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Incentives for Ecosystem Services

IES step by step

Here is an example of a step by step IES scheme using an hypothetical case, with links to useful information and tools to define and implement each step of the package:

Step 1 - Assessing and valuing ecosystem services provision

Soil erosion from intensive agricultural practices can cause siltation in lakes and rivers. Siltation can decrease the storage capacity of lakes and increase eutrophication. To prevent this, specific agricultural practices can enhance ecosystem services. The cost implications of unsustainable practices around the lake are dependent on the value of ecosystem services to different users.

For example, protecting water for consumption quality or irrigation quantity wouldn’t be valued the same way. A cost-benefit analysis of erosion prevention can assess the value of continued siltation versus improved agricultural practices for different stakeholders. It is important, therefore, that assessment and valuation identify context-specific solutions for farmers and water users.  More on Methods for Ecosystem Services Valuation.

To keep beneficiaries and farmers interested to maintain these sustainable agricultural practices, an IES scheme needs to deliver results that reduce erosion and siltation, with low cost implications. It is, therefore, important to develop a clear monitoring framework from the initial assessment of ecosystem services provision during an IES package inception to track environmental, economic and social impacts.

To track impact of improved practices on lake water conditions, verification of changes in environmental services can involve on-farm visits by Water Users Associations. Local Universities can assist in developing a hydrological monitoring protocol to be conducted by the water authorities. This can be carried out together with the water users’ technicians, who also conduct some of the sampling in their own laboratory. 

Different monitoring methods and rigor can be applied, from general observations and estimations, to verification and certification. Costs increase with rigor. It is important to balance feasibility with available institutional capacity and the finance to collect and analyze data, over long periods of time. More on Tracking Impact

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Step 2 - Adoption barriers and the need for incentives

Step 2 - Adoption barriers and the need for incentives

To reduce silt travelling downstream to the lake, farmers upstream can implement soil conservation measures. These include: cultivation along, rather than across, the contours to reduce water run-off and erosion, grass strips to fix soil and act as filtering materials, reinforced with agroforestry trees, rehabilitation of riparian strips by planting grass and trees to act as a filtering buffer.

These practices all require an effort from the farmers in terms of time, labor, money, etc. Implementation costs and benefits to farmers will be different and the incentives required will vary, depending on the agriculture practices and their cost implications. Farmers may need incentives to adopt these activities: from simply providing information and training, to cost-sharing of physical structures. More on Adoption Barriers.

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Step 3 - Types of incentives

As siltation becomes a major issue for lake users, it damages irrigation infrastructures, reduces aquatic biodiversity and pollutes drinking water, increasing its treatment cost. To address this problem, water authorities could establish a siltation reduction law that requires farmers to change their practices. Due to the adoption barriers mentioned above, however, they may not be able to do so without endangering their food security.

To help farmers conform to the law, farmers could receive grass plantings to sow grass strips along the lake’s slopes, and wire to fence off riparian buffers around the lake. In time this would reveal the benefits of improved soil and water conservation, both to farmers and water users. Facilitating participating farmers in accessing rural credit help to upgrade their production methods to comply with certification requirements and access better markets, would then act as a long-term incentive to sustain soil conservation measures. More on the Types of Incentives.

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Step 4 - The incentive package

To support the implementation of the siltation reduction law, the ministry of agriculture could direct its existing programmes on soil conservation to this area, provided farmers agree to also comply with conservation regulations. The ministry of forestry could assist with grass and tree seedlings, wire for fencing off forest and riparian buffers.

As businesses using the lake water would also directly benefit from less silt, they would agree to pay a higher price for the water they use and contribute to a fund that could continue financing these incentives in the long-run, and act as a guaranty for farmers to more easily access rural credit.

The incentives come in different forms and from different stakeholders, but work together as a complete package. Each stakeholder invests in the scheme for its own purpose, towards a common goal. To ensure sustainability, it is best to diversify the ways to incentivize and the sources of the incentives. More on Incentive Package or go to Case Studies for examples.

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Step 5 - Supportive policies

Due to pressure from the water users, the water authority negotiated with the ministries of water and forest to create a permanent task-force to facilitate cooperation between the various agencies. They also welcomed the participation of the representatives from water users and other companies whose operations depend on good ecological conditions and landscape values of the lake.

A private investment fund agreed to manage the Fund and permanently assist farmers with access to credit and in building their repayment capacity.

It is not an easy feat to bring all these different stakeholders to the same table. The mandate and work programme of staff from different ministries may not enable opportunities to coordinate conservation and development plans for the forest, cities and farms around the lake.

Adjusting the policy and institutional framework to facilitate the transfer of funds and skills across public institutions, and between the private sector and farmers, is the most important part of developing of IES packages that work for both the environment and for agriculture. More on Guidelines for Policy Makers to Build a Supportive Policy Environment for IES.

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