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Re: Payments for environmental services (PES) in theory and practice: Lessons learned and way forward

Simone Lovera Global Forest Coalition , Paraguay
18.03.2013

Dear Mr. Aerni and Ms. Neves,

Hereby I would like to contribute to the FSN Forum on Payments for Environmental Services. I also would like to submit a paper on Innovative Financial Mechanisms elaborated by the CBD Alliance, the global network of NGOs following the Convention on Biodiversity, which includes an elaborate critique on PES. See http://globalforestcoalition.org/wp-content/uploads/2012/03/submission-GFC-on-REDD+-Finance.pdf

Moreover, I would like to contribute a draft submission on Non-market based approaches to the UNFCCC which is currently being elaborated by my own organization, the Global Forest Coalition (a coalition of 54 NGOs and Indigenous Peoples Organizations from 39 different countries) and other groups. This submission analyzes the advantage of alternative incentive mechanisms if compared to PES. I am afraid it is only a draft at this moment , the final draft of this submission will be ready by March 22 only.  I would appreciate it if you could include that final draft in the forum. I could send you an almost final version on Monday afternoon my time.

From the outset I would like to point out that I considered the questions rather biased, they seem to assume that all respondents would be in favor of PES mechanisms. However, the above-mentioned papers by the CBD Alliance and GFC (representing hundreds of NGOs and IPOs that are actively involved in biodiversity policy) are very skeptical about these mechanisms. Many of these reservations are shared by Governments as well. The results of the Global Dialogue on Scaling up Finance for Biodiversity organized by the Secretariat of the Convention on Biological Diversity and the Governments of Japan, India, Norway, Sweden and Ecuador in March 2012, for example, expressed far more balanced views on PES and certainly did not outright support it. In fact, PES are increasingly being criticized by especially Southern Governments during intergovernmental negotiations while they were mainly are defended by OECD countries. A clear example are the Rio+20 negotiations, where G77 formally requested the term 'environmental services' to be removed from the outcome document. I feel it is important an organization like FAO takes a more balanced approach in this respect.

I have tried to fill out some of your questions below, also using some of the experiences in my own country Paraguay, where I work for a local NGO, Sobrevivencia, as well. See also http://globalforestcoalition.org/wp-content/uploads/2010/11/Casestudy-Life-as-Commerce-in-Paraguay1.pdf for an elaborate research by our colleague organizations on the social impacts of PES and Biodiversity Offsets schemes in Paraguay.

I wish you success with your consultations and I look forward to the results of this forum.

Sincerely yours,

Simone Lovera

 in the FSN Forum:

1. What are the lessons learned from PES in developed and developing countries?

1. What are the main challenges and opportunities with regard to PES projects in your particular country?

A very basic challenge is that there is no funding to implement a PES scheme in Paraguay. As an elaborate research by Milder (Milder, J.C., S.J. Scherr and C. Bracer, 2010.Trends and Future Potential of Payment for Ecosystem Services to Alleviate Rural Poverty in Developing Countries.Ecology and Society, 15(2):4.) has pointed out, 98% of all PES schemes are financed by Governments, and the budget of the Government of Paraguay is simply to restricted to take this on. One should also seriously question whether expensive PES schemes, which lead to permanent payment obligations if 'environmental services' are to be maintained, are a wise use of the very limited funding that is available for environmental conservation in developing countries. In the case of Paraguay, there are many, many other priorities. 

2. Do you know of highly successful PES cases in your particular field of expertise (watershed management, biodiversity/wildlife conservation, carbon sequestration,…)? If so, what were the main factors that contributed to the success of the PES scheme?

