Designing payments for ecosystem services
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Transcript of Designing payments for ecosystem services
Ecosystem Functions
“The capacity of natural processes and
components to provide goods and services that satisfy human needs, directly or
indirectly”(de Groot, 1992)
Ecosystem Services
• Food
• Fiber
• Genetic Resources
• Bio-chemicals,
Natural Medicines
and
PharmaceuticalsProvisioning services
Ecosystem Services
• Air Quality
Regulation
• Climate
Regulation
• Water Regulation
• Erosion
Regulation
• Water Purification
and Waste
Treatment
Regulating services
Ecosystem Services
• Cultural Diversity
• Spiritual And
Religious Values
• Knowledge
Systems
• Educational
Values
• Inspiration
• Aesthetic Values
• Social Relations
Cultural services
Ecosystem Services
• Soil Formation
• Photosynthesis
• Primary
Production
• Nutrient Recycling
• Water Cycling
Supporting services
“I believe that the great part of the miseries of mankind are brought upon them by false estimates they have made of the value of things.”
Benjamin Franklin, 1706-1790
of the environmental services are being degraded faster than they can recover*
*Millennium Ecosystem Assessment. 2005
Economic value of ecosystems
Direct values Outputs that can
be consumed directly, such as fish, medicines,
wild foods, recreation, etc.
Indirect values
Ecological services,
such as catchment
protection, flood control,
carbon sequestration,
climatic control, etc.
Option values
The premium placed on
maintaining resources
and landscapes for
future possible direct
and indirect uses, some
of which may not be
known now.
Existence values
The intrinsic value of
resources and landscapes,
irrespective of its use such
as cultural, aesthetic,
bequest significance, etc.
Non useUse
Total economic value of ecosystems
Environment ValuationEconomic techniques Non-economic techniques
Market price approaches
Market cost approaches
Replacement costs approaches
Damage cost avoided approaches
Production function approaches
Revealed preference methods
Travel cost method
Hedonic pricing method
Stated preference methods
Choice modelling
Contingent valuation
Participatory approaches to valuation
Deliberative valuation
Mediated modelling
Benefits transfer
Consultative methods:
Questionnaires
In-depth interviews
Deliberative and participatory approaches:
Focus groups, in-depth groups
Citizen juries
Health-based valuation approaches
Q-methodology
Delphi surveys
Rapid rural appraisal
Participatory rural appraisal
Participatory action research
Methods for reviewing information:
Systematic reviews
Market-based Approaches
Market-price approaches
Utilise directly observed prices and / or costs from actual markets related to the provision of an environmental good or services as a representative to the value of that environmental good or service
South Africa, market-price approaches based on resource use
patterns and trading prices and tourism revenues have been used
in estimating the direct use values of biodiversity in terms of
consumptive use
Market-Costs Approaches
The Replacement Cost Method
Uses the costs of replacing an environmental service as a representative to the value of that service
Has been used within a number of developing countries to value the cost of soil erosion, including in Sleman, Java (Moller, A. & Ranke, U., 2006), and in Sri Lanka (Gunatilake, H. M. & Vieth, G. R., 2000)
Market-Costs Approaches
The damage cost avoided approach
Uses the costs associated with mitigation of environmental damage was the representative to value
• Used to value the storm protection services delivered by mangroves forest in Thailand in terms of the reduction in expected future storm damage (barbier, E. B., 2007)
• The value of rodent pest control in Tanzania (Skonhoft, A. et al., 2006)
Market-Costs Approaches
The opportunity costs approach
• Assessing the opportunity cost of land preservation in landscapes that are changing from natural habitats towards agriculture in Paraguay - Naidoo and Adamowicz (2006)
Revealed Preference methods
Travel Cost Method
• Uses data on people’s actual behavior in real markets that are related to the environmental good in question; rather than their conjectured behavior in hypothetical markets
The method has been used to estimate the recreational value associated with particular aspects of biodiversity in developing countries
Revealed Preference methods
Hedonic Pricing Method
• The value of a non-market, environmental good is revealed through observations of the demand for a related complementary marketed good
• In Windhoek, Namibia, this method was applied to find meaningful relationships between biodiversity and house prices.
• The analysis indicated that close proximity to the Goreangabreserve raised house prices by $1980 US dollars (Humavindu, M. N. & Stage, J., 2003).
Stated Preference Methods
The contingent valuation method (CVM)
• Estimates economic values by constructing a hypothetical market and asking survey respondents to directly report their willingness to pay (WTP) to obtain a specified good, or willingness to accept (WTA) to give up a good
The CVM method has been widely used for valuing biodiversity benefits around the world (Nunes, P. & Van Den Bergh, J., 2001)
$ 3.7trillion
of climate-induced damage could be avoided
By halving deforestation rates by 2030
Source: www.fao.org/nr/sustainability/ecosystem-services
The PES ConceptPayments for Ecosystem Services
• The environment provides critically important services• Some of these are captured by markets, but many are not• They are positive externalities that are therefore regarded
by the beneficiaries as free• As a result, many ecosystem services tend to be both
under-conserved and undervalued• Payments for ecosystem services (PES) seek to “get the
incentives right” by capturing the positive externalities, by providing accurate signals to both service providers and users that reflect the real social benefits that ecosystem services deliver.
