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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,
04.03.2013
FSN Forum

Summary of the first week of discussion on the FSN forum on RPE-PES

Many thanks for the stimulating contributions to our FSN Forum on Payments for Environmental Services (PES). After one week of discussion we identified three major aspects that received particular attention:

a) REDD+  and PES projects designed for the compensation of carbon sequestration in agriculture,

b) PES and other market-based instruments to ensure the provision of environmental services and

c) the scope of PES and its applications.

The commentators so far came primarily from Latin America and Africa where many PES projects are currently being implemented. The view about the effectiveness of the projects in the respective countries is mixed and there seems to be a sort of consensus that PES schemes need to be complemented with a national environmental policy strategy that signals support and assistance from governments for local initiatives that aim at improving the provision of ecosystem services through corresponding incentives for land-users. Many commentators further believe that PES projects in developing countries need to take into account the local economic conditions. Unless the problem of poverty is properly addressed there is little hope for the improvement of environmental services. In this context, innovation and entrepreneurship  are seen as important ingredients in efforts to generate local revenues, off-farm employment and achieve a general improvement of rural livelihoods. This would all add to the financial sustainability of PES.

This week we hope to obtain some views from all World regions addressing also the specific challenges and opportunities in concrete areas such as watershed, biodiversity, livestock and fisheries. We would like to address some of the questions that have so far obtained little attention such as the gap between theory and practice when it comes to the polluter pays principle that still constitutes one of the main justifications of PES but often looks more like a ‘pay the polluter’ principle in practice, especially in PES projects that aim first of all at addressing poverty problems. Furthermore we would like to learn more about the application of landscape and territorial development approaches in efforts to improve rural development and the provision of environmental services. Finally, we would like to follow up Emmanuel Suka’s  contribution pointing out at the need to better understand the local context in PES projects and design incentives schemes that generate tangible economic opportunities for local people (e.g. new markets, off-farm employment, rural finance etc). Which types of incentive packages/business cases could lead to financial sustainability when applied to the fields of agriculture, forestry, fisheries and livestock?

Question about prior PES activities at FAO

We are very grateful to Prof. Conrado Lucas from Angola who was wondering about  previous FAO activities on PES.  Depending on how broad the PES concept is defined, PES-related activities at FAO cover activities in quite a few FAO departments.  But generally, PES obtained most attention in the Natural Resources Department (NR) where the present project is based. Prior to our project, the NR Department also hosted the SARD-Mountain project that had a major focus on PES in mountain regions (see http://www.fao.org/sard/en/sardm/home/index.html ). Moreover there was the earlier workshop in Arequipa, Peru on Payments Schemes for Environmental Services which was published as a Land and Water Discussion Paper (No. 3, 2003)  (see  ftp://ftp.fao.org/agl/aglw/docs/lwdp3_es.pdf). We think it is this workshop that Professor Lucas was referring to. The Land and Water Division of the NR Department (NRL) has also supported feasibility studies in East Africa and is part of the practitioners networks in Africa, Asia and Latin America. It is the NRL regional office for Latin America and the Caribbean (FAORLC) where probably most technical assistance to implementation is currently happening.

Our project takes in account the findings of these prior activities not just in the NR department but also the Agricultural Economics Department (ESA) that was in charge of the SOFA report 2007 on PES (see http://www.fao.org/docrep/010/a1200e/a1200e00.htm), and numerous projects in the forestry department where PES plays a role in one form or another.

Currently, all three departments are involved in follow-up activities to Rio+20, and PES is also considered to be one of the important instruments to promote a ‘Green Economy’.

a)    REDD+  and PES projects designed for the compensation of carbon sequestration in agriculture

Marcus Vinicius Alves Finco from the Federal University of Tocantins, Brazil regards REDD+ as an opportunity for farmers and the environment. He forsees a ‘win-win’ approach that could be achieved by paying farmers to sequester carbon and enabling them to increase yields through sustainable practices; provided that the international carbon market further evolves and enables trade in carbon offsets at moderate transaction costs.

Mr. Silenou Demanou Blondel from the African Youth Initiative in Cameroon is more skeptical wondering whether a market for carbon sequestration as envisioned by REDD+ will ever benefit farm and grassroots communities in his country. Payments should first go to motivated local people who are committed to the improvement capacity building and the build-up of infrastructure, as effective pre-conditions to make PES schemes work in the first place. He also points out the importance of linking PES to youth development strategies.

