the importance of natural resources and the contribution of environmental income in rural livelihoods and economies is important to understand the welfare implications of climate change – including the coping strategies available, and also to design effective development and conservation strategies that are adapted to future climate change scenarios. For a comprehensive analysis and discussion of environmental income in rural livelihoods, using the same PEN data set as in this paper, we refer to the special issue of World Development (Wunder et al. 2014a), with articles on the overall contribution and distribution of environmental incomes (Angelsen et al. 2014), the role as a safety net and seasonal gap-filler (Wunder et al. 2014b), the role of tenure in shaping forest income (Jagger et al. 2014), the gender division of environmental income (Sunderland et al. 2014), and forest conversion and poverty (Babigumira et al. 2014). The accompanying working paper by Noack et al. (2015) also provides summary data.

The literature distinguishes between three potential functions of environmental income in rural livelihoods (Angelsen and Wunder 2003, Cavendish 2002). Environmental income can: (i) support current consumption and subsistence needs, (ii) serve as a safety net, or (iii) provide a pathway out of poverty. Many studies focus on forest income rather than the broader environmental income (i.e., including incomes from non-forest, natural habitats). These find that forest income mainly supports current consumption, such as the study by Kamanga et al. (2009) from Malawi, Nielsen et al. (2012) in the Democratic Republic of Congo, Heubach et al. (2011) in Benin and by Rayamajhi et al. (2012) in Nepal. The importance of this role is also supported in the PEN data (Angelsen et al. 2014).

Several studies also recognize that forest income may serve as a safety net in case of a negative income shock, one of the questions raised in this paper. Debela et al. (2012) provides an example from Western Uganda, where large negative shocks were associated with a higher use of forest resources in subsequent periods, particularly among the asset poor households. The work based on the PEN data by Wunder et al. (2014b) provides a nuanced view of the universality of this pattern.

Finally, and also relevant for our paper, some studies suggest that commercially valuable forest products, when they exist, might lift (asset) poor people out of poverty (Ruiz-Pérez et al. 2004, Ainembabazi et al. 2013, Duchelle et al. 2014). There are, however, many hurdles to such a scenario, as elaborated in Angelsen and Wunder (2003): high value products might be captured by the elite (the Dove hypothesis); the resources can become privatized, which also tends to exclude the poorest; high rents can lead to overexploitation and a “tragedy of the commons” (the Hardin hypothesis); or the products are domesticated, lowering the prices of wild products (the Homma hypothesis).

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