Towards a green economy Regions

United States Canada

Western Europe

Japan and South Korea Australia and New Zealand Eastern Europe

Former Soviet Union Middle East

Central America South America South Asia

Southeast Asia China

North Africa

Sub-Saharan Africa Rest of the World Total

50% reduction in tariffs, no export subsidies and 50% reduction in domestic support to Agriculture

-1,069 -285

3,330

11,099 622 302 748

2,104 679

1,372 3,579 3,196 5,440 4,120 218 285

35,741

Strong Climate Change Scenario

-2,055 -20

1,325 -189

1,022 538

-6,865 -3,344 -240 805

-3,632 -3,813 71

-1,107 283

-308 -17,530

(Free trade and strong climate change)

-3,263 -237

4,861

10,970 1,483 883

-6,488 -1,213 444

2,237 -28

-552

5,543 3,034 458 -17

18,116

Table 3: Change in regional welfare over 20 years as a result of climate change and trade liberalisation, US$ million (findings from a model developed by Calzadilla et al. 2010)

5.3 Using market-based instruments

Market-based instruments that can be harnessed to foster a green economy include: ■ Payments for Ecosystem Services (PES); ■ Consumer-driven

accreditation and certification

schemes that create an opportunity for consumers to identify products that have been produced sustainably and pay a premium for access to them; and

■ Arrangements that send a scarcity signal including the development of offset schemes, the trading of pollution permits and the trading of access rights to water.

Each of these approaches has direct application to the water sector and the degree to which communities are likely to become interested in maintaining and investing in the provision of ecosystem services.

Payments for Ecosystem Services From a water perspective, there are two main types of payments for ecosystem services – those financed by the user of a service and those financed by a government or donor (Pagiola and Platais 2007; Engel et al. 2008). In either case, such schemes can be successful only when a secure source of money for the scheme has been

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identified and committed. Arguably, the most efficient are operated by users who are able to identify which services they want and the price they are willing to pay for them. Most government-financed programmes depend on financing from general revenues and, because they typically cover large areas, they are likely to be less efficient. Moreover, because they are subject to political risk, they are less likely to be sustainable. When a government or financial conditions change, support for the scheme can collapse (Pagiola and Platais 2007; Wunder et al. 2008).

Payments for Ecosystem Services schemes are becoming common in Latin America and the Caribbean region. In Ecuador, Quito’s water utility and electric power company pays local people to conserve the watersheds from which this company draws its water (Echavarría 2002a; Southgate and Wunder 2007). In Costa Rica, Heredia’s public-service utility pays for watershed conservation using funds derived from a levy on consumers (Pagiola et al. 2010).

Many small Latin American towns have similar schemes, including

Pimampiro in Ecuador; San Francisco

de Menéndez in El Salvador and Jesús de Otoro in Honduras (Wunder and Albán 2008; Herrador et al. 2002; Mejía and Barrantes 2003). Hydroelectric producers are also becoming involved. In Costa Rica, for example, public- sector and private-sector hydro-electricity producers are paying for conservation of the watersheds from which they draw water. Pagiola (2008) reports that these companies

Both scenarios combined