“Voluntary transactions where a service
provider is paid by or on behalf of service beneficiaries for land, coastal, or marine management practices that are expected to result in continued or improved
service provision”
Payments for Ecosystem Services
(Wunder 2005)
Idea:• Those who provide ES get paid for doing so
(service provider gets)• Those who benefit from ES pay for provision
(service user pays)
PES are popular for perceived simplicity and cost-effectivenessPES = new paradigm for contractual conservation
What are Payments for Environmental Services?
• Voluntary agreements …• Between buyers and sellers of ecosystem
services …• For cash or other rewards …
creating markets for ecosystem services…• Which provide incentives and finance to land
and resource managers …• Thereby strengthening conservation and
livelihoods
Key PES Design Questions
• What is the service being provided?- Can landscape management efficiently provide the service?
• Who provides the service and who benefits?- Are there discrete groups of providers and beneficiaries?
• What level of service is needed?- Can this be adequately monitored?
• What is the most effective payment mechanism?- Direct payment, mitigation and offsets, or certification?
• Are the supporting institutions adequate?
PES as a response to market failures
• The market fails to: o reward on-site ecosystem service providers, or to
compensate them for their costs (e.g. changing land use)
o charge off-site users for the benefits they enjoy (e.g. clean water)
• PES create a market for natural resources making conservation a more profitable land-use proposition
Potential buyers
Government bodies
Depending on the ecosystem service, there is a wide range of potential buyers….
• This might include government payments to landowners for the services of water quality (local government)
• Flood control (regional government)
• Carbon sequestration and biodiversity conservation (national government)
Potential buyers
Corporations
• A Hydroelectric company may be willing to pay upper watershed landowners to keep their forests intact in order to maintain the service of erosion control (so the lake behind the dam does not silt up)
• Similarly, ecotourism operators may pay a local community to ensure conservation of attractive biodiversity in the surrounding areas.
Potential buyers
Consumers
• A category of consumers may wish to direct its purchases toward companies and products that act in what they view as an environmentally responsible manner
Payments are made to land owners willing to change their land use so that it provides greater services
The goal here is to maintain the status quo
Potential sellers
Two Categories
Sellers who are paid for change
Those whocurrently provide services
The range of PES mechanisms
• Direct Paymentsgeneral subsidy (The Chinese PES scheme, the Sloping Land Conversion Program)
scored subsidy (The Conservation Reserve Program in the US)
reverse auction (BushTender program in Australia)
negotiation (Perrier Vittel in France)
• Mitigation and Offset Paymentsclean development mechanismwetlands mitigation banking (US)
biodiversity offsets• Certification
eco-labelsforestry certification
Payment Type
In a PES watershed project in Los Negros, Bolivia, the payments are not in cash.
The participating communities are
paid with BEE BOXES, technical
training and barbed wire
Key Challenges
Information: There is too little information on PES and that which does exist is often too generic to be of much use to policy makers.Technical barriers: There are too few people with the appropriate skills and knowledge to design and implement effective PES projects and programs.Policy and regulation: Generally legal and policy frameworks for environmental and resource management are fragmented, outdated and often lack cohesion. Institutional barriers: In addition to the limited human skills and fragmented legal and policy frameworks, there are insufficient organizations, such as financial intermediaries, certification bodies, national registries etc. to support the development of PES in the region.
• A promising tool, with regional differences (PES mainly in S. America, emerging in SEA and Africa)
• Should practice in Sri Lanka• But, effectiveness difficult to assess because
Many schemes still too recentInsufficient baseline data (no control area)Few analyses based on solid monitoring and
evaluation methods• Performance payments (PES) = key for REDD , but
upfront conditions needed• To address Decision makers, PES = promising, but not
sufficient >>> need government investments & extra-sectoral transfers
Suggestions
POLICY MAKERS CAN,
* Create economic incentives that encourage PES schemes, including environmentaltaxes and subsidies, transferable discharge permits and environmental labeling.* Develop specific PES projects with farmers, foresters and/or fisher folks in theirregion, or their watershed.* Provide incentives for the private sector to engage in PES schemes
CONSUMERS CAN
* Encourage the involvement of local and national governments in PES programs.* Convince their community to initiate PES schemes.* Choose, where possible, food products coming from producers involved in PES schemes
References• Salzman, James. (2012) A policy maker’s guide To designing payments For ecosystem
services, Duke University United States
• FAO. (2012) Payments for ecosystem services, Available at www.fao.org/
nr/sustainability/ecosystem-services (0116hr 01.09.2015)
• Ministry of Environment & Renewable Energy. (2013) Annual report
• Dunn, Helen. (2011) Payments for Ecosystem Services, The department for environment,
food and rural affairs
• Forest Stewardship Council. 2009. http://www.fscus.org/
• Aththanayake, W.K.A.M.D.S. (2014) Payment for Ecosystem Services (PES) for Kandyan
Forest Garden Conservation, Post Graduate Institute of Agriculture, University of
Peradeniya
• Cross, Catherine. (2012) Economic valuation and Payment for Ecosystem Services, IUCN
• Christie, Mike. (2012) Approaches to Valuing Ecosystem Services in Developing Countries,
Institute of Biological, Environmental and Rural Sciences, Aberystwyth University, Wales
• Forest Trends. 2006. Developing Future Ecosystem Service Payments in China: Lessons
Learned from International Experience. Washington, D.C.
• Costanza et al. 1997. The value of the world's ecosystem services and natural capital. Nature
387:253-260.