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CRITERIA AND MECHANISM FOR REWARDING UPLAND POOR FOR THE ENVIRONMENTAL

SERVICES THEY PROVIDE*)

Kriteria dan Mekanisme Pemberian Imbalan kepada Petani Miskin di Hulu atas Jasa Lingkungan yang Mereka Hasilkan

Meine van Noordwijk1, Bustanul Arifin1,2, and Beria Leimona1

World Agroforestry Centre (ICRAF)1, Bogor; Lampung University2, Bandar Lampung, Indonesia. [email protected]

Abstract

As agriculture evolves from a pure production focus to considerations of the multifunctionality of the rural landscape, the rationale and possible mechanisms need attention for internalizing the environmental services that have largely remains externalities in the dominant decision process. While this discussion in developed countries is politically linked to the acceptability of ‘agricultural; subsidies’, the concerns in the developing countries are directly linked to poverty reduction and millenium development goals. This paper derives from an effort to synthesize current experience across the developing world of what is broadly described as compensation and rewards for environmental services (CRES), and is focussed on criteria and indicators, and typologies of situations. Two main classes and four main criteria were formu-lated. The first class relates to the effectiveness, efficiency and sustainability of the CRES institutions, with the environmental services as the primary target and criteria that relate to three questions (Would rewards be realistic? Will they be voluntary? What conditionality will apply?) that predominate in the scoping, stakeholder analysis and negotiation + implementation stages, respectively). The second class is aimed at the equity dimension with also three main questions (Is poverty linked to ES issues? Who is/will be excluded? Are the rewards ‘pro-poor’?) for the three stages. A total of 12 sub-criteria with a range of possible indicators is proposed within the overall headings of realistic, con-ditional, voluntary and pro-poor. A number of prototypes have been recognized for ES reward mechanisms and experience is currently obtained as part of the RUPES project (Mechanism for Rewarding Upland Poor for the Environmental Services they Provide).

*) This paper is in large sections derived from a draft ‘Issue paper’ Criteria and indicators for ecosystem service reward and compensation mechanisms: realistic, voluntary, conditional and pro-poor prepared as part of a scoping study for IDRC’s future programmatic investment in the Poverty & Environment domain; comments are welcome in this stage, but for quotation please refer to the final text.

Van Noordwijk et al.

Abstrak

Pada saat pertanian berkembang dari suatu keadaan yang murni tertuju pada produksi ke kondisi diperhitungkannya multifungsi lingkungan pedesaan, mekanisme rasional yang memiliki peluang perlu dipikirkan untuk menginternal-isasikan jasa lingkungan yang sebagian besar masih tetap dianggap sebagai eksternalitas dalam proses pengambilan keputusan yang dominan. Sementara pembahasan ini di negara-negara maju secara politis dikaitkan dengan persetujuan akan subsidi pertanian, di negara-negara berkembang pertimbangannya berkaitan langsung dengan upaya pengentasan kemiskinan dan pencapaian pembangunan di era milenium. Makalah ini disusun dari hasil sintesis berbagai pengalaman terbaru di negara-negara berkembang terhadap apa yang paling banyak diusulkan sebagai kompensasi dan imbalan jasa lingkungan (CRES), dan difokuskan pada kriteria dan indikator, dan tipologi dari berbagai keadaan. Dua kategori (kelas) pokok dan empat kriteria utama diformulasikan. Kategori pertama berhubungan dengan efektivitas, efisiensi, dan keberlanjutan lembaga CRES dengan jasa lingkungan sebagai target utama dan kriteria yang berkaitan dengan tiga pertanyaan (Apakah imbalan bersifat realistis? Akankah mereka berpartisipasi secara sukarela? Persyaratan apa yang akan diaplikasikan?) yang paling dominan secara berturut-turut dalam cakupan, analisis dan negosiasi dari pemangku kepentingan (stakeholder) + tahap implementasi. Kategori kedua ditujukan pada ukuran-ukuran keadilan (equity) yang juga memiliki tiga pertanyaan (Apakah kemiskinan berkaitan dengan isu jasa lingkungan? Siapa yang/akan tidak termasuk (tidak boleh ikut)? Apakah imbalan memihak yang miskin?) untuk tiga tahapan. Sebanyak 12 sub kriteria dengan suatu selang indikator yang memungkinkan diusulkan di dalam keseluruhan bagian dari judul realistis, bersyarat, sukarela dan pro miskin. Sejumlah model telah dikenal untuk mekanisme imbalan jasa lingkungan dan pengalaman baru telah didapatkan sebagai bagian dari proyek RUPES (Mechanism for Rewarding Upland Poor for the Environmental Services they Provide).

