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International Institute for Environment and Development
Stockholm Research Institute
iied
S E I
Lessons from payments for environmental
services
Green Water Credits Workshop
Presented by Ina Porras
(iied)
Nairobi, 11-12 October 2006
International Institute for Environment and Development
Stockholm Research Institute
iied
S E I
Structure of the presentation
1. What are Payments for Environmental Services (PES)?
2. What is the experience from ongoing cases in developing countries?
3. What are the challenges and opportunities for Africa?
International Institute for Environment and Development
Stockholm Research Institute
iied
S E I
What are PES?
• Voluntary transactions• Between (a minimum of one) buyer and (a
minimum of one) seller;• Conditional on land use that is expected to
provide a environmental service• Also:
– Private sector pays for previously considered public goods;
– Represents new forms of funding– Depend on high levels of cooperation
International Institute for Environment and Development
Stockholm Research Institute
iied
S E I
Demand for watershed services
National and international demand
• Government (national and local)• Community groups• NGOs (local and international)• Technical advisors (e.g. engineers,
banking experts)• Academy• I nternational agencies
Supply of watershed services
•Private landowners •Communal lands
•Forest groups•Public parks
Deals direct or through facilitators:
•Hydroelectric Projects •Agriculture (e.g. irrigation)•“Wet” industry (e.g. distilleries, fi sheries) •Conservation interest groups (e.g. wetlands)•Tourism, transport (e.g. canals)•Local government (e.g municipalities)
Water utilities (public and private)
Local demand
Domestic water users
International Institute for Environment and Development
Stockholm Research Institute
iied
S E I
5 10
Bolivia
Brazil
Colombia
Ecuador
Peru
Venezuela
South America
Caribbean
Costa Rica
El Salvador
Guatemala
Honduras
Mexico
Nicaragua
Central America
and Caribbean
China
India
Indonesia
Nepal
Pakistan
Philippines
Asia
Kenya
South Africa
TanzaniaAfrica Ongoing
Proposals
Ongoing cases and advanced proposals of PES schemes
Source: IIED
International Institute for Environment and Development
Stockholm Research Institute
iied
S E I
Lessons from developing countries
1. Policy, legal and institutional framework;
2. Design of payment mechanisms
3. Upstream land managers;
4. Downstream water users;
International Institute for Environment and Development
Stockholm Research Institute
iied
S E I
Policy, legal and institutional framework
Property or tenancy rights PES benefit from supportive policy and
legal setting Cooperation is key Political support very important Civil society, NGOs and community
groups are key in ensuring participation of small farmers
International Institute for Environment and Development
Stockholm Research Institute
iied
S E I
Design
• PES is not about selling water.
• It is about the ability to carry out certain activities that will affect water quality and quantity downstream.
• Scientific basis must be clear to ensure transparency and sustainability
International Institute for Environment and Development
Stockholm Research Institute
iied
S E I
Design: transfer mechanisms
• Direct contracts between sellers and buyers (La Esperanza)
• Intermediary negotiations (includes trust funds - Quito);
• Area-based with rules set at national level (Mexico and Costa Rica)
• Product-based mechanism (certification)• Credits, licences, trading mechanisms
(Australia)
International Institute for Environment and Development
Stockholm Research Institute
iied
S E I
Design: type of payments
• Cash payments common and easier to ensure conditionality;
• In-kind (seeds, training, beehives) also used, but more difficult to ensure conditionality;
• On-going payments or compensations when farmers are required to stop activities (conservation);
• Transitional payments (3-5 years) for improved land use activities.
International Institute for Environment and Development
Stockholm Research Institute
iied
S E I
Design: payment levels and monitoring
• Payment or compensation should cover opportunity costs upstream
• WTP from downstream users has to be sufficient to provide a significant incentive
• Monitoring key but possible only with intermediaries with local knowledge
International Institute for Environment and Development
Stockholm Research Institute
iied
S E I
Upstream Issues
• Benefits to providers must be tangible and reflected in better incomes
• Payments help to diversify income and reduce vulnerability
• Capacity and training required;• Need to focus on those capable of making
required land changes;• More effective when there are organised
groups operating;
International Institute for Environment and Development
Stockholm Research Institute
iied
S E I
Downstream Issues
• There must be a business-drive in the scheme;
• Private sector, parastatal groups and Governments are main sources of funding for ongoing payments;
• Funding comes from:– additional fees to final users;
– companies operations budget and
– Governments re-allocations (CR fuel tax, Mexico irrigation charges)
International Institute for Environment and Development
Stockholm Research Institute
iied
S E I
Africa: opportunities and challenges
• Large experience in S&W• Many small properties• Higher levels of (increasing) poverty • Many basins shared internationally;• Low and variable capacity in national
and regional institutions• Multiple sources of authority for land
and water issues (formal and traditional)