examining payments/rewards for environmental services : experiences from pro-poor rewards for...

EXAMINING PAYMENTS/REWARDS FOR ENVIRONMENTAL

SERVICES : EXPERIENCES FROM

PRO-POOR REWARDS FOR ENVIRONMENTAL SERVICES IN AFRICA (PRESA)

Sara NamirembeWith

Meine van NoordwijkDelia CatacutanLeimona Beria

PRESA Sites

ConceptsEnvironmental services • Biophysical outcomes of proper management

of natural resources• Have considerable impact on human beings

and wide natural processes.

PES (payments or rewards for environmental services) - harnessing market forces to increase positive environmental outcomes.

Redirecting development pathways towards environmental integrity

Positive incentives are needed to reward rural poor for the envirponmental services they can/do provide

RES mechanisms differ from ‘command & control’ Conditional: a “performance” basis for the rewards/payments

as opposed to entitlement

Voluntary: engagement of both ES providers and beneficiaries in a negotiated scheme through free choice at the individual level

Key aspects of RES Realistic: RES schemes based on scientifically sound

assessment of relationships of land use changes and ES provision. Feasible

Pro-poor: RES schemes must consider multiple dimensions of poverty

Context

Mechanism

+

PRESA SO FAR:Can watersheds be managed sustainably through negotiated agreements between landowners and potential beneficiaries?

REALISTIC

RES schemes based on scientifically sound assessment of relationships of land use changes and ES provision. FeasiblePropoor

Impacts of land use change - Kapingazi

Scenario Water yield (mm) Surface runoff % Base flow %

Base case 846 86 14

Convert tea farms to annual crops

936 84 16

Convert coffee farms to annual crops

864 88 12

Double built up areas

860 86 14

The impact of land use change on water yield is generally low.

Effectiveness of landuse practices on hydrology

Landuse practices

Sediment yield reduction (%)

Reduction in surface runoff (%)

Increase in base flow (%)

Contour farming with trees

49 16 8

Grass filter strips 38 - -

Grass waterway 41 - -

Terraces 85 22 10

Quantity: Soil and water conservation practices have little effect on water yieldQuality: Significant effect on sediment yield

Sasumua

Towards a business case for PWS - Sasumua

Grassed waterway (3m width by 20 km length - approx 15 acres)

Benefit to Nairobi City Water and Sewerage Cooperation Reduction in cost of alum:

Reduction in costs of desiltation of dam

Cost to 500 households

Year 1:

•Land Annual lease•Labour and grass

Year 2 onwards:

Net annual earning per household:566.4

1,725,000 1,725,000

283,200283,200

(Values in Kenya Shillings)

400,000

20% less sediment yield into Sasumua dam

Pay-back period based on constant cost of allum alone

Ulugurus Mts, Tanzania

Increasing value accruing to farmers1. Alternative payment

mechanisms - UlugurusCo-investment preferred - village infrastructure

Group payments – not likely to be successful

2. Exploiting other income flows from sustainable watershed management:

Carbon: Albertine Rift: in River Mubuku watershed

Usambaras: REDD feasibility in Sigi River watershed

Eco-certification Albertine Rift of crafts and honey

Biodiversity: Fouta Djallon

Sediment sources in Sasumua

Low erosion rates from the forest

High rates on some agricultural areas, exceeding 11.2 tons/ha per year

Reducing costs: targeting hotspots

VOLUNTARY

Both ES providers and beneficiaries in a negotiated scheme through free choice at the individual level

Are sellers willing to accept payments for ES supply?

Farmers willing to accept (WTA) payments for:

• Adopting agroforestry and other soil and water conservation actions

• enhancing water quality

BUT may underestimate opportunity costs $93/ha/y compared to model estimate of $232/ha/y (Kapingazi)

IF (Ulugurus): •Not located in the main villages/towns•They own sufficient assets - livestock

Nairobi water users - 2o beneficiaries• Willing to pay higher water tariffs

• Interested in increased and regular flow

Nairobi Water and Sewerage Cooperation - 1o beneficiary

•Burdened with multiple levies:

Water Act demands abstraction fee of 50cts/m3 (Approx KS 1m/month) to WRMA for watershed mgt.

•Not authorised to increase water tariffs

•Governance - Inadequate management

Are buyers willing to pay for ES?

CONDITIONALITYPerformance-based rewards

Western Usambaras, Tanzania

If performance will not happen without incentives

PROVIDERS

1. Performance is driven by – Perceived value of interventions at household levelPerceived value of capacity gainedNOT recurrent payments

•Ulugurus: Prototype payments, one year

•Upper Tana: UTZ coffee certification, 9 years

Risk of a crowding-out effect - Usambaras

BENEFICIARIESShort run: payments for effort based on trust – CSRLong run: rigorous proof needed

CES: Commoditized Environmental ServicesDirect interaction of ES providers & beneficiariesRecurrent monetary payments based on supply and demandNo explicit poverty targetActual ES delivery & direct marketability

COS: Compensating for Opportunities Skipped Paying for accepting restrictionsAchievement of a condition or effortPoverty target added with certain conditions

CIS: Co-Investment in (landscape) StewardshipEntrusting resource management to local Full trust of management plan & local monitoring with high social capital flexible contract , broad sanctions

van Noordwijk and Leimona (2010)

WHAT IS THE RIGHT MECHANISM?

van Noordwijk and Leimona (2010)

A strict interpretation of commoditized ES can be problematic.Monetary incentives may be counterproductive undermine existing norms not sufficient and/or durable

enough “Co-investment” in stead of “payment” appeals to both social and financial concepts.

CO-INVESTMENT AND SHARED RESPONSIBILITY ENTAIL

respect mutual accountability commitment to sustainable

development social exchange rather than

financial transactions.

Free and prior informed consent

Efficiency Fairness

Balancing act is needed

Sellers: • Communities• Government

s• Industry• Large-scale

investors

Buyers:Local & international companiesBanksGovernmentsIndividuals

Buyers:Local & international companiesBanksGovernmentsIndividuals

Intermediaries:RegulatorsBrokersProject developers e.g., NGOsResearchers

Intermediaries:RegulatorsBrokersProject developers e.g., NGOsResearchers

Initial interest

Effective increase

in ES

Signed contract

Exte

rnal

inve

stor

s an

d re

gula

tors

:le

arni

ng c

urve

Learning curve for local stakeholders (actors) of land use change

Smooth implemen-

tation?

Efficient + Fair reward systems require a two-way learning curve

Negotiations

WHERE TO WITH PES?

1. Continuing to generate evidence to better engage multiple actors

2. Relating to financial mechanisms at national scale. Examining •context where CES-COS-CIS apply•effectiveness/viability of private sector market-driven versus fund approach•the business case for publically funded PES

3. Examining aspects of scale and thresholds for ES supply

4. Contributing to the carbon agenda: stocks and fluxes, leakage, adaptation, co-benefits

5. Linking P/RES into food security and broader ICRAF programs such as:•Evergreen Agriculture including grasslands/Drylands•Millennium Development Goals

Thank You

Sara Namirembe (s.namirembe@cgiar.org)

PRESA World Agroforestry Centrehttp://www.worldagroforestrycentre.org/sea/Networks/RUPEShttp://presa.worldagroforestry.org