Aug 5, 2016 - University of California, San Diego. December ... Tacuba, San Francisco de Menéndez ... Mexico: Technical support to national PES program.
8/5/16
Paying for Biodiversity Services: Mixing Domestic and International Financing
Stefano Pagiola Environment Department World Bank
International Financing for Biodiversity Conservation in Developing Countries University of California, San Diego December 5-6, 2003
Paying for Biodiversity Services: Mixing Domestic and International Financing
1. Payments for Environmental Services (PES) 2. Making PES work 3. Applying PES to biodiversity: the Regional Integrated Silvopastoral Management Project 4. Financing constraints 5. Mixing domestic and international financing
Stefano Pagiola, World Bank, 2003
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Payments for environmental services
The problem Deforestation and use for pasture
Conservation
Benefits to land users
• Loss of water services
Costs to others
• Loss of biodiversity • Loss of carbon sequestration
Stefano Pagiola, World Bank, 2003
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Payments for environmental services
The logic of PES Deforestation and use for pasture
Conservation with payment for service Payment
Benefits to land users
Costs to others
Important! This logic is repeated every year • Need annual payments • Need sustained income flow Stefano Pagiola, World Bank, 2003
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Payments for environmental services
The principles of PES ! Those who provide environmental services get paid for doing so (‘provider gets’) ! Those who benefit from environmental services pay for their provision
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Payments for environmental services
National initiatives Colombia:
! Cauca Valley water user associations
Costa Rica:
! FONAFIFO/Pagos por servicios ambientales ! Heredia: Environmentally adjusted water tariff
Ecuador:
! Quito: FONAG ! Cuenca: ETAPA
El Salvador:
! Mesa permanente de servicios ambientales ! Tacuba, San Francisco de Menéndez
Mexico:
! Pago por servicios ambientales bosques-agua ! Coatepec pilot
Venezuela:
! CVG-Edelca payments for conservation of Río Caroní (includes Canaima NP)
South Africa:
! Working for Water Program Stefano Pagiola, World Bank, 2003
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Payments for environmental services
World Bank support ! Projects under implementation: ! Costa Rica: Ecomarkets Project ($33 million WB + $8 million GEF) ! Colombia/Costa Rica/Nicaragua: Regional Integrated Silvopastoral Ecosystem Management Project ($4.5 million GEF) ! Guatemala: Western Altiplano Natural Resources Management Project (US$32 million, incl. US$2 million pilot PES component)
! Projects under preparation: ! ! ! !
Mexico: Technical support to national PES program Venezuela: Canaima National Park Project South Africa: Cape Action Plan for the Environment (CAPE) Dominican Republic, Ecuador, El Salvador: Pilot PES projects
! Research: ! Case studies ! Hydrological aspects ! Valuation
! Capacity building: ! Courses in Ecuador, Venezuela, Panama, Perú, Mexico, South Africa, Senegal Stefano Pagiola, World Bank, 2003
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Making payments for environmental services work
Main steps 1. Understanding the science…
Land use
… and the economics Hydrological effects
Water services
Welfare of water users
Carbon sequestration
CERs
Carbon buyers
Biodiversity conservation
Ecosystem services
Welfare of beneficiaries
Payment 2. Capturing benefits 3. Paying service providers
Stefano Pagiola, World Bank, 2003
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Making payments for environmental services work
Applying PES to different services Difficulty of application Water services
Step 1. Understanding the science 2. Capturing benefits
3. Paying providers
High
Carbon sequestration
Biodiversity conservation
Medium/Low Medium/Low
Medium/Low High/Medium
Very high
Depends primarily on local conditions Stefano Pagiola, World Bank, 2003
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Regional Integrated Silvopastoral Management Project (RISEMP) ! Pilot use of PES to promote silvopastoral practices ! Pilot sites: ! Quindío, Colombia ! Esparza, Costa Rica ! Matiguás-Río Blanco, Nicaragua
! Financed by GEF ($4.5 million), implemented by World Bank, prepared with assistance of LEAD ! Field implementation by local NGOs: ! CIPAV, Colombia ! CATIE, Costa Rica ! Nitlapan/UCA, Nicaragua
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Regional Integrated Silvopastoral Management Project
Context: Degraded pastures ! Expansion of livestock production a major cause of deforestation in Latin America " Considerable loss of biodiversity ! Much of this expansion in lands unsuited to it, quickly degraded ! Some are reverting to forest, but most cannot " Large areas of biodiversity-poor land Quindío, Colombia 11
Stefano Pagiola, World Bank, 2003
Regional Integrated Silvopastoral Management Project
Solution: Silvopastoral systems ! Combine trees with livestock production ! Use of trees in pastures ! Cut-and-carry systems ! Live fencing
Paiwas, Nicaragua
Quindío, Colombia 12
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Regional Integrated Silvopastoral Management Project
Benefits of silvopastoral systems ! On-site benefits: ! ! ! !
