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Mexico’s Program for the Payment of Hydrological Environmental Services of Forests

Mexico’s Program for the Payment of Hydrological Environmental Services of Forests. Carlos Muñoz Piña Instituto Nacional de Ecología. 60 million hectares of temperate and tropical forests in Mexico. Land use change in Mexico 1993-2000. -. 5. 4. 3. 2. Annual rate of change %. 1. 0.

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Mexico’s Program for the Payment of Hydrological Environmental Services of Forests

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  1. Mexico’s Program for the Payment of Hydrological Environmental Services of Forests Carlos Muñoz Piña Instituto Nacional de Ecología

  2. 60 million hectares of temperate and tropical forests in Mexico

  3. Land use change in Mexico 1993-2000 - 5 4 3 2 Annual rate of change % 1 0 - 1 - 2 - 3 Temperate Forests Tropical Forests Shrubs Vegetación Otros tipos de Natural Grassland Induced pasture Crops hidrófila vegetación A country experiencing very fast deforestation

  4. Overexploited Aquifers

  5. Market failures Less silting and better water quality in watershed and recharge areas in aquifers. The market does not pay for the environmental services of forests: • Biodiversity Conservation • Carbon sequestration

  6. 3 Types of Hydrological Services • Aquifer Recharge • Improved surface water quality, less suspended particles and lower costs. • Reduce frequency and damage from flooding in short steep watersheds

  7. Deforestation and market forces Market signals (inputs and output prices) Decisions to change land use respond to: Costly cooperation in common property forestry Short term horizon induced by poverty

  8. Localities with high or very high marginality

  9. 60 million hectares of temperate and tropical forests in Mexico

  10. Land use changesControl vs. Incentives • In Mexico, government’s control of land use changes is costly, not effective and potentially poverty increasing. • So, necessarily conservation = profitable forests for communal owners taking land use decisions Otherwise: regulatory taking on the poor

  11. A public policy niche

  12. Program’s Objective • Stop the deforestation that threatens those forests critical for watershed-related environmental services in Mexico By Paying land owners to preserve forest land and avoid its transformation for other uses, such as: agriculture and cattle raising.

  13. Eligibility Areas for PSAH Forests important for water With potential future clients Forests owned by the poor or or Overexploited acquifers Cities > 5K Deep poverty municipalities or or High water scarcity zones Priority Mountains Providing other environmental services? or or H related natural disasters Natural protected areas

  14. Linking providers with those who benefit • Federal Fees Law reformed to introduce an earmarking of a portion of the water fee. Negotiations • Initial proposal 2.5% • Finance Ministry & National Water Commission want to exclude municipalities from payment, so fix amount to ~US$20 million.

  15. How much? Two ways of approaching the problem: • Value of the service: What would society loose if the forests were not there? • Opportunity Cost: What landowners would sacrifice if they kept the forest. • Between those 2 values is the relevant space of the transaction.

  16. Densidad .0015 Maíz RENTA N(s=282) .00125 .001 .00075 .0005 .00025 -1000 -750 -500 -250 0 250 500 750 1000 1250 Corn OPORTUNITY COSTS Beans Sheep & Goats Cattle Source: Luis Jaramillo (2003) www.ine.gob.mx

  17. Differentiated payment • A political economy mix, recommendation based on opp cost, combined with value of service & forestry lobby: • Cloudforests: $400 pesos (~US$37) per hectare per year • Rest of temperate and tropical forests: $300 pesos (~US$28) per hectare per year

  18. Forest area incorporated into PSAH

  19. PSAH 2003-2008: >1.2 million hectares

  20. Durango: a watershed supplying cities and irrigation districts

  21. Challenges for PES • Unexpected success: Three times as many applications as funds. (Excess demand) • Possibility of generating greater value to customers. • Who received the payments? • Lets look at the actual targeting…

  22. Targetting: • By value of environmental service • By level of poverty • By risk of deforestation • Important: voluntary program implies self-selection.

  23. Overexploited Aquifers

  24. Overexploited aquifers

  25. Overexploited aquifers

  26. Targeting the poor

  27. Poverty and PSAH 79% - 83%

  28. Targetting poverty

  29. Targetting poverty

  30. SEEKING EFFICIENCY • Objetive: Maximize protection of environmental services through avoiding deforestation • Efficiency: Maximize value to fee-payers through avoiding maximum hectares deforested at minimum cost, within budget constraint.

  31. How to measure real risk of deforestation? • Main driving force: land use changes. • More profitable agricultural and cattle ranching activities. • Short term horizon caused by poverty (Guevara:2002). • Specific patterns identified through econometrics: transport cost, slope, potential ag yields.

  32. “All models are wrong, but some are useful.”(George Box, quoted by Kennedy 1992: 73; quoted by Kaimowitz & Angelsen: 1998; and here).

  33. Una rejilla para puntos de muestreo

  34. Cambios de uso de suelo y distancia al poblado más cercano 100% 80% 60% 40% 20% 0% 15 75 135 195 255 315 375 435 495 555 615 675+ MINUTOS Primario conservado Secundario regenerado Primario degradado Primario deforestado Secundario sin cambio Secundario deforestado

  35. ANÁLISIS ECONOMÉTRICO 18k obs * Significativo a niveles mayores a 90%; ** Significativo a niveles mayores a 99%,

  36. Results for 2000 forests in Oaxaca

  37. Targetting: Risk of Deforestation

  38. Targetting: Risk of Deforestation

  39. 2008: Incorporating Watershed Targeting

  40. TopographicalZones and Watersheds

  41. DeforestationRisk and TopographicalZones(millions of hectares of forests) A significant amount of key watershed areas has a high and very high deforestation risk

  42. Modifying rules toincorporate new criteriaforselection: locationwithin a watershed and relativewaterscarcity of thewatershed

  43. Looking ahead • We need tests to compare areas with payment and areas without payment, to see if there is a difference (control by deforestation risk, obviously ) • The problem of the “sixth year”. Need to see what they do after the contract ends: • They can re-apply but no certainty that they are chosen • They had money and time to build a sustainable forestry operation or move into other markets for environmental services. It is an empirical question.

  44. Modifying behaviour, really (1) • Combinación de imágenes Spot y Landsat. Método que sobreestima la deforestación, por lo tanto tomar en cuenta sólo el valor relativo. • Muestra aleatoria, 160 predios. • La diferencia está entre el polígono pagado y las zonas (polígono o predio) no pagado.

  45. Modifying behaviour, really (2) • Imágenes Spot y Landsat. Umbral alto, método que subestima la deforestación, por lo tanto tomar en cuenta sólo el valor relativo. • Muestra aleatoria, 115 predios. • La diferencia está entre el polígono pagado y las zonas (polígono o predio) no pagado.

  46. Mexico’s Program for the Payment of Hydrological Environmental Services of Forests Carlos Muñoz Piña carmunoz@ine.gob.mx

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