THE CGIAR AND MILLENNIUM DEVELOPMENT GOALS

The Future Harvest centres supported by the Consultative Group on International Agricultural Research (CGIAR) are committed to ending global poverty, contributing to the 2015 targets of the Millenium Development Goals (MDG). They also anticipate that further progress will be needed beyond that date, which requires that fundamental questions are addressed now. The Millenium Development Goals can only be reached by reducing both rural and urban poverty. Key dimensions of poverty are lack of food (quantity, quality), lack of income to buy food, lack of access to clean water, lack of access to energy, lack of voice in the public and political arena, lack of access to relevant

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Criteria and Mechanism for Rewarding Upland Poor

education and lack of respect as a human being. Integrated natural resource management is essential to address all these dimensions of poverty, both for rural and urban poor. Forest use and protection, and forms of agroforestry (using trees on farm and in the landscape) will be an important component of integrated natural resource management reducing various forms of poverty.

Economic growth as provider of employment in urban and non-agricultural sectors has to be the main way out for the next generation of rural people across the tropics. This requires both the provision of affordable high quality food and the provision of clean water and other environmental services. The real and perceived contrasts and tradeoffs between these two aspects of agroecosystems thus need to be resolved. Agricultural intensification has traditionally supported the ‘affordable food’ part of this relationship, but also caused concern on the environmental service side. ‘Domesticated forests’ and agroforestry as pathway for a more gradual intensification has the potential to balance the food and water aspects of urban Millenium Development Goals, while also improving rural livelihoods. The CGIAR centres are jointly approaching these targets by partnering with national and international partners across the research-development continuum, with separate centres responsible for annual food crops, livestock, fish, trees and forest, as well as attention for integration at the ago-ecological zone level. We will focus here on the ‘tree and forest’ part of this agenda.

1: Sustaining bio-diversity for cur-

rent and future generations

2: Genetic Impro-vements for pro-ducing more food at lower cost

3: Reducing rural poverty through agricultural di-versification and high-value commodities and products

4: Poverty alleviation and sustainable mana-

gement of water, land, and forest resources

5: Improving policies and facilitating institutional

innovation

Millenium Development Goals: Economic growth facilitated by employment in urban and non- agricultural sectors made possible by availability of affordable and high quality food

+ clean water and other environmental services

Figure 1. Relationships between the CGIAR priorities and Millennium Development Goals

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In brief, the ‘Future Harvest’ research priorities to support Millenium Development Goals are thus to support rural development processes that:

1. Reduce rural poverty through profitable farms based on agricultural diverse and high value commodities, including products derived from forests and trees,

2. Manage the water, land and forest resources in a sustainable way to maintain the provision of environmental services,

3. Improve policies and facilitate institutional innovation that balances the short and long term needs of both rural and urban parts of the population.

To support these processes in the long term, a continued investment in

plant (and animal) genetic resources is needed to (1) sustain biodiversity and (2) provide crop and tree germplasm and livestock of high quality. These are the 5 priority areas adopted by the CGIAR in December 2005.

SUSTAINABILITY ISSUES

Sustainability of a range of land use systems, which can follow forest conversion, can be assessed if we first specify the threats to persistence (Figure 2).

Figure 2. Threats to agricultural sustainability: the inner circle is essentially agronomic and the outer circle is more focused on environment and market issues

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Four ways by which continued farming degrades its own resource base to a level that impairs future productive use of the land are:

A. Not maintaining soil of sufficient structure and biological activity, B. Not balancing the budget of nutrient exports and imports, C. Letting pest, weed and disease problems reach unmanageable proportions. D. Not maintaining essential soil biota, such as mycorrhizal fungi and Rhizobium.

Any of these categories can become such a constraint to continued farming that land may have to be (temporarily) abandoned. Therefore the most serious category of problems determines the overall sustainability.

Other threats to continued farming that may dominate discussions on agricultural sustainability, especially in developed countries, are E, F, and G (Figure 2). Thus, if there are very serious negative effects on water (E), on the atmosphere (F), or on the soil or biotic (G) qualities of the environment, then outside stakeholders may take measures to stop the land use practice (in its current form). Another threat is H: not producing products of a quality that meets consumers’ expectations.

