Payment for Ecosystem Services: A Guide Book for Planning PES projects

Transcription

1 Payment for Ecosystem Services: A Guide Book for Planning PES projects October 2015 Multi Stakeholder Forestry Programme Kathmandu

2 Published by: Multi Stakeholder Forestry Programme (MSFP) Services Support Unit (SSU) Forestry Complex, Babarmahal, Nepal Tel: Multi Stakeholder Forestry Programme (MSFP) The MSFP aims to improve livelihoods and resilience of poor men and women and disadvantaged people in Nepal. It will also strengthen the contribution of Nepal s forestry sector to inclusive economic growth, poverty reduction and tackling climate change.

3 Introduction Ecosystem services (ES) are the diverse benefits rendered from the natural environment. The Millennium Ecosystem Assessment (MEA 2005) has broadly categorized ecosystem services in four types - provisioning, regulating, cultural and supporting. Payment for Ecosystem Services (PES) is a scheme where the beneficiaries of the ecosystem services (users of the ecosystem service) make payments to the producers of those services (also known as service providers) for enhancement or improvement of the services rendered. The fundamental principle behind PES is that it is a market based mechanism where the consumers of the environmental services compensate the providers of those services. In context of Nepal, thousands of community forests generate range of ES both for the community forestry user groups (CFUGs), and outside communities and stakeholders. The services include, but not limited to, clean air, drinking water, carbon sink, erosion control, aesthetic values, forest products including timber and fuelwood and food among others. Since the CFUGs manage these forests, they are the service providers while those benefiting from the services for example, through tourism, water supply, clean air, erosion control in the downstream etc are the beneficiaries or buyers of the service. In addition, role of government line agencies for instance, District Forest Office (DFO), Village Development Committee (VDC) among others is crucial perhaps as intermediary or even as providers or buyers of the ecosystem service. This guide book gives an overview on facilitating the process on PES at various levels including community through national level. Though the steps adopted may vary depending on the nature of the ecosystem service and understanding between concerned parties, in general, there could be 11 practical steps to facilitate a PES project. This guide book in particular focuses the community forestry context in Nepal, primarily aimed at the field practitioners who are working to establish 1

4 and operate PES scheme. Moreover, it will also be a handy tool for development programmes and projects that are exploring on developing such scheme. Practical steps for PES scheme Step 1: Identification of ecosystem Service(s) The first step in a PES scheme is to identify what ecosystem service is being bought and sold. For instance, in community forestry, there could be diverse ecosystem services like water, carbon, aesthetic, biodiversity among others that can be considered for PES scheme. The services considered for PES can either be single or in bundles. Moreover, it is important to identify the problem associated with the service, which also determines the nature of PES scheme. For example, whether the PES being thought is for additionality in the service delivered (e.g. increment in the water supply, increase in forest cover etc) or whether it addresses the threat of resource degradation (e.g. pollution of water source; deforestation etc). Along with identification of the services, equally important is the identification of land ownership (who owns the land) and management input (CFUGs who manage the forest), which actually determines benefit sharing arrangement. Step 2: Sensitization Sensitization involves raising awareness among the service producers and stakeholders (CFUGs, buyers, government officials at different governance levels, private companies etc) on the problem/issue over the ecosystem service and how PES 2

5 scheme can address that problem (e.g. what is the value of the ecosystem service(s) and possible benefit PES can bring about). Though there will be a targeted awareness programmes in the later stages with actual service providers and buyers, this step rather focuses on broader stakeholders who may keep interest on the issue or the ecosystem service, but may not necessarily be a primary actor of the scheme. For instance, social clubs or groups, private companies etc. Step 3: Identification of service providers (resource managers) and beneficiaries This step involves the clear identification of who owns the service and is entitled to sell the service. In some cases, regardless of the ownership of the land, groups who are actually managing the service too may be considered as the service providers and are thus the recipient of the payments for the ecosystem service. This is the case in CF, where CFUGs are managing the forests while the government owns the forestland. In all cases, it is important to seek Free, Prior and Informed consent from the service providers before entering into any type of contract. The next step is to identify the buyer of the service being delivered.. In some cases, it might be difficult to identify the real beneficiaries of the service (buyers). This is especially in case of water service delivery in the downstream, where it is really crucial to differentiate who is using the water and who is not. For example, they could be private companies, communities, farmers, hotels among others. So excluding some or any of them might result in dissatisfaction, if not conflict. In some cases, the local communities can be the buyers of the service as well. 3

