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• Influencing Policies on Payments for Environmental Service: Guidance Paper for the GEF Scientific and Technical Advisory Panel

  Sven Wunder of CIFOR and Sheila Wertz-Kanounnikoff, who has recently come to CIFOR from the l’Institut du Développement Durable et des Relations Internationales (IDDRI) in France (s.wertz@cgiar.org) recently prepared a solicited guidance paper on payments on environmental services (PES) for the Scientific and Technical Advisory Panel (STAP) of the Global Environmental Facility (GEF). The paper, which was presented to the Biodiversity Task Force (BDTF) by STAP member and CIFOR partner Paul Ferraro, discussed the strategic opportunities presented by payments for environmental services (PES), specifically which GEF investments in PES would be most likely to generate global environmental benefits, and what assumptions underpin these possibilities. PES is relevant to a number of GEF focal areas and strategic programmes, including Biodiversity (in particular the strategic programmes on “Sustainable Financing of Protected Area Systems at the National Level” and “Fostering Markets for Biodiversity Goods and Services”), Climate Change, Land Degradation, and the cross-cutting strategy for Sustainable Forest Management (SFM).

  In contrast to current GEF policy not to fund direct payments, the report recommended that GEF should consider making direct payments in cases when short-term payments are likely to shift land use; when tests of payment effectiveness can persuade pre-identified potential long-term buyers of ecosystem services; or when long-term payments through trust funds are the most promising way to secure valuable biodiversity. The report also suggested that GEF co-finance government payments for multiple environmental services, particularly the start-up costs, but take advantage of any emerging best-PES practices. For example, it would be important to take account of concerns for biodiversity conservation in the design of REDD schemes. In cases where GEF is considering financing the high start-up costs of a PES scheme, it needs to scrutinize carefully the feasibility of the proposal, in particular who will make recurrent payments, and assess if the start-up costs are really the main constraint to implementing the project.

  The report stimulated a wide-ranging discussion within the BDTF. Although there were reservations about GEF getting involved in making long-term payments, the substantive and specific advice provided by the paper was welcomed by all. The report was considered useful, provocative, and the kind of information that the STAP should be considering. It would be considered during the GEF-5 strategy process, together with a number of key concerns raised by task force members.

  For more information, contact Sven Wunder (s.wunder@cgiar.org)

• Payments for Environmental Services: fad or future??

  How do we translate the external, traditionally non-marketed, benefits of environmental services (ES) into real financial incentives for landowners and users to provide such services? One way is through Payments for Environmental Services (PES), an innovative approach that has been used to protect the environment and secure ES in four areas: carbon, watershed management, biodiversity conservation, and landscape beauty protection. PES has been tried for some time now, notably in Latin America. How is it progressing? Will it become a mainstream tool of environmental management, or is it just another short-lived fad?

  Current PES programmes fall into two basic categories. First, user-financed schemes that are often small-scale, focused on a single service, such as carbon or watershed protection, with differentiated payments and spatial targeting. Such schemes apparently can be quite effective in achieving their environmental objectives, but they are time-consuming and costly to set up. The second category comprises government-financed PES schemes. These are typically multi-service and much larger in scale, but by making uniform payments, and with little spatial differentiation and politically motivated side-objectives, their efficiency in delivering incremental services is questionable. Nevertheless, their size allows them to operate cost-efficiently. Improving the design of the two types of PES schemes is thus about remedying their respective disadvantages: making user-financed schemes cheaper to set up, and making government-financed schemes more focused and efficient.

  The uptake of PES schemes outside of Latin America is increasing slowly, but sluggish demand remains a constraint. This may change with the institution of REDD (Reduced Emissions from Deforestation and Degradation) schemes as a cost-effective way to mitigate climate change. Under such schemes, landowners and users are rewarded for measurable reductions in the rates of deforestation and forest degradation, thereby lowering carbon emissions and, perhaps also, increasing carbon storage. This expansion in what is effectively a PES may have ancillary benefits for other environmental services as well, such as biodiversity protection. Work carried out by CIFOR and the Amazon Initiative in Brazil explored the potential for establishing PES and emerging REDD payments across the Amazon (see the next item). A major obstacle may be the insecurity of land tenure and access rights in the Amazon, making it often difficult to pay only the good land stewards for their efforts.

