Co-investment in ecosystem services: global lessons from payment and incentive schemes
Co-investment in ecosystem services: global lessons from payment and incentive schemes
09 January, 2018
FTA COMMUNICATIONS TEAM
This book discusses key lessons from various development stages of landscape stewardship for ecosystem services provision. It focuses in particular on agricultural landscapes in Africa, Asia, and Latin America, which have not featured prominently in existing literature.
Human use, overuse and neglect are degrading ecosystems, the very fabric which is producing ecosystem services that benefit human well-being, and which allowed natural capital to develop. Stewardships that might ensure ecosystem service provision in agricultural landscapes, are in reality extensively complex and comprise the interaction of social-ecological systems in a world ruled by economic and political feedback. In order to ensure their operationalization and sustainability, empirical cases of landscape stewardship for ecosystem service provisions in Africa and Asia show that incentive-based mechanisms, as a ways of governing the landscape, need to be fair to the actors involved as well as fulfil their main goal of providing ecosystem services efficiently.
A host of rich and diverse empirical cases are the result of more than a decade of field experience with Pro-poor Rewards for Environmental Services in Africa (PRESA) and Rewarding the Upland Poor for Environmental Services (RUPES) in Asia, two projects coordinated by the World Agroforestry Centre. This book highlights the gaps between the theory and the implementation of operational and sustainable ecosystem service incentive-based mechanisms on the ground. It provides and reviews arguments as to why specific forms of payment for ecosystem services (PES) schemes (including pro-poor payments, rewards, and co-investment) can be viable approaches toward sustainable land-use practices.
To this end, this book:
Provides new insights that support development practitioners with appropriate leverage points so that they may increase the potential of payment for ecosystem service (PES) schemes to deliver the desired outcomes.
Stimulates debate among scientists and analysts about PES as a theory of change in the developing-world context and where new models or knowledge are needed.
Recommends appropriate interventions for policy-makers to apply PES as a tool for sustainable land governance and management in contexts where poverty is rampant, business activity is low and environmental funds need to be better targeted in providing ecosystem services.
The growing collection of chapters in the book can be viewed here:
By Barbara Fraser, originally published CIFOR’s Forests News
Let’s assume you want to conserve a large, widely-forested watershed by compensating people for not cutting down trees. Would it be more effective to choose the most threatened, erosion-prone areas first? Would it be best to offer higher payments for the most strategic spots? Or should you offer the same payment per hectare to everyone, to avoid jealousy and keep transaction costs down?
Einstein once said: “Everything should be made as simple as possible, but not simpler.” This quest for the right level of sophistication also applies to payments for environmental services (PES).
A recent meta-study of 55 PES schemes from around the world sheds some light on what payment strategies work best, under particular circumstances, to bring about optimal environmental impacts.
“Considering the large diversity of experiences worldwide, we found that PES schemes fell into three neat clusters,” Wunder says. Some are implemented by governments, others are coordinated by non-governmental organizations (NGOs), and still others are private commercial ventures. The three groups all have different characteristics.
“Previous studies focused largely on public versus private models, but we also found a difference between private, commercial, and typical NGO schemes in terms of focus, relationship with markets, and other factors,” Wunder says. “The type of implementer and the characteristics of the PES scheme tend to go hand in hand.”
When a single ecosystem is to provide many ecological services, for example, it is easiest for the scheme to be managed by a government, which can act as a custodian for the many different players involved.
Non-governmental organizations may manage compensation for services such as biodiversity conservation, using funding from foundations, or perhaps companies that have a special interest in a certain area.
Private schemes include carbon storage, where there is a mechanism for trading credits, or watershed conservation, in which payments could be gleaned from hydroelectric power companies, water bottlers, or breweries.
The mix of types varies in different parts of the world, with public schemes dominating in Asia, Latin America and Europe, while the few schemes operating in Africa tend to have less public-sector involvement.
Forests tend to play an important role in all three types of PES schemes—public, private non-governmental and private commercial, the study found.
So what determines whether or not a PES model is likely to make a positive environmental difference, known as an “additionality”?
Using a simple “yes-or-no” distinction, the study found three key factors related to implementation.
First is whether the implementers target places that offer great possibility for gains, such as biodiversity hotspots, and places that are threatened, such as areas of high deforestation. Both forms of targeting offer possibilities for making a noticeable environmental difference.
