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Box 7: Payments for Ecosystem Services


Payments for Ecosystem Services (PES) is an economic in- strument that consists of offering incentives to landowners in exchange for managing their land to provide some sort of ecological service that benefits society more broadly. A payment for environmental services scheme usually entails:


1. voluntary transaction between a provider and a beneficiary 2. a well-defined environmental service (ES), or a form of land use likely to secure that service


3. involves at least one buyer and one seller 4. if and only if the provider continues to supply that provi- sion of ES as a result of considered effort (conditionality).


Strict interpretations of this definition suggest that the PES concept cannot be applied in the majority of situa- tions in developing countries, as property rights of poten- tial ‘sellers’ remain contested, ES cannot be readily quan- tified and potential ‘buyers’ prefer ‘command and control’ approaches to securing the service. A broader concept of ‘rewards’ (van Noordwijk et al. 2004; Tomich et al. 2004; Kumar & Muradian 2009; TEEB 2010) has a wider applica- tion domain (Swallow et al. 2009) and has been applied in Indonesia and elsewhere in Asia (Leimona et al. 2009). Based on the Asian experience, three paradigms can be distinguished within the payment/rewards approach: 1.) commodification of ES (CES), 2.) compensation for oppor- tunities foregone (COS) and 3.) co-investment in steward- ship (CIS) (van Noordwijk and Leimona 2010). The latter concept is the most widely applicable and can include forms of tenure and management contracts for ‘watershed protection forest’ that are conditional on maintenance of ES, such as the ‘village forest’ agreements that are regu- lated in the 1999 Forestry Law but have not yet been widely applied (Akiefnawati et al. 2010).


Costa Rica has been a pioneer in a Green Economy mod- el, for based on public payment schemes as an incentive for private landowners to maintain or enhance precious ecosystem services (WWF PES InfoExchange Year 3 No 19) based on its forest legislation. Payments to landown- ers are made for the provision of four types of ecosystem services: 1.) carbon sequestration and storage (mitigation of greenhouse gas emissions); 2.) watershed protection


(hydrological services); 3.) landscape protection (conser- vation); and 4.) landscape beautification (for recreation and ecotourism). Under this system, landowners receive direct payments for the ecosystem services their lands are assumed to produce when they adopt sustainable forest management techniques that do not have negative im- pacts on the forest cover and which maintain quality of life (Oritz and Kellenberg 2001).


The Government of Costa Rica acts as the buyer/investor, seeking international stakeholder buy-in for carbon se- questration services and domestic stakeholder buy-in for expected hydrological services. This combination of do- mestic and international sales, together with tax revenue, international loans and donations, is used to finance en- vironmental service provisions (Chomitz et al. 1999). Costa Rica has made substantial progress in (involuntarily) charg- ing the ‘captive audience’ of water users, and more limited progress in charging beneficiaries of the biodiversity and carbon sequestration users (Pagiola 2008). Strong ‘path dependency’ in the way payments to service providers origi- nated in previous forest subsidy schemes, however, imply considerable room for improvement in the efficiency with which it generates environmental services (Pagiola 2008).


Lessons from other public incentive schemes (Jack et al., 2008) suggest lessons how the environmental, socioeco- nomic, political, and dynamic context of a PES policy is like- ly to interact with policy design to produce policy outcomes, including environmental effectiveness, cost-effectiveness, and poverty alleviation. While the initial success and vis- ibility of the Costa Rica program has encouraged experi- mentation elsewhere (FAO 2007b), a more critical literature (Porras et al. 2008; Swallow et al. 2009; Kosoy and Corbera 2010; Lele et al. 2010; van Noordwijk and Leimona 2010; Pascual et al. 2010; Peterson et al. 2010) is now emerging that suggests that a reframing of the way incentive-based mechanisms are perceived, and a deeper analysis of the social and psychological dimensions of human-decision making in response to external signals. Approaches that support collective action at local community level and ad- dress issues of conflict over land use rights are now seen as essential to achieve success.


In the above analyses no attention has been given to the vari- ous stakeholders and how a business-as-usual scenario with its negative effects on ecosystem services or conservation sce- nario with payments for ecosystem services would benefit these various stakeholders. Although much more work remains to be done on this aspect, one analysis shows that the local commu- nity would benefit most from a scenario under which the forest is conserved, negative effects on ecosystem services are avoid- ed and payments for ecosystem services are realized. Industry would gain most under a business-as-usual scenario, while local and national government benefits do not differ much for the two scenarios (Figure 7).


70


Opportunities in the region Because orangutans also occur on the island of Borneo, where specifically the Indonesian part of the island (Kalimantan) has large peatlands (Hooijer et al. 2006) and contains significant numbers of orangutans (Wich et al. 2008), it is important to as- sess whether by valuing ecosystem services, forests can compete with other forms of land use here as well. One study focusing on this issue (Venter et al. 2009) for Kalimantan found that for for- ests on carbon-rich peatlands, carbon prices needed to be in the range of USD 1.63-4.66 t/CO2


to offset timber profits and sub-


sequent transition into oil palm plantations. For forests on min- eral soils the carbon prices to offset opportunity costs for oil palm


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