6 Step 4: Develop and agree on institutional arrangement It is imperative to discuss and agree on certain institutional and administrative arrangement in a PES scheme. For instance, in case of multiple providers of the service, there might be a need to agree and develop a certain entity comprising of representatives from different actors including the buyers, sellers, government agency, third party etc who will actually oversee the PES scheme and take necessary steps for conflict resolution. In certain situations, a PES committee can be formed that will include representatives from different stakeholders to govern the PES scheme. In case of CF, the executive committee may assume the responsibility of handling PES related affaires. In addition, all of the activities in CF are governed by the Operational Plan, which is be approved by the DFO. Therefore, before entering into any PES agreement, it will be necessary to make sure that the provisions allowing such schemes need to be clearly stated in the legal document. Step 5: Economic valuation Economic valuation is an important aspect of any PES scheme. This actually determines how much needs to be paid for the ecosystem service. For this, there needs to be some type of assessment of the ecosystem service to identify how much it is worth applying certain economic tools depending on the context. While assessing the economic value, it will important to make sure that it is based on the current market value of the ecosystem service. For example, what is the cost of per unit water in the current market. Economic valuation can be carried out by an expert on the subject matter like researcher, consultant etc. 4

7 Case 1: Economic valuation of ecosystem services in Sundarijal watershed A study by Kunwar (2008), based on Rapid Rural Appraisal, calculated the cost of conservation for local communities and park management to be around NRs 26,873 per household annually. Likewise, the value of the water service from Sundarijal catchment was calculated using the producers surplus of the electricity production and drinking water which was estimated to be NPRs million for the year 2008/09. On the basis of the catchment area, the value of the water services generated is NPRs 62,645/ha. Using the principle that the compensation of upstream landholders should be at least equal to the opportunity cost of land use, and the amount of the payment should be lower than the economic value of the environmental externality (Kosoy et al. 2005), the payment should be higher than NPRs 27,000 per household for the upstream community and lower than NPRs 62,000 per ha for the electricity and water companies. Source: Khatri et al. (2011) The actual value of the ecosystem service that comes from the assessment should be agreed among both the parties and endorsed by the committee or body formed to oversee the PES process. Step 6: Baseline data collection To assess the change and monitor the progress of the change, it will be important to carry out the baseline data. The data can be on social, economic and biophysical aspect which will be compared to the forecasted outcome of the PES scheme. Depending on the agreed PES scheme, the type of baseline data collected may vary. The measured changes could either be in the form of increment in the service delivered (e.g. increase in biodiversity of certain species, increase in water flow) or prevention of negative change to the ES (e.g. decrease in 5

8 pollutant flow in the water source, decrease in hunting of certain animal species). The responsibility for baseline data collection is usually carried out by third party for example NGO, research group, etc having expertise on the subject. Step 7: Dialogue/negotiation Following the baseline assessment and economic valuation of the ecosystem service, it will be important to arrive to a common understanding among the providers and buyers that service. In fact, the actual price of the ecosystem service will be determined by the negotiation between the two parties. The negotiation, in some cases, is also carried out to resolve contested issues on ownership of the ecosystem service (e.g. national park and local inhabitants). Moreover, the process may also include an agreement on the sharing of the cost incurred during baseline data collection. In case of community forestry context, the Executive Committee can be designated to carry out negotiation with the service buyers with the mandate from the General Assembly of the CFUGs. For this, the Executive Committee can conduct an expert consultation to secure their interest in the PES scheme. The role of an intermediary (VDC, DFO, clubs, NGOs) can be crucial in this regard. Step 8: Formal agreement - payment scheme The payment is carried out by the buyers to the providers of the ecosystem service. The payment usually depends on the economic valuation of the ecosystem services following step 5. However, the final payment will be based on the agreement between the two parties during negotiation (see step 7). Based on the agreement between the two parties, the payment scheme can differ for instance i) the payment can be on a yearly basis where buyers make a payment to the service providers for the agreed time frame; ii) Onetime payment, where the 6

