Can Payments for Ecosystem Services Steer Sustainable Management of Forest Patches in an Agricultural Landscape? Valuing Environmental Services for PES

Nasta Babirye, Sara Namirembe and Byamukama Biryahwaho

11 t h February, 2014

Outline

1. Introduction

2. Analysis

3. Conclusions

4. PES for small tree farmers

1. Introduction

Payments for Ecosystem Services (PES): Economic incentives to land users for

continued supply of environmental services (ES)

Sufficient PES incentive levels are needed to motivate land owners

Aim To examine the practicability of PES levels to

sustain small forest owners’ implementation of PES interventions.

Analysis of PES compensation PES level by project Opportunity cost Carbon market price

Project “Developing an Experimental Methodology for Testing the Effectiveness of PES to Enhance Conservation in Productive Landscapes in Uganda”

Location Hoima and Kibaale districts, Albertine

Rift, Western Uganda.

Partners Global Environmental Facility. National Environment Management

Authority (Uganda) and local partners

kibaale

2. Analysis

a. Project PES compensation

2a. Project Compensation cont.

Project approach Private natural forest owners (PFOs)

Pays PFOs US$33ha-1yr-1

Prior to PESA. Cultivation on forest landB. Unregulated forest product harvesting

PES InterventionsA. Regulated forest product harvesting B. ReforestationC. Additional activities:

Enrichment planting Silvicultural practices

2a. Project Compensation cont.

Higher NPV/ha/yr (US$140) obtained before than under PES scheme (US$ 71 for relatively intact [RI] and US$55.2 ha-1yr-1 degraded forests).

Low compensation

Fixed payments

Affordable to ES buyers but unjustifiable to ES producers

2b. Opportunity cost

Minimum PES compensation to break even: $104.4 for RI and US$124.5/ha/yr for degraded forests, on

regulating forest product harvesting

US$122.3/ha/yr for replanting trees in cultivated forest areas.

Project compensation (US$33/ha/yr) unable to compensate smallest opportunity cost

Opportunity cost is fairer.

Compensating bare minimum opportunity cost is un realistic

Difficult to attain

2c. Market price

Carbon market price range is S$4 - 20/tCO2/yr in East Africa

Corresponding financial worth of study forests = US$20.4 - 100.4/ha/yr. (net creditable carbon benefit = 5.2 tCO2/ha/yr)

Smaller payment than project or opportunity cost compensation.

Economically acceptable

Imbalanced understanding of PES market dynamics.

Complex ecosystems, un specified and bundled ES.

Small forests to generate reasonable continuously ES units. Total worth per average forest (average forest size

is 1.15ha per land owner) = US$23.5 – 115.5/yr.

Costly to operate under individual PES contracts.

2c. Market price cont.

3. Conclusions

Project PES incentive payment provides insufficient incentives to forests owners.

Generally, PES Incentive levels (study project, minimum opportunity cost and market prices) are too low to sustain land owners’ participation.

Need for higher, realistic and fair incentive levels.

Buyers are unwilling to pay more.

PES schemes are more expensive to operate under individual PES contracts for small forest owners farmers.

5. How can PES work for small forest owners?

Group/collective contracts

Market intervention

Holistic and integrative strategies

Agricultural intensification

Diversify livelihoods

Partnering into broader government programs.

Thank you