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Using Payments for Ecosystem Services to Achieve Conservation and Development Objectives

Using Payments for Ecosystem Services to Achieve Conservation and Development Objectives Sara Scherr Forest Trends Ecoagriculture Partners September 2005. Investing in “Natural Infrastructure’. Air quality Pest & disease control.

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Using Payments for Ecosystem Services to Achieve Conservation and Development Objectives

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  1. Using Payments for Ecosystem Services to Achieve Conservation and Development Objectives Sara Scherr Forest Trends Ecoagriculture Partners September 2005

  2. Investing in “Natural Infrastructure’ Air quality Pest & disease control The Forest Climate Alliance Strategic Advice to National Policy Initiatives Biodiversity Offsets Watershed protection and regulation Plant pollination Wilds species & habitat protection Carbon sequestration and storage Soil formation and fertility Decomposition of wastes Landscape beauty

  3. a) Self-Organized Private Deals Private entities pay for private services * Perrier-Vittel pays upstream landowners for improved agricultural practices and reforestation of sensitive infiltration zones (US$230/ha/yr) * TNC, CI, WCS payments to farmers and communities for conservation management Price of service typically negotiated, based on willingness to buy and sell (valuation studies may be an input for negotiation)

  4. b) Public Payments to Farmers, Communities • Public agency pays for service • Public payments for watershed • protection in Mexico ($60 mln • in 2004) • US pay landowners for wildlife • conservation (EQUIP, Safe • Harbor) • Price of service either set by program (based on willingness to sell and valuation studies) or through auction

  5. c) Open Trading of Ecosystem Credits Under a Cap or Floor Landowners either comply directly with regulations, or buy compliance credits * Wetland banking in US allows developers to offset damage * The Kyoto-compliant carbon emission offset market * Freshwater nutrient-trading * Price of service is based on supply and demand for the service (with demand determined by regulation)

  6. d) Eco-labeled farm, forest, natural products THE FOREST CLIMATE ALLIANCE • Consumers prefer certified sustainable supplies • * “Shade-grown coffee” in • Mesoamerica (US$5 billion for • sale in USA alone) • * Certified timber • * Eco-landscape source labels • * Price of service embedded as • part of product price--usually by • market (FSC), sometimes by • negotiation (Starbucks)

  7. Building Blocks for Ecosystem Services Payments and Markets

  8. Potential Benefits for Sustainable Development Poverty Reduction • New sources of finance for conservation, esp. outside Protected Areas • Incentives for rational decision-making about resource use and management • Income for rural communities with few other market opportunities (e.g., where no transport) • Rewards rural communities for real benefits they provide to others • Financing for transition to sustainable agriculture, forestry and fisheries

  9. Current Obstacles to Developing PES • Lack of technical and market information • Potential buyers not organized • High costs fo find, negotiate, monitor deals • Lack of experience and capacity • Inadequate legal and regulatory framework • Political conflict over rights, responsibilities • Distrust of markets for public goods

  10. Potential Benefits & Risks for Community Sellers • Benefits • * New, often more regular, flows of income (15-25% +) • * Portfolio diversification • * Catalyst for adopting better management practices • * Asset appreciation (pest & disease control, high inventory) • * Locally-valued ecosystem goods and services • * Social investment, such as preserving cultural heritage • Risks • * Loss of economic use options • * Loss of land and forest ownership or access • * Loss of local ecosystem services • * Contractual obligations if services not delivered

  11. Overcoming Obstacles for Community Producers • Democratizeinformation about ecosystem service markets • Encourage broad participation in policy dialogue about the rules and shape of ecosystem service payments • Reduce learning costs for new entrants to these markets; training programs and enterprise support; financial viable and appropriate business models • Reduce transaction costs through institutional innovations like suitable intermediaries, ‘bundling’, large-area programs, integrate with economic activities

  12. The Katoomba Group–Linking Global Innovators, Providing Policy Support

  13. Are PES relevant for East and Southern Africa? • Critical need for new sources of confirmation finance • Many one-off projects being developed or in pipeline • Use models that fit local social and institutional conditions (“it’s all about design….”) • Be strategic about role of PES in national conservation and development strategy

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