9 buyers make a payment for a single time unless another set of agreement is made among the two parties; and iii) yearly increment, where payment is made to the service providers with certain yearly increment on the previous payment. Case 2: Payment scheme in Rupa Lake Area A voluntary payment mechanism in Rupa lake area in the midwestern part of the country is in place. Payment is made by the Rupa Lake Restoration and Fishery Cooperative, whose members are the beneficiaries from the services provided by the upstream farmers, to the local CFUG members in the upstream. The payments are made both in cash and in kind. The in kind payment includes scholarships to the local students, scholarship to the students from displaced communities particularly fishermen, support conservation activities around the lake, support in income generating activities like bee-keeping, fodder/forage plantation etc. Other indirect payments include construction of gabion boxes to control landslides, support of seedlings of broom grass, napier and oranges. Source: Pradhan et al In addition, the payment can be in different forms as agreed between the parties. The payment can be in the form of cash or non-cash. Noncash payment can include infrastructure development like roads, schools, temples among others that will not adversely affect the ecosystem service. In addition, providing scholarships to students, jobs, etc. 7

10 Step 9: Benefit sharing/cost sharing arrangement This step involves developing and agreeing the basis of payment as well as cost sharing in a fair and equitable manner among the producer and buyer groups. Usually, a PES scheme involves a pro-poor benefit sharing mechanism. In community forestry context, there is already a well established mechanism for benefit sharing where benefits from the community forest income are shared based on the well being ranking of the community forestry user groups (CFUGs). In other cases, a pro-poor mechanism, that are either in place or a new one, can be taken into consideration. The benefit sharing mechanism can also vary according to the payment received (e.g. cash, non-cash). The benefit sharing can either take place within a single group (e.g. CFUG) or sometimes there could be more than one producers of the service according to which benefit sharing arrangement needs to be agreed (e.g. between government and local communities). From service beneficiaries' perspective, there could be situations where a community is the buyer of the service. In that case, there might be a need to design a cost sharing mechanism which will determine the actual share of the payment in fair and equitable manner. Step 10: Implementation Implementation is the final stage of PES where all parties execute activities based on the agreement. From the service providers' perspective, the party will carry out activities that will ensure the 8

11 enhancement of the ecosystem service (e.g. tree plantation, control of water pollution, soil erosion control etc). While from the buyers' perspective, the party will need to make sure that the agreed payment is being made timely to the providers of the service. Step 11: Monitoring, reporting, verification Once the PES scheme is operational, Monitoring, Reporting and Verification (MRV) is carried out to justify the PES scheme and the payment made and received by the beneficiary and provider of the service respectively. The MRV requirements are agreed between the two parties during the negotiation and are carried out on three elements i.e. social, economic and biophysical. This is usually carried out by third party having expertise on the subject matter. There are numerous examples of PES in place both nationally and internationally. However, in all cases, the fundamental issue that needs to be considered is a defined ecosystem service, and buyers and providers of that service. Finally, the payment made should not have an adverse results like promotion of illegal harvesting of trees, construction of road in the name of development, construction of other infrastructure that have negative impact on the ecosystem etc. and there should be a long-term commitment from all parties to ensure the sustainability of the ecosystem services rendered. 9

12 References Khatri, D.B., Karki, R., Panta, K., Joshi, L. and Paudel, N.S Scoping of Payment for Ecosystem Services in Sundarijal Watershed. Kathmandu: ForestAction Nepal and ICIMOD. Kosoy, N., Tuna, M. M., Muradin, R., & Alier, J. M Payment for Environmental Services in Watersheds: Insight From a Comparative Study of two Cases in Central America. Oxford. Kunwar K J 2008 Payment for Environmental Services in Nepal (A Case Study of Shivapuri National Park, Kathmandu, Nepal), The Initiation 2008, Student Forum For Forestry Research and Environment Conservation (SUFFREC) pp MEA Ecosystems and Human Well-being: Synthesis. Washington DC: Island Press. Pradhan, N., Providoli, I., Regmi, B. and Kafle, G Valuing Water and its Ecological Services in Rural Landscapes: A Case Study from Nepal. Mountain Forum Bulletin, January

13 Abbreviations CF CFUGs DFO ES MRV NGOs PES VDC Community Forest Community Forest User Groups District Forest Office/Officer Ecosystem Services Monitoring, Reporting and Verification Non-Governmental Organizations Payment for Ecosystem Services Village Development Committee 11

14 For more information: Multi Stakeholder Forestry Programme Programme Coordinator's Office Services Support Unit (SSU) Forestry Complex, Babarmahal, Nepal Forestry Complex, Babarmahal, Nepal Tel: Tel: P.O. Box 12095, Kathmandu,, Nepal