Promote soil fertility Provide shade Provide fodder Provide additional products (timber, fruit, etc)
! Biodiversity benefits: ! Host larger number and wider variety of species ! Help connect remaining natural habitats
! Carbon benefits: ! Sequester more carbon in soil and biomass
! Water benefits: ! Increased infiltration (but higher evapotranspiration) ! Improved water filtration Stefano Pagiola, World Bank, 2003
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Regional Integrated Silvopastoral Management Project
Why are silvopastoral systems not used? ! Need for technical assistance ! High investment requirements ! Marginal profitability for farmers ! Tenure insecurity
Stefano Pagiola, World Bank, 2003
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Regional Integrated Silvopastoral Management Project
Profitability of silvopastoral practices 1,250
Net farm income (US$)
1,000 750 500 250 Current practices
0
Silvopastoral practices
-250 -500 0
1
2
3
4
5
6
7
Note: 20ha farm in Nicaragua
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9 10 11 12 13 14 15 16 17 18 19 20 Year
Very marginal
Returns to silvopastoral practices NPV (50 yrs, 10%)
US$439
IRR
11.8%
On-site benefits only! Stefano Pagiola, World Bank, 2003
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Regional Integrated Silvopastoral Management Project
How does one ‘buy’ biodiversity? ! Cannot ask land users to sell biodiversity ! Can pay for more biodiversity-friendly land uses ! But not all land uses equally biodiversity-friendly ! Create index of biodiversity benefits by land use
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Regional Integrated Silvopastoral Management Project
Biodiversity index Land use
Points per hectare
Crops (annual, grains, and tubers)
0.0
Perennial crops (plantain, unshaded coffee)
0.2
Natural pasture
0.0 without trees, 0.3 with trees
Improved pasture
0.0 without trees, 0.3 30 trees
Fruit crops
0.3 monocrop, 0.4 diverse
Shaded coffee
0.6
Fodder bank
0.4 monocrop, 0.6 diverse
Commercial tree plantation
0.4
Bamboo (guadua)
0.5
Riparian forest
0.8
Secondary forest
(>10m2)
Primary forest
0.9 1.0
Notes:
+0.1 for multiple species (>5); +0.1 for multiple shade species; +0.1 for multi strata; +0.1 for connectivity; +0.2 with understory; +0.3 with species enrichment; +0.1 if riparian; +0.1 with species enrichment Source: Pagiola and others, 2003. Stefano Pagiola, World Bank, 2003 17
Regional Integrated Silvopastoral Management Project
Paying service providers ! Compute initial points from baseline land use ! Pay baseline points $5/point ! Monitor land use change Finca Putumayo, Quindío, Colombia
! Compute incremental points ! Pay incremental points $50/ point/year, for 4 years 0.6mx0.6m image = US$0.25/ha
Stefano Pagiola, World Bank, 2003
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Regional Integrated Silvopastoral Management Project
Impact of PES on silvopastoral profitability 1,250
Net farm income (US$)
1,000 750 500 250
Current practices Silvopastoral practices
0
Silvopastoral practices with PES
-250 -500 0
1
2
3
4
5
6
7
Note: 20ha farm in Nicaragua
Returns to silvopastoral practices
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9 10 11 12 13 14 15 16 17 18 19 20 Year
Without PES
With PES
NPV (50 yrs, 10%)
US$439
US$1,301
IRR
11.8%
17.6% Stefano Pagiola, World Bank, 2003
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So what’s the problem? ! Who’s going to pay? ! How can we make annual, indefinite payments?
Stefano Pagiola, World Bank, 2003
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Financing constraints
Who’s going to pay? Capturing benefits is easiest when beneficiaries ! Are easy to identify ! Are already organized ! Easier to negotiate agreements ! Already have payment mechanisms
! Are few ! Receive well-defined benefits
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Financing constraints
Who’s going to pay? Water services
Biodiversity services
Easy to identify?
√
X
Already organized?
√
X
Few?
√
X
Receive well-defined benefits?
