GEF IW: LEARN / IUCN Regional Workshop on Designing Payments for Ecosystem Services

Are Payments for Ecosystem Services (PES) a viable way of financing management of river basins and coastal environments? What steps are needed to develop PES schemes? What experiences and lessons learned have been generated from attempts to develop PES in the real world?

GEF IW: LEARN / IUCN Regional Workshop on Designing Payments for Ecosystem Services, Vietnam Photo: IUCN

These are some of the questions examined at the IUCN-GEF IW-Learn workshop on Designing Payment Schemes for Ecosystem Services held from April 3-5, 2008 in conjunction with the Global Forum on Oceans, Coasts and Islands in Hanoi, Vietnam.

An increasing number of multilateral development projects have ambitions to develop PES as a mechanism for sustainable financing of ecosystem-based management of natural resources. These initiatives reflect a relatively young body of experience from around the world, which has so far mainly focused on the application of the PES concept to watershed management. Interest in developing PES schemes for coastal and marine environments is growing, including ways to link river basins and downstream marine ecosystems.

The workshop was attended by more than 40 people, who came to Hanoi from as far afield as Samoa and India. Participants represented GEF International Waters projects and partner institutions from government and NGOs. Some brought mostly perspectives from freshwater systems, others from marine ecosystems. All brought an interest in understanding the principles behind PES and practical approaches to designing and implementing workable payment schemes.

Learning by participants was supported by a series of case studies presented to the workshop from around the world, but including regional examples from China, the Philippines, India and Vietnam. These illustrated PES applications ranging from user fees in parks or Marine Protected Areas, to payments by hydropower companies to upstream land-users to reduce erosion, and implementation of sea-use rights to address excessive use of marine resources. Common to all schemes were site-specific challenges requiring a pragmatic approach, the building of trust, and sound monitoring to ensure a constant flow of funds to clearly identified beneficiaries.

Arlene Amponin from Resources, Environment & Economics Centre for Studies in the Philippines gave an example from the Manila Bay area of how understanding the opportunity costs for environmental services can help in designing market-based incentives for conservation. She explained, “Only a few mangroves are left in the reclamation area, so property developers and the public reclamation authority computed commercial value of land in coastal lagoons. This allowed us to estimate the opportunity cost of protecting mangroves and coastal habitats from clearing and development. We tried to do resource valuation with mangroves, migratory birds, and endangered species in the area. We compared the commercial value to the value of mangroves.” With this knowledge, it was possible to convince the authorities that conservation of mangroves and the ecosystem services they provide, for example to fisheries, will benefit from finding ways of offsetting these opportunity costs

Chetan Agarwal, of Winrock International India, described a PES scheme from a small watershed where soil erosion is damaging downstream livelihoods. Villagers downstream looked at what sedimentation in the river was costing them and decided that the best thing was to help pay for soil conservation upstream. So, upstream and downstream villagers negotiated a deal. They decided not to pay with cash, but with tree saplings instead. As Chetan explained, “Obviously the benefit of saplings is that they don’t have to buy them. The second benefit is that when the saplings grow, they’ll become trees and upstream villagers will get other benefits.”

It is clear that developing payment schemes does not depend only on pure economics. There need to be laws and institutions in place that make provision for and have capacity for effectively facilitating transactions. Negotiation between providers of ecosystems services and buyers is also a key. To explore the issues that arise in PES negotiations, participants engaged in a lively role-play scenario, negotiating agreements among stakeholders, including the electrical engineer Mr. Ki Lo Wat and the politician Mme. Vo Tfa Mi, in efforts to increase benefits and equity among upstream and downstream actors. It was evident through this exercise that in addition to creating incentives, well-designed PES schemes can open dialogue over how to better manage ecosystem services and improve benefit sharing in watersheds and marine and coastal ecosystems.

A report from the workshop will be released by IUCN this summer whilst all presentations from the workshop are posted to:

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