Categories A to D are essentially agronomic in nature, categories E to H depend on the perceptions and response of consumers and other outside stakeholders, so they require very different methods of investigation. They have an impact on farming via government or local regulations and financial incentives. Other threats to continued farming are based on the (lack of) financial viability of a farm, changes in prices for the products, and a lack of options for change.

In the rest of this paper we will focus of aspects E, F and G that relate to ‘externalities’ in environmental services. There are essentially two ways to address these concerns: regulation or rewards (‘sticks or carrots’).

PREMISES

The following concepts and lessons from the past decade of research in integrated natural resource management and livelihoods are taken as a basis for the analysis here, and will not be fully explained:

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1. Land use intensification affects environmental services with a dominantly negative trade-off between ‘goods’ and ‘services’, but

Relative agricultural function (RAF)

Rel

ativ

e ec

olog

ical

func

tion

(RE

F)

AInitial use

BDegra-dation C

Rehabilitation

ECritical loss of ecological functions

D

Relative agricultural function (RAF)

Rel

ativ

e ec

olog

ical

func

tion

(RE

F)

AInitial use

AInitial use

BDegra-dation B

Degra-dation C

RehabilitationC

Rehabilitation

ECritical loss of ecological functions ECritical loss of ecological functions

Da. The slope of the trade-off curve is not

constant and there are phases with win-win opportunities (van Noordwijk et al., 2004)

b. It could be worse: Existing land use maintain intermediate ES (environ-mental service) levels at levels above a worst case baseline – partly because of local apprecia-tion of ES and conscious efforts to maintain these, partly because of opportunity costs of labour that make a further shift on the intensification – environment trade-off unprofitable for the moment (Tomich and Lewis 2003; van Noordwijk et al. 2004a; Tomich et al., 2005; Palm et al., 2005).

2. Externalities of decision making are a valid concern for society at large, but regulations to internalize the presumed external impacts are stifling innovation and initiative – steering the boat between Scylla (the beautiful ‘develop-ment’ nymph transformed into a horrible six-headed doglike monster that gobbles up passers-by) and Charybdis (the whirlpool of environmental destruction) is the art of governance (Tomich et al., 2005); the global agenda (Millenium Ecosystem Assessment, 2005) for environmental services and poverty (Sachs 2005) intersect; there are examples of good practice in forest management (Durst et al., 2005) and eco-agriculture (McNeeley and Scherr, 2003), but overall tradeoffs dominate (Lee and Barret, 2001).

Segregate or Integrate Segregate or Integrate Segregate or Integrate

3. Segregate – integrate solutions across scales. Multiple-function problems have two basic solutions: to provide for the different functions in specialized activities (or land categories), using the

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efficiency gain of specialization, or to ‘manage the tradeoffs’ and benefit from the risk reduction and possible synergy in a ‘generalist’ approach. The segregate approach will usually depend on spatially explicit regulation; in managing the tradeoffs in the integrate approach incentives may shift land use decisions in a cost effective way in parts of the curve where the slope is relatively small (van Noordwijk et al., 2004a).

Stop environ-mental des-truction

Reward ser-vices exceed-ing baseline

Tolerate baseline behaviour

Stop environ-mental des-truction

Reward ser-vices exceed-ing baseline

Tolerate baseline behaviour4. Incentives can only be used in the

deregulated domain, as they suggest a freedom of choice between alternatives; ‘compensation’ pay-ments may be the equivalent in the regulated domain

5. Environmental services range from the specific (source – flow – sink relations are spatially explicit and measurable; Van Noordwijk et al., 2004a) to the general (overall balance sheets may be clear but where specific attribution is complex) (Fay and Michon, 2005)

6. Perceptions differ among stakeholders and language is imprecise -- the word ‘forest’ means anything from a stack of wood, vegetation with trees, wilder-ness, hide-out for rebels, state or elite-controlled hunting and (timber) mining domain, medicine chest to regulator of water flows and storehouse of biodiversity. To farmers and local land users the ‘domesticated forest’ is of particular relevance (Michon, 2005)

7. Contemporary non-market valuation methods may be a poor guideline for resource allocation and cost–benefit analysis (Zhang and Li, 2005).The value of losing something is the welfare that that something brings minus the welfare that would be brought by the next best alternative.

8. Economic efficiency for the ‘environmental service buyer’ dictates that the price that is negotiable by the seller depends on the credibility of the ‘threat’ to the service (Wunder, 2005): if the threat it too small the potential buyer expects to be a free rider, if the threat is too high the potential buyer will see it as a hopeless case. In-between is an ‘optimum threat’ level. Conveying the appropriate level of threat to audiences unknown is a major gamble in communication, which can easily backfire.