No, as described in the research on PES and biodiversity offsets in Paraguay mentioned above, community conservation initiatives were unable to obtain PES funding as the procedures were too complicated. Only large conservation organizations and/or large landholders with very strong links to the government are able to obtain PES funding. The combination of bad governance (Paraguay has one of the highest levels of corruption in the world, a situation that has worsened even further since last year's coup d'etat) and PES is a very nasty one. More importantly, the added value of PES in countries like Mexico and Costa Rica is seriously questioned by independent researchers (See e.g. Alix-Garcia, J., de Janvry, A., Sadoulet, E. and Torres, J., 2005. An Assessment of Mexico’s Payment for Environmental Services Program. University of California at Berkeley and CIDE for the FAO Comparative Studies Service Agricultural and Development Economics Division. and Pfaff, A., Robalino, J. And Sanchez-Azofeifa, A., 2008. Payments for Environmental Services: Emperical analysis for Costa Rica. Working Papers Series, Terry Sanford Institute of Public Policy, Duke University.

3. Do you know of PES projects that have failed to deliver despite substantial donor support? If so, what were the reasons that caused the failure?

Significant donor support was gathered for setting up the PES scheme in Paraguay, and other countries, but in most countries it is a complete failure as it is impossible to generate sufficient funding to provide permanent payments. Even when the direct corruption is less, there are many cases of favoritism. 

2. PES can be conceived as a diverse set of policies, institutions and processes that mobilize funding from direct beneficiaries, taxpayers, consumers and other interested parties to reward/remunerate/pay providers of environmental services. Which type of PES-related policy instruments would you recommend for your own particular country and why?

1. Are PES-related policy tools applied in affluent countries with lots of off-farm employment opportunities and low population growth rates also adequate for least developed countries where farm sizes often tend to get smaller due to lack of opportunities outside agriculture?

As explained above, setting up a PES scheme does not imply that money suddenly starts to fall out of the sky. In the overwhelming majority of cases, governments will have to pay for them themselves, or at least subsidize their establishment, and for most least developed countries there are many other priorities than spending precious financial resources on schemes to permanently compensate landholders for proper environmental behaviour. As explained in the submission on non-market mechanisms attached, there are many alternatives to PES that require far less financial resources and are far more sustanable from a social, environmental and especially economic point of view. These alternatives play an important role in strengthening community governance and traditional value systems as well, which is important for the social, economic and cultural well-being of indigenous and non-indigenous communities in general.

2. What should be the role of the public sector in creating a regulatory/enabling environment for PES to deliver?  Where is public sector assistance most needed (knowledge transfer,  communal/private land rights, infrastructure, measurement of environmental quality changes, etc.)?

I feel it is fundamentally wrong if the public sector subsidies the establishment of markets in environmental services. It often creates unfair competition, as only rich countries can afford extensive PES schemes, and it makes it easier for rich farmers to compete with producers in other countries if they received additional income for "environmental services".

3. To what extent is it justified to abandon the ‘polluter pays’ principle of PES to increase agricultural productivity and reduce poverty in developing countries? Or should we use other tools to tackle these objectives separately?

Your question seems based on the wrong assumption. PES means the polluter gets paid principle, it assumes that people have a right to destroy the environment, and that they should be compensated for not doing so. So it is in square contradiction with the polluter pays principle.

3. What should be the role of innovation and entrepreneurship in making PES work for sustainable development?

See above, your question assumes that everyone would favor this policy mechanism, but many Governments, NGOs, IPOs and social movements have serious and fundamental objections against it.

1. In some cases, PES has become a vehicle for a market for environmental goods (e.g. farmers respond to a growing regional demand for trees by setting up their own tree nurseries). Do you know of other business opportunities for farmers that could arise from the implementation of a PES scheme?

2. According to your practical experience with PES, where do we need innovation to make PES more effective and what type of reward system could create such innovation?

3. Innovative landscape approaches focus on the improvement of environmental services on the landscape-level while the PES approach is focused on the remuneration of individual farmers on the field-level. How can the two approaches be reconciled?

Simone Lovera

executive director
Global Forest Coalition
Bruselas 2273
Asuncion

Paraguay