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Markets for Ecosystem Services: An examination of alternative Payment for Ecosystem Services (PES) structures for Mui Ca Mau National Park . Linus Hasselström Enveco Ltd. 2013-10-15, Hanoi . Key questions. Why do we want markets? What is the role of policy?

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Linus hasselstr m enveco ltd

Markets for Ecosystem Services: An examination of alternative Payment for Ecosystem Services (PES) structures for MuiCa Mau National Park

Linus Hasselström

Enveco Ltd.

2013-10-15, Hanoi


Key questions

Key questions

Why do we want markets?

What is the role of policy?

What are the necessary preconditions?

What is the potential for markets in Mui Ca Mau?

What could be some promising options for wetland PES in Vietnam?


Linus hasselstr m enveco ltd

FORES 2012 Report

  • Reportfocuses on howtoexpand the use of markets

  • Published in June 2012

  • Was basis for a 90 minute roundtable discussion at the UNCSD (Rio+20) Conference

Scott Cole

[email protected]

+46702532883

www.eesweden.com

Linus Hasselström

[email protected]

+46704987820

www.enveco.se

Fanny Engkvist

[email protected]

+46701482835

www.fores.se

Tore Söderqvist

[email protected]

+46704937473

www.enveco.se


Linus hasselstr m enveco ltd

OUR PROJECT:

Piloting a model on payment for coastal wetland ecosystems of the Mui Ca Mau National Park in the context of climate change and contribute to reducing poverty for local community

PARTNERS:

BCA

ISPONRE

MONRE

FORWET

FORES

EnviroEconomics Sweden

(Enveco subcontracted by EES)

Daxam


Linus hasselstr m enveco ltd

Markets – whatarethey?

Transactionsbetweenbuyers & sellersthat benefit both

Twokeyfeatures:

Voluntary

Alignsincentives


Linus hasselstr m enveco ltd

  • Habitat/Conservation Banking in California (Madsen et al 2010)

    • BUYER: Developer that must compensate for environmental injuries (e.g., wetlands)

    • SELLER: Entrepreneur that invests in wetland restoration and sells the ”compensation credit” to developer or other organization


Linus hasselstr m enveco ltd

  • Market to address eutrophication in the Baltic Sea (Zandersen et al 2009)

    • BUYER: Wastewater treatment plant that must reduce Nitrogen emissions

    • SELLER: Mussel farmer that contributes to nitrogen uptake


Linus hasselstr m enveco ltd

  • Market for clean water in France (Perrot-Maitre, 2006)

  • BUYER: Mineral water producer that wants to avoid contaminated water sources

    • SELLER: Farmers that change their farming practices


Linus hasselstr m enveco ltd

  • Market for Forest Ecosystem Services (Lam Dong Province, Vietnam)

    • Payers: Hydropower, water supply, tourism industries

    • Service providers: Local landowners


Linus hasselstr m enveco ltd

Overview of policy instruments

Directregulation

Information

Support for research & development

Incentive-based instruments (”economic instruments”)

  • Markets for ecosystem services fall under Category 4.

  • …are one of many possible policy instruments

  • …and should complement rather than replace other instruments


Linus hasselstr m enveco ltd

Why markets?

  • Economicreasons

  • Rewards those who improve ES (e.g., planting trees)

  • Penalizes those who damage ES (cutting trees)

  • Provides environmentalprotection at lowestcosttosociety

  • Politicalreasons in Vietnam

  • Biodiversity Law, 2008

  • Decree 99 prefers market-basedapproaches, 2010

  • Vietnam’sBiodiversityStrategyto 2030


Linus hasselstr m enveco ltd

What creates and drives markets?

What creates and drives markets?


Linus hasselstr m enveco ltd

What creates and drives markets?

  • Compliance-driven

  • e.g., Habitat banking California, PFES in Vietnam

  • Based on gov’t regulations

  • Heavily dependent on level of env. objective set by the government


Linus hasselstr m enveco ltd

What creates and drives markets?

  • Kravuppfyllande

  • ex: Biodiversitetsmarknader i Kalifornien

  • Bygger på regleringar

  • Starkt beroende av de mål som sätts

  • Compliance-driven

  • e.g., Habitat banking California, PFES in Vietnam

  • Based on gov’t regulations

  • Heavily dependent on level of env. objective set by the government

  • Taxpayer-financed

  • e.g., subsidized mussel farming.

  • Heavily dependent on taxpayer funding


Linus hasselstr m enveco ltd

What creates and drives markets?

  • Kravuppfyllande

  • ex: Biodiversitetsmarknader i Kalifornien

  • Bygger på regleringar

  • Starkt beroende av de mål som sätts

  • Compliance-driven

  • e.g., Habitat banking California, PFES in VIetnam

  • Based on gov’t regulations

  • Heavily dependent on level of env. objective set by the government

  • Skattefinansiering

  • ex: blåmusselodlingar som subventioneras.

  • Starkt beroende av tillgängliga skattemedel

  • Taxpayer-financed

  • e.g., subsidized mussel farming.

  • Heavily dependent on taxpayer funding

  • Voluntary

  • e.g., drinking water in France

  • Dependent on that an ecosystemservice provides a private profit

  • Or benevolence & charity


Linus hasselstr m enveco ltd

Conclusions – Market pre-conditions

  • The report’s various conclusions underscore the importance of

  • Measurability

  • Clear markets rules (”social acceptance”)

  • Institutional capacity

  • Property rights


Linus hasselstr m enveco ltd

Policy Recommendations

  • Governments must clearly define market structure – both market goals and rules of the game .. Butletmature markets workwithouttoomuch intervention.

