CompensationPayment for Ecosystem Services

1
Compensation/Payment for Ecosystem Services

• Ecosystem goods services
• Instruments for conservation of ES
• Case studies Mexico, Costa Rica, US-CRP, CDM
• Equity concerns
• ES within wider context ecoagriculture/
  landscape mosaics, etc.
• Workshop 1, June 30, 2003, Beahrs ELP Marsh

2
Goods Services that Society Derives from
Ecosystems

• Consumption goods seafood, timber,
  pharmaceuticals
• Life-support processes water purification and
  storage, removal of carbon dioxide/air
  filtration, climate stabilization, pollination,
  renewal of soil fertility, pest, flood
  landslide control
• Life-fulfilling conditions (existence values) -
  beauty, appreciation, recreation
• Conservation of options (option values) - genetic
  diversity for food and health of future
  generations
• Estimated total economic value of the
  biospheres natural ecosystems 33 trillion
  dollars annually 1.8 times the entire worlds
  GNP. An interesting benchmark.
• Constanza, R. Nature, May 1997.

3
Instruments to Conserve Ecosystem Services

• Command and Control regulations set to meet
  acceptable levels of pollution (e.g., air quality
  standards for car makers)
• Public regulation of local resource management
  (e.g., gov. forest mgmt plans, restrictions on
  clearing and logging)
• Impose charge/tax on use of ecosystem services
  (e.g. taxes on wastewater discharges into rivers)
• Support self-regulation and innovation in
  resource management by local communities/resource
  operators (e.g., assign property rights to
  previously unowned resources subsidies for land
  use transitions or improved management)
• Public payments to producers for services (e.g.,
  CRP, Costa Rica, Mexico, rubber tappers in Acre,
  Brazil)
• Private deals for environmental services (e.g.,
  public utility payment to upstream landowners
  Costa Rica, carbon trading)
• Eco-labeling of marketed products (e.g., forest
  product certification)
• adapted from S. Scherr and A. White, 2001

4
PES Forest Ejidos of Mexico

• Berkeley/ELP connection Carlos Munoz, 2001,
  2002 and 2003 alumni
• Jen dissertation on forest ejidos/causes of
  deforestation
• Fiscal resources for pilot phase, 2003
• Considerable interest in Mexican case because of
  unique property rights and social organization of
  ejidos and comunidades
• But major concerns over targeting, cost,
  organizational capacity.
• Adapted from Carlos Munoz, INE, SEMARNAT, March
  2001

5
Mexico - Increasing profitability vs. agriculture
and cattle grazing

• Elements of the strategy
• Neutralize subsidies
• Apply VAT to agrochemicals
• Eliminate agricultural bias in Procampo
• Continue strategic support to community forestry
  firms, i.e. Prodefor, Procymaf
• Develop markets to link beneficiaries and forest
  communities
• Payment for environmental services of forests to
  Ejidos Comunidades

6
Mexico To whom? Priority Population Forests

• Priority watersheds (over-drafted aquifers)
• Temperate and tropical forests
• Conservation priority regions (CONABIO)
• Land titling program finished (SRA)
• High marginality areas (CONAPO)

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Forests, CPA high marginality areas
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Social ownership Ejidos and Comunidades
9
Governance, opportunity costs and cooperation on
common resource management 1997 WB-Berkeley
survey
10

• Size of payments
• Max Value of services
• Min Opportunity costs for forested areas

?
200
0
11
The Use of Market Instruments to Pay for
Environmental Services in Costa Rica Adapted
from Luis Gamez, Advisor, Ministry of
Environment of Costa Rica April, 2001
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Costa Rica Determining Levels of Payment Based on
the Opportunity Cost of Land Payment gt OCL

• Grazing land is the major competitor to forest
  conservation
• What is the OCL for dairy and cattle ranching?
• Market value acceptable income / Ha. of
  benefits foregone

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Costa Rica Modalities Distribution of Payment
(2001)
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Costa RicaTotal Area and Number of Contracts by
Modality and Year
17
Lessons Learned from PES in Costa Rica

• Public and Private PES schemes are highly
  complementary and not mutually exclusive.
• Therefore coexistance must be enabled and
  coordinated.
• Direct payment schemes assist in local solution
  of conservation problems by sharing costs
  benefits with end-users of environmental services
  like water.
• Success depends upon political openess to NGO and
  private sector participation.
• Major weaknesses are related to complex and
  centralized government financial management.