Second is offering different payment rates, depending on the goal. Paying more for ecosystem services in cloud forest than other forests, as Mexico has done in its national watershed PES scheme, creates an additional incentive to protect a strategic ecosystem for capturing water. Especially vulnerable ecosystems—such as forest close to a road, where the threat of deforestation is higher—can also be better preserved if higher payments are offered.
Geographic targeting and differentiated payments may go hand in hand for greater effectiveness.
“Combining them helps ensure that you get the right people and land areas into your PES scheme,” Wunder says. “Targeting means you pre-screen who can take part in the scheme. Once you have decided that, you can offer to pay more for some features, making it more attractive for those special landowners or resource stewards to join.”
The third factor is whether penalties are applied for non-compliance with PES contracts —what the researchers call “enforced conditionality.” Failure to comply with the terms of a PES scheme usually carries a sanction, but those punishments often are not carried out, Wunder says. Failure to monitor and enforce compliance with the PES agreement can doom it to failure.
“Many of the schemes we looked at in our study have never punished anybody,” Wunder says. “They all monitor compliance, to some extent, but the real test is whether they sanction non-compliance. Often, that’s a political choice, because punishing people by cutting their payments can have a high political cost.”
Wunder and his colleagues from the French research center CIRAD (Agricultural Research for Development) hope to expand the study, adding more case studies and examining in more detail which types of schemes have the greatest impact or “additionality”.
Meanwhile, Wunder says, policymakers can learn from their present findings.
“The lesson is that it’s costly to oversimplify,” he says. “Many implementers still choose the easy way out—not targeting, paying the same amount per hectare or per family, and lax attitudes towards sanctioning.”
Even when penalties for non-compliance with PES agreements are stated clearly in contracts, it can be convenient to turn a blind eye, because punishing people can have a political cost.
“Our study shows that if you take the easiest route, with too many shortcuts, the likelihood for under-performance of PES is greater,” Wunder says.
This study is part of the PESMIX project with the French research center CIRAD (Agricultural Research for Development).
Research and development aim to benefit local communities but how should researchers and indigenous people work together in projects? Four researchers from the World Agroforestry Centre (ICRAF) met with members of the Tala-andig tribe in Indonesia to discuss solutions. Amy Cruz watched and learned.
The Smart Tree-Invest project under the CGIAR Research Program on Forests, Trees and Agroforestry has been generally well-received in Indonesia, Vietnam and the Philippines. Yet, team members in the Philippines wanted to know what local communities think of the project. They met representatives from the Tala-andig tribe in Songco, Lantapan in Bukidnon Province in the southern Philippines.
ICRAF’s work in Lantapan is part of the Climate-smart, Tree-based, Co-investment in Adaptation and Mitigation in Asia (Smart Tree-Invest) project, which aims to help communities create local solutions to cope with climate-change risks.
ICRAF had identified the Tala-andig as important custodians of a critical watershed that was increasingly threatened by the impact of climate change. Smart Tree-Invest is funded by the International Fund for Agricultural Development. IFAD stresses the importance of participation of marginalized groups, including women, youth and indigenous peoples; and the empowerment of smallholding farmers.
For the Tala-andig, the possibility of a ‘co-investment scheme’—in which all people interested in a watershed work together to ensure its benefits are sustainable—would not only mean an additional source of financial support but is also seen as way of strengthening their culture and introducing it to others.
According to Victorino Saway, known to the Tala-andig as Datu Migketay, ‘The project could be seen as co-investment in the culture of our tribe because it is part of our culture to preserve the environment’.
If a co-investment scheme can preserve the tribe’s culture then the people can in turn contribute to improving environmental conservation.
Yet, the elders remained cautious. Datu Migketay talked about the importance of first building trust between the project team and the tribe. He emphasized how respecting their culture was important for the sustainability of any project.
Different understanding of development
There was often a disjunction, he explained, between some developers and his people because, for example, the tribe’s definition of development differed from the definition used by some of the organizations implementing projects in their area.
He gave the example of cementing roads in their village, which could be considered as a welcome development providing faster access all year round but these same roads also contributed to the fragmentation of their tribe by allowing individuals and families to disperse far from the central group.
Datu Migketay says of such development: “To be honest, I am tired. Tired of projects that only benefit those implementing them: projects that do not have any positive impacts for our people.”