9. Of the five criteria for ‘payments for environmental services’ (PES), the conditionality criterion is the most difficult to achieve (Wunder, 2005).


10. On the institutional side we need to distinguish between formal regulation, the level of ‘bridging’ social capital between stakeholder groups and the level of ‘bonding’ social capital within each group (Arifin, 2005)

Natural capital

External stakeholders

Human capital

Financial capital cash, credit, reserves

Physical capital, Infrastructure

∆ Environmen-tal services

stewardship

guardianship

stewardship

guardianshipSocial capitalEnvironmental

Services Rewards

generally come in the form of Financial or

Physical Capi-tal (infra-

structure)…

Figure 3. Payments for environmental services are essentially ways to use the natural capital of a landscape, together with the human and social capital of the stewards and guardians to ‘produce’ environmental services that can be ‘exchanged’ for financial and/or infrastructure capital

REGULATION, COMPENSATION AND REWARD IN ENVIRONMENTAL ISSUE CYCLES

Concerns over ‘environmental services’ or the ‘condition of the global or local ecosystem’ come and go. They disappear from the public radar screen when they are either reframed or solved by effective institutions. They usually start with ‘externalities’ or consequences of land use decisions that negatively affect stakeholders other than the primary decision makers. The ‘issue cycle’ (Fig. 3A; Tomich et al., 2004a) describes a sequence of stages that can be recognized in the political process of identifying (and challenging…) an ‘issue’, establishing clarity on cause-effect relationships, spatial extent and ‘size’ of the problem and ‘attribution of blame’, in the ‘scoping’ stage. If the issue gains in political prominence by an increase in the number of people who are concerned, and especially if a coalition emerges with people and institutions with political clout, a further stakeholder analysis will focus on what can be done to stop or undo the ‘root causes’, mitigate the impacts, or adapt to the less desirable condition, as well

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as an analysis of who benefits from the behaviour that contributes to the causation of the problem.

The political discussion then has a number of options:

1) to ‘regulate’ the behaviour that leads to the problem by setting standards of what is considered to be acceptable, with possible ‘compensation’, during a transition period, for the stakeholders who are affected by the regulation,

2) to provide an incentive scheme to ‘reward’ behaviour that will positive influence the condition of the system, or

3) to stimulate stakeholders to seek innovative) solutions within set standards.

The choice between these three options will depend on the political weight of the various actors and the ability of stakeholders to reduce negative effects on their interests (‘right to pollute’ versus ‘right to live in a pollution-free world’). Once new institutions (either regulatory or based on positive incentives) are in place, a phase of implementation and monitoring ensues, with a need to periodic evaluation and re-assessment. As many environmental issue are linked across scales (from local to national/regional and global), the institutional solutions will also have to be cross-linked (Fig. 3B). Regulations at one level serve as boundaries to what can be ‘voluntarily’ achieved at another scale.

The relationship between regulation and voluntary, incentive-based mechanisms can be visualized as a ‘traffic light’ (Fig 4), with the transition between red and amber light zone determined by the minimum acceptable behaviour set by regulations and the transition between amber and green determined by the baseline of ‘business as usual’. If there is no ‘amber’ zone (i.e. if the business as usual is in fact operating in the red zone, we cannot expect incentive-based mechanisms to provide solutions.

Global agreements: regulate and reward

National legislation: regulate and reward

Local by-laws: regulate and reward

Private sector

Global agreements: regulate and reward

National legislation: regulate and reward

Local by-laws: regulate and reward

Private sectorPrivate sector

Polit

ical

pro

min

ence

Σ

peop

le *

influ

ence

* c

once

rn

Stage of the issue cycle

Scoping Stakeholder Negotiation Implemen- Re-eva-analysis response tation luation

Is it a problem?

Cause-effect mechanisms

Who’s to blame?

What will it cost?

Regulate and/or reward

Implement & monitor

Evaluate, re-assess

Who’ll have to pay?

What can be done to stop, mitigate, undo or adapt?

How much and where?

Who will monitor compliance? Litigation

Polit

ical

pro

min

ence

Σ

peop

le *

influ

ence

* c

once

rn

Stage of the issue cycle

Scoping Stakeholder Negotiation Implemen- Re-eva-analysis response tation luation

Is it a problem?

Cause-effect mechanisms

Who’s to blame?

What will it cost?

Regulate and/or reward

Implement & monitor

Evaluate, re-assess

Who’ll have to pay?

What can be done to stop, mitigate, undo or adapt?