  • Report identifies 10 key things governments can do, including:

    • Stimulate Demand/Supply

    • Help reduce transaction costs

    • Maintain other regulatory policies

    • Inform market participants (about ES and about markets)

    • Create pilot studies/markets and evaluate outcomes before scaling up


  • Description of the project

    Description of the project

    Develop a livelihood model (20 HH)

    Develop a PES mechanism

    Improve capacity building & public awareness

    Create long-term partnership


    Partner contributions

    Partner Contributions

    FORWET (Vietnam)

    • Develop livelihood model & PES model

      FORES (Sweden)

    • Critic PES model & suggest PES alternatives

      • Identify ecosystem services & their value

      • Identify benefits of markets

      • Focus on MCMNPwith International PES experience


    Fores project deliverables

    FORES’ Project Deliverables

    • Capacity assessment (Activity 3.1)

    • Land use (Act 2.8)

    • Desk study of climate change impacts (Act 2.1)

    • Ecosystem service assessment (Act 2.6)

    • Valuation of ecosystem services (Act 2.7)

    • International PES case studies (Act 2.3)

    • Alternative PES Structures Report (Act 2.12)

      Draft  late Oct

      Final  Nov


    Alternative pes structures report

    Alternative PES Structures Report

    Objectives

    Propose alternative PES structures in MCMNP

    Identify economic criteria to evaluate PES

    Assess PES alternatives with criteria

    Provide recommendations for next phase in MCMNP


    How to identify alternative pes structures

    How to identify alternative PES structures?


    Our 4 alternative pes structures

    Our 4 Alternative PES structures:

    • PES #1a – Aquaculture & Agriculture livelihood

    • PES #1b – Eco-tourism/Homestay livelihood

    • PES #2 – Traditional with state as buyer

    • PES #3 – Carbon market

    • PES #4 – Eco-labeling


    Why these 4 pes alternatives

    Why these 4 PES alternatives?

    • IllustratePES possibilities

    • Illustratebuyer&sellerpossibilities

    • Cover manyEcosystem Services in MCMNP

    • Cover many different geographicscales

      • Local

      • National

      • Global

    • Illustratepossibilitiestocombine/layer PES structures


    Pes 1a aquaculture agriculture

    PES #1a – Aquaculture & Agriculture


    Pes 1b ecotourism homestay

    PES #1b – Ecotourism/homestay


    Pes 2 traditional state as buyer

    PES #2 – Traditional: State as buyer


    Pes 3 carbon market

    PES #3 – Carbon market


    Pes 4 eco labeling

    PES #4 – Eco-labeling


    Is pes 1a sufficient

    Is PES #1a sufficient?

    Seller

    Buyer

    Payment:

    Forest Protection

    • LUR to farmer

    • Tech assistance

    • Trees to plant

    • Small wage

    Ecosystem

    Services

    (ES)


    Is pes 1a sufficient1

    Is PES #1a sufficient?

    Seller

    Buyer

    Payment:

    Forest Protection

    • LUR to farmer

    • Tech assistance

    • Trees to plant

    • Small wage

    A good livelihood model … but:

    1. Many more beneficiaries out there …

    2. Need buyers who can can/will pay

    3. Sufficient incentive/income for HHsto protect forest?


    Let s introduce a new buyer

    Let’s introduce a new buyer …


    Linus hasselstr m enveco ltd

    Buyer

    Buyer

    / Seller

    Seller

    PES

    Input #2:

    Knowledge

    Livelihood

    Ecosystem

    Services

    (ES)

    Eco-Label Shrimp

    Input #1:

    ES

    Now  HH has better economic incentive to protect forest


    Conclusions and recommendations 1

    Conclusions and Recommendations(1)

    • MCMNP is a strong candidate for PES

    • All PES structures should be “tested – evaluated – improved” repeatedly

    • Some PES structures more likely to succeed than others. Key criteria to be met:

      • Voluntary transactions

      • Additionality

      • Include maximum number of beneficiaries


    Conclusions and recommendations 2

    Conclusions and Recommendations(2)

    • PES #1b Eco-tourism

    • Should be expanded to include additional HHs

    • Strong focus on innovative marketing strategies

    • Potential effects on ES should be further discussed and evaluated

    • PES#2 (coastal protection) and PES #3 (carbon)

    • Suggest a PES structure that includes “layering” to improve income possibilities for HHs


    Conclusions and recommendations 3

    Conclusions and Recommendations (3)

    • Combine PES #1a and PES#4

    • PES#1a is a good first step but is expensive

    • PES#4 Eco-labeling is the logical next step, as it identifies more potential buyers and creates improved incentives for HHs to protect the forest.

    • Eco-labeling is promising because:

      • Current shrimp production already meets “eco” standards – very important (!)

      • Can rely on existing contracts between HHs & NP

      • Good opportunity for piloting this PES #4 in 2014 when re-newing contracts

      • Self financing (after initial investment)


    Recommended next steps

    Recommended next steps

    • Review PES #1a and #1b pilot before proceeding to next stage

    • Consider piloting our PES #4 alternative

    • Further investigation need for PES #2 and PES #3

    • Given trade-offs between PES alternatives, should consider the top policy priority:

      • Raising gov’t revenue?

      • Reducing poverty?

      • Improving ecosystem services?


    Thank you

    Thank you!

    Linus Hasselström

    Enveco Ltd. Sweden

    [email protected]

    +46 70 498 78 20


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