Ms. Nelly-Diane Alemfack from the Efozo Young Volunteers for Environment in Cameroon describes a carbon PES project funded by the UK Rainforest Foundation and Communities Bio Climate Research and Development.  She basically considers the project to be a success but also identifies many major constraints and challenges in the implementation of the PES. Environmental legislation on the national level is complex and cumbersome and therefore difficult to implement on the local level. There is a need not just mobilize more financial resources but also some local competent people who have the leadership capacity and the trust of the local community to credibly engage in PES contracts. She thinks the establishment of community institutions must be based on a proper understanding of the power of informal and family-oriented institutions that prevail in rural Cameroon. Otherwise such institutions designed to implement PES will have no real impact on natural resource management.

David Mwayafu from the Uganda Coalition for Sustainable Development, Uganda, agrees that the support of the national government and a consistent and implementable national strategy for the protection of environmental services is crucial in PES. He illustrates this by discussing the case of ‘Trees for Global Benefits’. This government supported initiative works with the farmers as tree growers for carbon sequestration. Another example is the Mt. Elgon Regional Ecosystem Conservation Programme (MERECP) with its REDD+ pilot. Like ‘Trees for Global Benefits’, it offers alternative income generating activities and through community Revolving funds. What needs to be done is replicating such good initiatives to other areas. According to Mr. Mwayafu, there are however remaining  challenges because some projects may work well in one particular community but not in others. If they fail it is because the cultural set up of the communities and other factors such awareness and education levels have not been taken into account to a sufficient extent.

b)    PES and other market-based instruments to ensure the provision of environmental services

Demetrio Miguel Castillo from Universidad Experimental Felix Adam, Dominican Republic deplores that PES has so far not been very effective, even though he firmly believes that there must be alternative policy instruments that help award communities for protecting environmental services in an effective way.

Mr. Carlos Alborta, IFAD Consultant in Bolivia suggests some interesting alternatives such as Community Contests (CCs). He argues that CCs have the advantage of being based on open community rules and regulations with incentives that ensure the provision of ecosystem services via a prize on investment rather than a recurrent cost project cost. He believes that therefore CCs have proved to be successful in community management of natural resources   In view of some of the inconsistencies with regard to the identification of water buyers and sellers in a water fund scheme in Peru, he suggests water management contests as a a creative and innovative way out of this riddle.

Mr. Emmanuel Suka from the Association of Friends of Limbe Botanic Garden, Cameroon believes that current PES projects in his country are not delivering what they promise. He therefore suggests to improve PES schemes by including ‘Best Available Technologies’ packages and capacity building programs that aim at enabling the local stakeholders to effectively implement PES activities while also becoming more productive. For that purpose, PES schemes should encourage the development of community business plans that describe measurable objectives and how to ensure the permanence of the economic and environmental benefits for the local community once outside support for PES decreases. He thinks that local communities have assets that are worth investing in. Yet, the value of these assets (local knowledge, innovation, practices) have hardly ever been quantified and therefore remain largely ignored by in PES schemes that are also designed to generating alternative income generating activities. Even though there are successful PES projects, it is not sure how long they will last, especially if PES schemes ignore the particular developing country context. The expansion of farm activities due to land scarcity and lack of off-farm employment opportunities may even lead to a colonization of protected sites and thus a reversal of previous environmental achievements.  According to Mr. Suka, a combination of PES with micro-finance schemes and institutions could therefore important to generate more local businesses and employment.

c)    The scope of PES and its applications.

Prof. George Kent from Hawaii University: Should the concept of PES be extended to other sustainability challenges that generate negative externalities (passing on debt to future generations, exclusion of small-scale farmers in the global food chain) and positive externalities (investing in education and extension services for farm families, making nutritious food more widely accessible)?

Prof. Bayron Medina from Guatemala argues that there must be a more clear distinction between PES in the narrow sense (buyer and seller of a single measurable environmental service) and PES in the broad sense (government policies and environmental projects designed to provide farmers with incentives to adopt environmental sustainable practices). In Guatemala, there is still no coherent environmental policy framework that would be supportive of a broad PES scheme. But there are nevertheless 35 interesting cases of PES that have an impact on communities, the environment and rural empowerment.

Bertha Cecilia Garcia Cienfuegos from Universidad Nacional de Tumbes in Peru expresses her optimism about the future of PES in her country. She observes that many PES projects in Peru have already improved environmental services in certain regions. She personally does not know any projects that have failed but expects FAO to provide further clarification about reasons of possible failure.  After all, it is a learning process.