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Conservation Reserve Program (CRP)

• Voluntary Program to promote soil, wetlands,
  wildlife and water conservation on agricultural/
  grazing lands
• USDA funded (urban-rural taxpayer transfer)
• Annual Rental Payment (EBI score/rental rate
  highest ratios accepted)
• 50 cost-share for approved cover establishment
  and conservation practices.
• 10-15 year contracts.
• adapted from Ralph Heimlich, USDA

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EBI Evaluated for Each Parcel

• Wildlife factor (0-100 points)
• Wildlife cover (0-50 points)
• Endangered species (0-15 points)
• Water Quality factor (0-100 points)
• Location (0-30 points)
• Wetlands (0-10 points)
• Erosion factor (0-100 points)
• Air Quality factor (0-35 points)
• Wind erosion impacts (0-25 points)
• State/National Conservation Priority Area factor
  (0-25 points)

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Current CRP (January 2002)

• 33.7 million acres enrolled in CRP (10 of
  cropland)
• More than 370,000 farmers (about 18 )
• 1.5 billion annual rental cost
• Average rental cost per acre is 47
• Conservation cover
• 60 percent of CRP acreage is planted to grasses
• 16 percent to trees or woody vegetation for
  wildlife
• 5 percent to wetland restoration

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Lessons Learned From CRP

• Targeting (to maximize environmental benefits per
  spent EBI since 1990)
• Getting the Rent Right (ensure adequate
  enrollment without windfalls opportunity cost
  using soil productivity as proxy/works best for
  dryland agriculture since CRP cannot compensate
  O.C. of irrigation water)
• Setting the Contract Term (more toward permanent
  conservation easements cheaper for government)
• Slippage (Conservation Compliance Provisions
  prohibits CRP farmers from converting highly
  erodible land or wetlands to crops)

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Costs and Benefits of CRPTo Landowners
78.0
26.5
12.5
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Costs and Benefits of CRPTo Government
(16.0)
(6.9)
(4.9)
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Costs and Benefits of CRPTo Nonfarm Consumers
14.0
(13.6)
(7.4)
(24.5)
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Land Use, Land Use Change and Forestry Projects
in Developing Countries LULUCF-DC CDM

• Sources of greenhouse gas emissions
• Roughly 80 from fossil fuel combustion
• Roughly 20 from tropical deforestation (big
  players Brazil, Indonesia, Congo)
• Proportionality Mitigation attempts should
  broadly mimic the source of the problem. gives
  rise to LULUCFunder Kyoto Protocols CDM
• LULUCF activities accepted under Kyoto
• afforestation (conversion of non-forest land -
  for at least 50 years, to forest)
• reforestation (same as above, not forested since
  1989)

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Problems with designing and implementing
LULUCF-DC projects

• Permanence how long is carbon sequestered for?
• Monitoring how to verify carbon
  sequestration/sinks?
• Projects need to be long-term to realize
  benefits/ high attrition rates
• Lack of investors/investment capital concerns
  about political instability
• Technical, institutional and human capital
  obstacles for operating large-scale forest
  projects
• How to involve small and medium size
  farm/forestry operators issues of transaction
  costs, land tenure, governance, monitoring

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PES Key Equity Concerns

• For PES programs to conserve ES and improve
  livelihoods of the poor
• Rules for participation should not exclude the
  poor (e.g., land titles, capital/technical
  requirements, org. capacity Costa Rica).
• Must embrace dual objectives of resource
  conservation and social advancement/poverty
  alleviation (e.g. CDM large plantation projects
  vs. agroforestry, rubber-tappers in Acre Chico
  Mendes Law).
• Look beyond the forest (PES as part of wider
  support for complex agroecosytems of the poor)
• Support social capital accumulation/organizational
  capacity to ensure sustainable NRM (e.g.
  capacity of a community to discuss, carry out,
  monitor PES activities capacity to secure
  external resources and negotiate proposals to
  advance community goals)
• Expand and defend poor communities rights of
  access, usufruct and control of natural resources
  (e.g. 1917 Constitution, land titling/Forestry
  Law in Mexico)
• adapted from PRISMA, evaluation of six PES
  activities in the Americas

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Look Beyond the Forest

• Think of Ecosystem Services as part of
  integrated land-use systems that support
  biological functions and the livelihoods of
  producers and communities. Income from PES
  should be just one source of diverse income
  strategies.
• ecoagriculture
• multi-functional agriculture
• agroecosystems
• landscape mosaics