How much and where?

Who will monitor compliance? Litigation

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Figure 4. A. Issue cycle or stages in the political process from problem identification to solution; B. Cross-scale linkage of the ‘solutions’ based on regulation and/or reward of environmental service issues (modified from Tomich et al., 2004a) Public policy context: Actor position Trend Mechanism

Minimum acceptable

behaviour and its effect on ES is set by regulation

Baseline of ‘busi-ness as usual’ under

current driver conditions

Green Maintenance & enhancement

of ES

Amber Current practi-

ce and ‘rights to pollute’

RED Unacceptable environmental

degradation

CES1: Polluter pays compensation for damage inflicted

CES2a: Tradable pollu-

tion and ES-use rights as ‘offsets'

CES2b: Tradable pollu-

tion and ES-use rights bought for conservation sake

RES1: Rewards for ES enhancement through ‘stewardship’

RES2: Rewards for ES maintenance (avoided degradation) by guardians

Figure 5. Conceptualization of the role of the four types of compensation and reward mechanisms in relation to existing regulation that defines ‘minimum acceptable behaviour’ (the border between red and amber) and current drivers of change that define the baseline ‘business as usual’ trajectory (modified from van Noordwijk et al., 2005)

For the current discussion we distinguish four types of compensation or reward mechanisms:

CES_1 operates in the red area, and is some form of ‘polluter-pay’ compensation for damage inflicted

CES_2 is from the ‘sellers’ perspective based on partially unutilized rights to pollute or rights to a share of the environmental resource use (including hunting, logging or water use rights); from the buyers side it can be either (a) an opportunity for ‘off-set’ transactions for buyers who otherwise would

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operate in the red zone (it includes ‘cap and trade’ mechanisms, such as allowed by the Kyoto protocol), or (b) a buyer with a conservation objective who buys the rights in order not to utilize them (e.g. the conservation concession concept)

RES_1 operates from the transition of the yellow to the green zone and provides rewards for ‘stewardship’

RES_2 operates within the green zone and aims at avoiding losses and maintaining environmental qualities over and beyond existing legal protection.

The current debate on environmental services does not start with a blank slate. A patchwork of regulations and opportunities for positive reward schemes applies at the different scales, which set the boundary conditions for any new or renewed concerns over environmental issues. Specifically, the options for voluntary, positive incentive schemes (rewards) are constrained by the current rules on ‘minimum acceptable behavior’. One can (or should) not be rewarded for what one is obliged to do. Where regulations and laws are substantially ahead of implementation and compliance, an approach based on positive incentives will likely require revisions of the regulatory framework as well.

Water may well be the environmental resource with the longest history of concerns over the public/private nature of the effects of land use. Institutions often started with a settlers’ right that prevented newcomers from disturbing water flows to existing farms or households, but evolved towards more equitable sharing of rights and responsibilities. Hunting rights have a long history of political contest, appropriation and regulation, which only gradually evolved into current concerns on wildlife conservation, as a starting point for broader biodiversity conservation. Climate change, greenhouse gas emissions and carbon stocks are a concern of the last two decades, only, and made a ‘fresh’ start. However, the land-use related components of the issues via fire and smoke/ haze have a longer history of regulation. Existing regulation of ‘forest’ as a land cover with restrictions on the basis of water, timber resources and biodiversity conservation also implies a complex ‘inheritance’ for climate change institutions .

We recognize four main actor groups, and a link between two ‘subsystems’ (the land use system that modifies the ES, and the subsystem of the beneficiaries of ES), linked by on one hand the condition of the (agro) ecosystem that generates the ES, and on the other hand by the regulation, recognition and rewards that provide feedback (or fail to do so…) from the beneficiaries to the modifiers.

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Environ-mental Service

providers

Natural capital & properties that ‘come with the territory’

Absence Mitigation, increase in filtering

Dynamic

Control over territory

Efforts

Direct benefits


providers

Natural capital &

territory’

of threats

Dynamic landscape


Opportunity costs for change in land use practice

functionsEnviron-mental Service

beneficiaries


beneficiaries

Alternative service providers

Costs for other service providers

Water quantity, evenness of flow & quality

Biodiversity & landscape beauty

Terrestrial carbonstorage

implications




implications

Recognition & rewardstransaction costs

‘Interme-diaries’

‘Regu-lators’

‘Modifiers/Sellers’ ‘Beneficiaries/ Buyers’


providers

Natural capital & properties that ‘come with the territory’