This was not meant to altogether discourage development projects or to say that research in development would not achieve anything. However, if institutions involved in development and research in development, such as ICRAF, wanted to truly improve people’s lives then an open, respectful approach was needed.
Researchers, in particular, should be ready to challenge standardized ways of thinking—even their own—and change inappropriate practices. Putting this to the test, researchers took the first step in growing mutual respect with the Tala-andig by obeying the directive to undergo the ritual.
As a result, the elders allowed researchers to return and conduct a participatory cultural impact assessment with the whole tribe to ensure that everyone, including women and young people, can identify their roles in the project. All members of the tribe shall also further discuss potential benefits and disadvantages of Smart Tree-Invest and decide as a group if they want to continue or not.
And so whether the project will continue with the Tala-andig is in the hands of the tribe themselves. Researchers may be hopeful as, during the special ceremony, the tribal leaders had asked for guidance from their highest god, Magbabaya, and spirits. Afterwards these elders noted that it seemed that Smart Tree-Invest could benefit their people.
Researchers have found that smallholders participating in a payments for ecosystem services (PES) scheme in Cidanau Watershed, Indonesia had more diverse diets than farmers who weren’t participating. Food security, however, is still an issue for the watershed so promoting agroforestry could not only increase households’ incomes but also improve their nutrition.
Cidanau Watershed in Banten province, Indonesia, is the main source of water for the industrial city of Cilegon. To maintain its water-provisioning function, Forum Komunikasi DAS Cidanau, a multi-stakeholder communication forum in the watershed, facilitated a PES scheme, wherein smallholders who voluntarily adopted sustainable agroforestry practices received annual cash payments from the companies that benefited from the water
Most farmers who joined the PES scheme in Cidanau now practise agroforestry and choose crop diversification over intensification to reduce risks from agricultural challenges, like fluctuating market prices, lack of farming knowledge and migration of the young people to cities. Generally, high agro-diversity, as is expected in such diversified farming systems, results in greater diversity of farmers’ diets and improved nutritional status. However, Banten province, including Cidanau, still reports low nutritional status of the local population. This holds even in the rural areas, where diets are commonly thought to be non-diverse and dependent on their farm produce.
It is in this context that researchers from ICRAF The World Agroforestry Centre and the Technical University of Cologne in Germany conducted a study on food, nutrition and profitability of farming systems in Cidanau Watershed. Supported by the CGIAR Research Program on Forests, Trees and Agroforestry, the study investigated the links between different farming systems, household dietary diversity, including smallholders’ household food consumption, and the profitability of tree- and crop-based farming systems.
Key research questions were: ‘Do agroforestry farmers who receive PES payments make different management decisions for their plots compared to those who don’t? If so, does it lead to higher monetary returns for their households? Also, do households that receive compensation have higher dietary diversity and improved nutritional status than those that are not part of the PES scheme?’
In April 2016, the researchers conducted a survey with smallholding households, both those participating and those not participating in the PES scheme. From seven villages in Cidanau, 45 farmers were interviewed for a farming profitability analysis, while 105 women, mostly wives of farmers, were interviewed regarding their household food consumption.
The preliminary results show that the crop-based farming systems in the area were predominantly rice-based, whereas tree-based systems largely grew clove and ‘melinjo’ (Gnetum gnemon), usually mixed with some ‘petai’(Parkia speciosa), durian, banana and other species. Farming systems widely vary in Cidanau, as each farmer can have different tree and crop combinations in their plots. Yields and farm gate prices of commodities also have a very wide range.
On average, farmers receiving compensation have a higher tree density on their plots. However, results also indicated that food security was still an issue throughout the watershed. More than half of all households fear not having enough food, while some go to bed hungry.
Diets throughout the watershed are quite non-diverse without taking into consideration the farming systems they employ. The researchers also found self-generated produce plays only a minor role in food consumption while bought and processed foods are highly important for households’ dietary diversity. Households that joined the PES scheme had more varied dietary patterns and higher consumption of meat and carbohydrates.
A strategy to increase household incomes and purchasing power is needed to improve people’s nutritional status in Cidanau. Increasing yields and consequently, profits by improved plot management or promotion of planting crops in the agroforest understorey could be easy and inexpensive starting points for the smallholders.