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

Philipp Aerni and Bernardete Neves facilitators, FAO, Italy
11.03.2013
FSN Forum

Last week we received many valuable comments on lessons learned from selected PES projects but also more general views about the challenges PES schemes currently face on the policy level as well as on the project level.

The share of contributions from developed countries increased compared to the previous week. Comments addressed the question whether the EU’s Common Agricultural Policy (CAP) contains the right schemes to remunerate farmers for the positive externalities they generate through the adoption of sustainable agricultural practices.  In this context, the experiences of national implementation schemes in England and Italy received particular attention.  

In the case of England, the stewardship scheme run by Natural England rewards farmers for following certain specified pro-biodiversity practices. They are linked to CAP but also complemented by more voluntary schemes such as large-scale farm carbon footprint measurement and management programmes - typically based around livestock. These voluntary schemes seem to deliver promising results and could eventually be linked to PES schemes that generate win-win situations through sustainable intensification in livestock management.

The case documented in the Region of Marche in Italy suggests that EU agricultural development programs with a PES component could be designed in a more targeted and effective way. It is suggested that this could be achieved by moving towards more site specificity, more accurate priorities and more sensitive area definition. This would have a strong additionality impact and generate a higher level of ESs provision. Such a change may however lead to an increase in transaction costs resulting from monitoring, reporting and verification (MRV) on the governmental level.

The government-sponsored PES schemes in Europe appear to meet only few criteria set by PES purists who look at a particular environmental service as a commodity that can be traded as long as a proper value has been assigned. Some contributors doubt that such narrowly defined PES schemes are effective when implemented on the farm level. The local context, challenges in the proper valuation of environmental services, high transaction costs (largely due to MRV) and social complexities must be taken into account.

Quite a few contributors have expressed very critical views about PES schemes in developing countries. A case where REDD projects apparently have not delivered well is documented in the case of Nepal. The contributor also points out that PES does not just reflect a theoretical approach that could be implemented in various contexts. Instead it must be understood in the context of the history of subsidies in agricultural policies in developed countries and international environmental politics. He warns that PES approaches often neglect the cultural dimension and the complexity of local human-environment systems that are sustained through many informal institutions that PES schemes tend to ignore.

An approach to PES that seems to facilitate the empowerment of indigenous communities through grassroots innovation, local entrepreneurship and experimentation is however illustrated by another contributor from New Zealand. She reports on a Maori project that started as an effort to protect Maori-owned land from environmental degradation through an afforestation project.  It eventually attracted foreign private sector investment but also benefited from an government incentive scheme (East Coast Forestry Project).  Even though the focus was on erosion control, the project also increased the range of other environmental services and raises now new options such as the participation in markets for biodiversity offsets or carbon credits. The project also had a positive socioeconomic impact. It generated capital, income and employment for local Maoris, thanks to the establishment of a company called Porou Whanui Forests that is 100% owned by local Maoris.  The success of this case is compared to another more top-down conservation-focused approach in the central part of the Northern Island of New Zealand where Maoris did have hardly any chance to set their own development agenda and the outcome in terms of livelihood improvements and environmental services was correspondingly low.

Finally, a contributor drew attention to the efforts of Bioversity International to connect PES also to sustainable management and preservation of agrobiodiversity, documenting cases in Bolivia and Peru. These Payments for Agro-Biodiversity Conservation Services (PACS)  schemes also focus on the possibilities of local communities to generate value from the maintenance of threatened genetic resources through the development of market opportunities. The contributor sees a potential of such schemes to improve poor farmer livelihoods, once it is up-scaled. The success would however also depend on future research on the degree of potential complementarity between more conventional niche product/value chain development initiatives and PACS; and the potential to use market development approaches as a cornerstone of a PACS-related wide-ranging, cost-effective, diversity-maximizing national agrobiodiversity management strategy (as opposed to the many examples of individual threatened crop and livestock genetic resources market development applications).

In general, the contributors of last week seem to indicate that farmers are quite willing to take into account the provision of environmental services in their crop and livestock management practices if the incentive schemes are really able to either compensate them sufficiently for the additional work and the transaction costs or if they actually contribute to win-win situation that help them to generate more revenues through sustainable intensification, eco-label premium price schemes and agri-tourism.

In our final week of debate we would like to learn more about the effective use of new technologies (e.g. ICT, monitoring technologies) that help reduce transaction costs of PES projects and thus contribute to financial sustainability. Otherwise, we hope obtain many further contributions on the reasons for the successes and failures of policies and projects related to the remuneration of positive externalities in agriculture and payments for environmental services.

Many thanks to all of you for the lively discussion so far.