Absence Mitigation, increase in filtering

Mitigation, increase in filtering

Dynamic


Efforts

Direct benefits


providers

Natural capital &

territory’

of threats

Dynamic landscape


Opportunity costs for change in land use practice


beneficiaries


beneficiaries

Alternative service providers

Costs for other service providers




implications




implications

Recognition & rewardstransaction costs

‘Interme-diaries’

‘Regu-lators’

‘Modifiers/Sellers’ ‘Beneficiaries/ Buyers’

Figure 6. The four categories of stakeholders ‘beneficiaries/ buyers’, ‘modifiers/ sellers’, ‘regulators’ and ‘intermediaries’ that are engaged in voluntary mechanisms CES_2, RES_1 and RES_2 (compare Fig. 5).

ES-MODIFIERS, GUARDIANS AND STEWARDS AS POTENTIAL SELLERS

Environmental services are emergent properties at landscape scale of a complex interaction between the natural capital of the site (including geomorphology, climate, biota, soils), land use aimed at increasing the flow of goods and services to the local land users, the network of filter functions within the landscape that modifies the impacts of field-level land use and the social fabric of the community that constrains the decisions by individual households to use or modify local resources. The environmental services that are thus influenced consists largely of ‘lateral flows’ of water, (suspended) sediments, solutes, gases and particulate matter, biota or energy that are perceived as beneficial or harmful outside of the area of primary influence. Local land use decisions thus affect other stakeholders. Most of the ‘environmental services’ are seen as public good and thus taken for granted, until the time that they are affected and become in short supply. The ‘environmental issue cycle’ (Fig. 3) that then starts provides the background for opportunities of the modifiers to be compensated or rewarded.

ES reward mechanisms can start while the environmental condition is still good and where ‘avoided degradation’ is the key issue. They can also start in conditions of low environmental quality, where ‘rehabilitation’ is the key

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objective. Van Noordwijk et al. (2004) used the terms ‘guardians’ and ‘stewards’, respectively, for these two situations. In reality there may be elements of both guardianship (protecting remaining landscape elements of ES value) and stewardship (rehabilitating other parts of the landscape) in many ES reward applications. However, the discussions on the Clean Development Mechanism (CDM) have shown that the attribution issues are markedly different. In rehabilitation the positive efforts may be more easily compensated (especially where the ‘baseline’ is considered to be zero as in af/reforestation for terrestrial carbon storage) than efforts to protect existing stocks (where the baseline rate of degradation is harder to define and agree upon). Also, avoided degradation needs to be assessed over large enough areas to allay concerns about ‘leakage’ (negative effects outside of the target area, but causally linked to the target area).

Generally, avoided degradation is linked to control over land, and is therefore primarily an opportunity for those who have secure control over substantial tracts of land – generally not the poorest members of the local community. Rehabilitation may be more directly linked to labour, the primary resource of the rural poor. The effects of ES reward schemes on poverty dimensions may thus differ between ‘avoided degradation’ and ‘rehabilitation’ issues.

For much of the following discussion, it is important to start with a clear concept of the ‘threat’ that is either avoided or mitigated by the actions that are to be rewarded. Table 1 provides examples of such threats, linked to a classification of environmental services (van Noordwijk, 2005).

The threats that derive from land uses that are not within the range that is not prohibited by existing regulations, are (at least in theory) handled by the enforcement mechanisms of the existing regulations – but in practice there may be a considerable gap between what is practiced and what is allowed. However, for ‘reward’ mechanisms the point of departure must be what is technically allowed, unless the reward mechanism itself is shifting the boundaries of the regulatory domain. For a voluntary mechanism, the main issue for the modifiers of environmental services who considers to forgo the benefits that they can derive from a less-ES friendly land use practice, is the ‘opportunity cost’ (Fig. 7).

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Table 1. Examples of threats to identified environmental services by land uses that may well be more (financially) profitable (from a private perspective) than more ES friendly alternatives

Potential negative ES impacts of land use that is (privately) most profitable c.q. desirable, within the range that is not prohibited by existing regulations

Code Environmental service function affected ES_ code Explanation of ES affected

TB1 Loss of habitat: Conversion natural forest (or other pre-human habitat) to less ES friendly land use

B1 Protecting the integrity of conservation areas by preventing loss of habitat and threats at population level in the areas directly around core protection areas,

TB2 Loss of habitat functions within agricul-turally used landscapes

TB3 Direct threat to local biota by overhar-vesting

TB4 Direct threat to local biota by pollution (agrochemicals, organic wastes, mine spoils, industrial waste…)

B2 Providing habitat for a sub-set of the original fauna and flora inside agri-culturally used landscapes

TB5 Loss of habitat in corridors between protected areas

B3 Maintaining connectivity between protected areas via corridors,

TB6 Genetic erosion of useful tree, crop & stock resources or their wild relatives

B4 Creating opportunities for local-level ‘restoration’, in landscapes where connectivity is still maintained.