  Many challenges still remain and lessons continue to be learned from these and other initiatives. Attention is now focused on testing the applicability of models developed in Bolivia in a number of other countries across three continents. Some structured cross-site visits have been held or are planned, to promote South-South learning and establish consolidated models that may eventually be sufficiently robust to be applied more widely. Fad or not, PES is an evolving tool. The size of the niche that it will eventually occupy is still being established but, at this stage, there is no evidence of outright failure.

  For more information, contact Sven Wunder (s.wunder@cgiar.org)

• Are payments for environmental services an option for the Brazilian Amazon?

  As part of Brazil’s environmental agenda towards establishing a legal basis for PES at national level, CIFOR and the Amazon Initiative have been asked by the Brazilian Ministry of Environment – within the framework of the Monitoring and Analysis Support project – to conduct a study on the feasibility of PES schemes in the Brazilian Amazon. This efforts also links closely to the search for on-the-ground tools to implement REDD, given that Brazil is starting to receive some international funding for avoided deforestation.

  Focusing thus on carbon sequestration and biodiversity protection, the study reviewed ongoing PES experiences worldwide, identifying technical, legal and institutional opportunities for and constraints on the development of PES schemes in Brazil. To assess the feasibility of PES in the Brazilian Amazon, the opportunity costs of setting up PES schemes in the region were estimated in a spatially specific manner. The potential for implementing PES in the Legal Amazon was also evaluated by analyzing potential ES supply by farmers and forest dwellers compared with current carbon service demand. The study also discusses land tenure and other contextual factors, which determine the prospects of implementing such schemes.

  A report on the findings of this study is currently being published (in Portuguese), and will be formally launched by the Ministry in February 2009. For more information, please contact Sven Wunder (CIFOR): s.wunder@cgiar.org or Jan Börner (Amazon Initiative): j.borner@cgiar.org

• Paying for avoided deforestation in Mato Grosso state, Brazil

  Following particularly the focus of the Stern Report on avoided deforestation, there is growing recognition that Reduced Emissions from Deforestation and Degradation (REDD) have to be part of our global efforts to mitigate greenhouse gas emissions. Correspondingly, developing countries are also starting to respond with proposals on how REDD could be put into action in the South.

  Jan Börner from the Amazon Initiative and Sven Wunder from CIFOR (both based in Belém Brazil) had been asked to advise a consortium of Brazilian NGOs, headed by the Centro de Vida (ICV) in Cuiabá, on how to design a scheme to compensate land users for avoiding deforestation in the Brazilian state of Mato Grosso, in the southern part of the Amazon. Placed in the heart of the so-called “arc of deforestation”, Mato Grosso has been responsible for about one-third of all Brazilian forest clearing in the past, clearly making it the “champion of deforestation”. Forest has been converted mostly to cattle pasture and soybean cropland. However, the state also possesses a pro-active civil society, and has recently undertaken promising reforms in its environmental policies. Over the last couple of years, these have already contributed to a reduction in forest clearing. The challenge will be to design an incentive system, at the federal-state and farmer levels, that can further reduce deforestation significantly and, at the same time, link this hoped-for achievement to global carbon markets willing to help financing and rewarding those reductions. The study report can be downloaded on the ICV website: http://www.icv.org.br/publique/media/redd_icv.pdf 

  For more information, please contact Jan Börner [j.borner@cgiar.org]

• Payments for watershed services: Building on pilot experiences to mainstream a tool for sustainable conservation and development

  25 participants from both developing and developed countries met from 12-17 March 2007 at the Rockefeller Center in Bellagio (Northern Italy) to discuss payment schemes for watershed protection. The workshop was organized jointly by Fundación Natura Bolivia, CIFOR, IIED and EcoFund Ecuador. The participants included a rich blend of PES practitioners, analysts, financial sector and multilateral specialists, as well as NGO, government and grassroot-organization representatives. In particular, there was ample participation of people based in Latin America, reflecting the pioneer role this region has played in watershed PES development: Mexico (3), Costa Rica (2), Bolivia (2), Ecuador (2), and Brazil (1). The main purpose was to discuss eight ”hot issues” in the watershed PES debate: the role of legal frameworks; research needs prior to implementation; 'bundling' of services; how to stimulate users' willingness to pay; poverty aspects; contract design, transaction costs, and upscaling. Also, some elements for a decision-support system of when to use PES and when not were developed. For each of these themes, a small discussion paper was prepared in advance and discussed both in plenary and in focus groups. Two-page synthesis papers were produced for each topic, which were then synthesised into a report edited by two of the organisers of the workshop, Nigel Asquith, of Fundación Natura Bolivia, and Sven Wunder of CIFOR (s.wunder@cgiar.org).