Lessons from payments for environmental services

1. Lessons from payments for environmental services Green Water Credits Workshop Presented by Ina Porras (iied) Nairobi, 11-12 October 2006

2. Structure of the presentation • What are Payments for Environmental Services (PES)? • What is the experience from ongoing cases in developing countries? • What are the challenges and opportunities for Africa?

3. What are PES? • Voluntary transactions • Between (a minimum of one) buyer and (a minimum of one) seller; • Conditional on land use that is expected to provide a environmental service • Also: • Private sector pays for previously considered public goods; • Represents new forms of funding • Depend on high levels of cooperation

5. Venezuela Peru South America Ecuador Colombia Brazil Bolivia Nicaragua Mexico Central America and Caribbean Honduras Guatemala El Salvador Costa Rica Caribbean Philippines Pakistan Asia Nepal Indonesia India China Africa Ongoing Tanzania South Africa Proposals Kenya Ongoing cases and advanced proposals of PES schemes Source: IIED 5 10

6. Lessons from developing countries • Policy, legal and institutional framework; • Design of payment mechanisms • Upstream land managers; • Downstream water users;

7. Policy, legal and institutional framework • Property or tenancy rights • PES benefit from supportive policy and legal setting • Cooperation is key • Political support very important • Civil society, NGOs and community groups are key in ensuring participation of small farmers

8. Design • PES is not about selling water. • It is about the ability to carry out certain activities that will affect water quality and quantity downstream. • Scientific basis must be clear to ensure transparency and sustainability

9. Design: transfer mechanisms • Direct contracts between sellers and buyers (La Esperanza) • Intermediary negotiations (includes trust funds - Quito); • Area-based with rules set at national level (Mexico and Costa Rica) • Product-based mechanism (certification) • Credits, licences, trading mechanisms (Australia)

10. Design: type of payments • Cash payments common and easier to ensure conditionality; • In-kind (seeds, training, beehives) also used, but more difficult to ensure conditionality; • On-going payments or compensations when farmers are required to stop activities (conservation); • Transitional payments (3-5 years) for improved land use activities.

11. Design: payment levels and monitoring • Payment or compensation should cover opportunity costs upstream • WTP from downstream users has to be sufficient to provide a significant incentive • Monitoring key but possible only with intermediaries with local knowledge

12. Upstream Issues • Benefits to providers must be tangible and reflected in better incomes • Payments help to diversify income and reduce vulnerability • Capacity and training required; • Need to focus on those capable of making required land changes; • More effective when there are organised groups operating;

13. Downstream Issues • There must be a business-drive in the scheme; • Private sector, parastatal groups and Governments are main sources of funding for ongoing payments; • Funding comes from: • additional fees to final users; • companies operations budget and • Governments re-allocations (CR fuel tax, Mexico irrigation charges)

14. Africa: opportunities and challenges • Large experience in S&W • Many small properties • Higher levels of (increasing) poverty • Many basins shared internationally; • Low and variable capacity in national and regional institutions • Multiple sources of authority for land and water issues (formal and traditional)