TB7 Loss of pollinators and pest control agents

P1 Allowing extraction of potentially renewable resources

TB8 Enhancing disease carriers H1 Regulation of pests and diseases TB9 Loss of landscape beauty in areas of high

spiritual/aesthetic value H3 Spiritual, religious and aesthetic values

TB10 Loss of landscape beauty in areas for active recreation

H4 Opportunity for active recreation (ecotourism)

TB11 Erosion of local ecological knowledge H5 Ecological knowledge TC1 Reduction of stored carbon in natural

forest or peat soils C1 Protecting natural forest area, peat soils

and other carbon storage areas

TC2 Reduction of stored carbon in agricultu-re/agroforestry areas

C2 Protecting above- and/or belowground carbon stocks in areas used for (agro)forestry and/or agriculture

TC3 Increasing net emission of greenhouse gasses

C5 Accumulating terrestrial carbon stocks

TC4 Generation of smoke and haze, affecting human health

H2 Detoxification of air, water, food

TW1 Changing vegetation to one with greater water use

TW2 Increase local water use trough irrigation

W1 Water transmission (total water yield per unit rainfall)

TW3 Compaction of topsoil reducing infiltration and thus enhancing overland

W2 Buffering (above average river discharge per unit above average rainfall)

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Potential negative ES impacts of land use that is (privately) most profitable c.q. desirable, within the range that is not prohibited by existing regulations

Code Environmental service function affected ES_ code Explanation of ES affected

flow leading to flash floods

TW4 Compaction of topsoil reducing infiltration and reducing low flows from stored reserves

W3 Gradual release of stored water supporting dry-season flows

TW5 Enhancing drainage and thus reducing gradual release of water in dry periods

W3 Gradual release of stored water supporting dry-season flows

TW6 Erosion leading to water pollution and downstream sedimentation

W4 Maintaining water quality (relative to that of rainfall)

TW7 Erosion: transfer of soil fertility W6 Tolerable intensities of net soil loss from slopes by erosion

TW8 Reduction of existing filter functions TW9 Pollution of water resources

W4 Maintaining water quality (relative to that of rainfall)

TW10 Destabilizing slopes (undercutting slopes, killing trees with anchoring roots)

W5 Stability of slopes, absence of landslides

TW11 Removing windbreaks W7 Microclimate effects on air humidity and temperature

Costs to the ‘buyer’

Payments to the ‘seller’

Transaction costs + profit for intermediary

Benefit for the seller

Benefit for the buyer

Oppor-tunitycosts for the seller

‘Value’ = Oppor-tunitycosts for the buyer

Value

(across capital types)

Costs to the ‘buyer’

Payments to the ‘seller’

Transaction costs + profit for intermediary

Benefit for the seller

Benefit for the buyer

Oppor-tunitycosts for the seller

‘Value’ = Oppor-tunitycosts for the buyer

Value

(across capital types)

Figure 7. Schematic representation of minimum criterion for ‘voluntary’ rewards: where the opportunity costs for the seller exceeds the opportunity costs for the buyer + unavoidable transaction costs, no transaction is likely to take place; if there is space for negotiations, the benefits will be shared between buyer, intermediary and seller, depending on their strength in the negotiations.

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In the relationship between biodiversity and agricultural productivity (Fig. 8), we can identify four relative positions of agricultural systems (please note that the endpoint of each axis is the potential maximum productivity or biodiversity in each landscape):

A. High biodiversity, low productivity, as in the ‘agroforest landscapes’ of the humid tropics

B. Low biodiversity, low productivity, as in many fragile agroecosystems under the impact of ‘land degradation’

C. High biodiversity, high productivity – an impossible dream scenario, but approachable in biodiversity-friendly agriculture

D. Low biodiversity, high productivity, as found in intensively managed agricultural landscapes that (so far) have avoided thresholds of critical environmental degradation where the relatively low levels of agrobiodiversity may be highly appreciated by society….

