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Incentive and market based mechanisms for SLM

Session’s Objectives

1. Why incentive & market based mechanisms for SLM

2. Types and examples

3. How to identify appropriate mechanisms in your country

4. Recommendation

Why incentive & market-based mechanisms?

Land use decisions by a land users may have implications far beyond the site

Return for investments in land management often occur in the medium to long term

Land users cannot be expected to pay the total cost of implementing measures to prevent land degradation

We need to provide incentives for land users to invest in Sustainable Land Management Practices (SLMPs)…

Incentive and market based mechanisms: Type

Examples

1. Public payment schemes •Permanent conservation easements•Subsidies•Co finance investments •Contract farmland set-asides

2. Open trading between buyers and sellers under a regulatory cap or floor

•Tradable development rights•Trading of emission reductions

3. Self organized private deals •Direct payments for environmental services

4. Eco-labeling of products and services

•Marketing labels•Certification schemes

Green fund of Trinidad and Tobago• Established by the Finance Act 2000• 0.1% tax on gross sales of companies conducting

business in T&T into a Green Fund• Fund goes to grants to community groups and

organisations engaged in activities to reforest and conserve the environment

• Fund serves as a mechanism whereby financing for environmental programmes and projects can be sourced

1. Public payment schemes

China – Contract farmland set-aside• “Grain for Green”• Implemented in areas with land soil erosion

and desertification• 15 mill farmers received compensation for

setting aside their land• 1999-2008: 8,216 million hectares of

farmland were converted into forest land

1. Public payment schemes

Tanzania – Direct payments for environmental services

• Watershed services• Objective: To decrease soil erosion and overall

land degradation in Uluguru region• Coca Cola and public water company – willing to

pay farmers for implementing SLM practices because it reduces their water treatment costs

• CARE responsible for training and monitoring

3. Self organized private deals

Zambia – Marketing labels• COMACO: Community Markets for Conservation • Objective: to improve the situation of poverty and eliminated

hunger in the Luangwa Valley whilst conserving environment• Poor, food insecure farmers are organized into producer

groups, trained in quality, legal and income-generating skills focused on sustainable agriculture

• Sustainable land use practices qualifies the farmer for conservation dividends that reward the farmer

• COMACO purchases surplus crops and resells them as processed, value-added, organic products under the special brand IT`S WILD!

4. Eco-labeling of products and services

Factors determining the suitability of incentive & marked based

mechanisms

The success and feasibility depend upon factors at national and local level

One type of mechanism may be a good option in one context but not in another

Score card system have been developed by GM and CATIE to select the most suitable mechanisms within the specific country and site context

Factors determining the suitability of marked based mechanisms

National/ local context Institutional Capacity

Governance

Macroeconomics

Regulatory framework

Environmental awareness

Site specific context Ecosystem type

Environmental capacity (know how)

Local capacities

Land tenure

Economics of SLMPs Demand for SLMPs

Supply of SLMPs

Mechanism A B C D E F G H I J K L M N National/Local Context Institutions -1 -1 1 1 -1 2 -1 -1 -1 1 0 1 0 0

Governance -3 -3 0 0 -2 0 -2 -3 -3 -2 -2 -2 -1 -2

Macroeconomics (economic freedom) 0 0 0 0 1 -2 1 -2 -2 -1 0

-1 -1 -1

Regulatory framework 0 0 0 -1 -1 -1 -2 -2 -2 -1 0 0 0 0 Environmental Awareness 1 1 1 -1 -1 -1 1 -2 -2 1 -1 0 -1 -1 Site specific context Ecosystem Type -1 0 1 1 2 -1 1 1 1 2 0 1 0 0

Environmental -2 -2 -2 -2 0 -1 0 -2 -2 -2 -1 -1 0 0

Production Units / land economics 2 2 0 0 2 1 2 0 0 1 1 2 0 0

Land Tenure -1 0 1 1 1 -1 2 -1 -1 0 1 -1 2 2

Economics of Sustainable Land Use Practices Demand On site benefits 2 2 1 1 0 1 0 3 3 2 2 1 3 3 Off site benefits 0 0 1 0 1 -1 1 -1 -1 -1 0 0 -1 -1 Awareness/payment culture 0 0 1 1 2 0 2 -1 -1 1 -1 1 -1 -1 Supply

Low Oportunity cost -2 -2 1 0 1 -1 1 0 0 -2 -1 -1 1 1

RESULTS -5 -3 6 1 5 -5 6 -11 -11 -1 -2 0 1 0

Cameroon sudano-sahelian zone results

Cameroon sudano-sahelian zone results

1st tier: Co-finance Subsidies Taxes and fees

2nd tier: Payments for proven investments in land

conservation Ecolabeling and certification

Recommendations for implementation of incentive & market based mechanisms

Identify appropriate mechanisms for the national and site specific context

Ensure enabling conditions (sufficient credit, resources and knowledge, tenure security)

Undertake a broad analysis of benefits and costs of land use activities (to decide optimal SLMP and to present solid arguments for those who will pay for the services provided)

Identify partners (buyers & sellers of environmental services and facilitators for setting up the appropriate mechanisms).

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Thank for your Attention!