√
X
Are service users…
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Financing constraints
Need for annual payments ! In most cases PES need to be made annually, and indefinitely ! Water services: easy to do, as people will keep using water indefinitely
! Most biodiversity conservation financing mechanisms (GEF, NGOs) not set up to make long-term payments ! Exception: Conservation Trust Funds (CTFs) ! But: expensive Stefano Pagiola, World Bank, 2003
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Financing constraints
Why do we need annual payments? What if on-site returns to silvopastoral practices look like this? 1,250
Net farm income (US$)
1,000 750 500 250
Current practices Silvopastoral practices
0
Silvopastoral practices with PES
-250 -500 0
1
2
3
4
5
6
7
8
9 10 11 12 13 14 15 16 17 18 19 20 Year Stefano Pagiola, World Bank, 2003
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Solving the conundrum ! Mixing domestic and international financing
Stefano Pagiola, World Bank, 2003
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Making payments for environmental services work
Applying PES to different services Difficulty of application Water services
Biodiversity conservation
1. Understanding the science
High Hard to start
Medium/Low Easy to start
2. Capturing benefits
Medium/Low Sustainable
Step
3. Paying providers
Potential synergies
Very high Unsustainable
Depends primarily on local conditions Stefano Pagiola, World Bank, 2003
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Making payments for environmental services work
Solving the conundrum ! Mixing domestic and international financing ! Use short-term international financing to create payment mechanism ! Domestic water payments take over long-term financing burden
Stefano Pagiola, World Bank, 2003
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El Salvador National Environment Management Project
Project design Project Components
GEF
2. PES
3. Natural area management
Other critical areas
Corridors
4.
Monitoring
WB loan
Institutional Strengthening
Financing 1.
Natural areas
Outputs
• Reduced vulnerability to floods • Improved water quality • Reduced sedimentation • Other…
• Biodiversity conservation
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El Salvador National Environment Management Project
PES Component Project Components
GEF
2. PES
3. Natural area management
Other critical areas
Corridors
4.
Monitoring
WB loan
Institutional Strengthening
Financing 1.
Natural areas
Outputs
• Reduced vulnerability to floods • Improved water quality • Reduced sedimentation • Other…
• Biodiversity conservation
Stefano Pagiola, World Bank, 2003
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El Salvador National Environment Management Project
Natural area management component Project Components
GEF
2. PES
3. Natural area management
Other critical areas
Corridors
4.
Monitoring
WB loan
Institutional Strengthening
Financing 1.
Natural areas
Outputs
• Reduced vulnerability to floods • Improved water quality • Reduced sedimentation • Other…
• Biodiversity conservation
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El Salvador National Environment Management Project
Synergy between components Project Components
GEF
2. PES
3. Natural area management
Other critical areas
Corridors
4.
Monitoring
WB loan
Institutional Strengthening
Financing 1.
Natural areas
Outputs
• Reduced vulnerability to floods • Improved water quality • Reduced sedimentation • Other…
• Biodiversity conservation
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El Salvador National Environment Management Project
Watershed protection service Origin of water flows PES-eligible activities in the watershed • In riparian zones
Water users
• On steep slopes Stefano Pagiola, World Bank, 2003
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El Salvador National Environment Management Project
Biodiversity corridors Biodiversity corridor
Core zone Buffer zone
Protected area 2 Core zone
Buffer zone
Protected areas are small and isolated: not viable Biodiversity corridors help make them viable
Protected area 1 Stefano Pagiola, World Bank, 2003
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El Salvador National Environment Management Project
Biodiversity corridors Biodiversity corridor
Core zone Buffer zone
Core zone
Buffer zone
PES-eligible activities in Protected area 2 the corridor • Very biodiversity-friendly
• Biodiversity-friendly
Protected area 1 Stefano Pagiola, World Bank, 2003
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El Salvador National Environment Management Project
Targeting: Different areas A
C
B PES-eligible activities in the watershed • In riparian zones
PES-eligible activities in the corridor • Very biodiversity-friendly
• On steep slopes
• Biodiversity-friendly
PES-eligible activities • Area A • Area B • Area C Stefano Pagiola, World Bank, 2003
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Making payments for environmental services work
Problem solved? ! How much overlap between biodiversity and water service priorities? No overlap, but need for biodiversity-specific funding is reduced
! Geographically? A B
C
A
No/limited biodiversity benefits from conservation
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Can water services help finance Bolivia’s protected areas? ! How much potential? ! Most PAs downstream of users, so no/limited potential ! Limited potential in specific cases Tunari NP (municipalities, HEP) Cordillera de Sama (irrigation, HEP)
Aguarague NP (municipalities, irrigation) Stefano Pagiola, World Bank, 2003
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Making payments for environmental services work
Problem solved? ! How much overlap between biodiversity and water service priorities? ! By type of land use? A
How much overlap? B
PES-eligible activities in the watershed
C PES-eligible activities in the corridor
A PES-eligible activities • Area A • Area B • Area C Stefano Pagiola, World Bank, 2003
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Conclusions ! Possible to contract for biodiversity conservation ! Need to understand link between land use and biodiversity ! Need to understand economics of land use decisions
! Key issues: ! Sustainability of funding ! Transaction costs (especially for involvement of poor)
! Possible synergies between domestic and international financing ! Extent of synergies needs to be determined, will be case-specific ! Even if few synergies, effective domestic financing of conservation can reduce need for international financing Stefano Pagiola, World Bank, 2003
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