Ecosystem quality

Biodiversity

Environmental services

High

Low

Low High

Agricultural productivity: goods

impossible

A. Agroforest landscapes

D. Intensive agriculture landscapes

B. Fragile agro-ecosystems

C. Biodiversity friendly agricul-ture?

Pathways to be avoided Socially desirable pathway

‘Natural’ point of reference

‘Potential production’ as reference

Ecosystem quality

Biodiversity

Environmental services

High

Low

Low High

Agricultural productivity: goods

impossible

A. Agroforest landscapes

D. Intensive agriculture landscapes

B. Fragile agro-ecosystems

C. Biodiversity friendly agricul-ture?

Pathways to be avoided Socially desirable pathwayPathways to be avoided Socially desirable pathway

‘Natural’ point of reference

‘Potential production’ as reference

Figure 8. Relationship between agricultural productivity (‘goods’) and ecosystem quality as a basis for continued supply of ‘services’, with four broad domains for current agro-ecosystems (A…D), the red trajectories to be avoided and the socially desirable pathways in green.

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GOVERNMENT ROLES: REGULATOR

‘Pro-poor’ approaches to CRES can spontaneously arise from private sector involvement, or (more often) be supported by public sector involvement in CRES. Governments or the public sector can potentially play three roles in the interactions between sellers (providers) and buyers (beneficiaries) of ES. They can act as 1) buyer on behalf of ‘downstream’ stakeholders, 2) seller in international interactions, 3) intermediary or 4) market regulator. While different levels of the public sector or government can be involved in these different roles, a clear separation of roles is expected to be needed for transparency and for public control.

The governments’ primary role as ‘marker regulator’ needs to be reflected across a range of scales from the local community to the national scale, with international conventions as an umbrella for cross-boundary issues. Depending on the degree and success of ‘decentralization’, the different levels of government may either support each other in this role across scales, or, more often, contest overlapping authorities and thus substantially add to the transaction costs.

Unfortunately, much of existing regulation can be interpreted as not maximizing the overall efficiency, but at maximizing opportunities for rent seeking as intermediary (to help smooth out the pathway through a regulatory jungle). Where government entities that regulate also (intend to) operate as seller (e.g. forestry departments in applications of the ‘clean development mechanism’) public scrutiny of the conglomeration of roles is warranted.

A major long-term role for a public sector regulator of CRES agreements is to provide mechanisms for litigation. Conditionality in CRES can refer to essentially five ‘levels’: objectives, management plans, activities, condition of the agro-ecosystem, or actual ES outcomes (Fig. 9). The last are the closest to the interests of external agents, but the time lags and difficulties of attribution of effects in the presence of substantial variation in ‘natural’ events, often leads to a focus on ‘activity’ as basis for CRES. Detailed prescriptions of activities will have the inefficiencies of ‘micro-management’, and a shift to higher order ‘management plans’ may be appropriate. Finally, a basic agreement on the objectives and criteria that drive management plans may be the preferred basis for CRES, if sufficient trust has been established.

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a)

b)

c)

Sellers/ providers of

ES

Buyers/ beneficiaries

of ES

Government as ‘market regulator’


ES


of ES

Government acting as international ‘seller’


ES


of ES

Government acting on be-half of ‘downstream’a)

b)

c)


ES


of ES



ES


of ES


ES


of ES



ES


of ES



ES


of ES


ES


of ES



ES


of ES

Government acting on be-half of ‘downstream’


ES


of ES


ES


of ES

Government acting on be-half of ‘downstream’

Figure 9. Three main roles that the government (public sector) can play relative to private sector involvement in CRES

Local Externalagents agents

Objectives, criteria

Management plans

Actions Actions

System performance

Consequences for Development & Environment: Indicators


Management plans

Other

influences

Other

influences

Local Externalagents agents


Management plans

Actions Actions

System performance

Consequences for Development & Environment: Indicators


Management plans

Other

influences

Other

influences

level V

IV

III

II I

Figure 10. Five levels at which agreements on ES Reward schemes between local and external actors can be based: I. Consequences for the ES, II. Condition of the agro-ecosystem, III.Human activity, IV. Management plans or V. Management objectives (modified from van Noordwijk et al., 2004)

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MARKETS OR MIXED-INSTITUTIONS?

Markets are by definition realistic, voluntary and conditional. Their effects on poverty are mixed. Many environmental issues and the increasing scarcity of ecosystem services are linked to ‘market failure’. Time-lags, complex cause-effect and multiple layers of rights and responsibilities of environmental issues make ‘service’ considerations externalities of decision making processes that are focused on ‘marketable goods’. Which combination of characteristics, short of full markets, is needed for effective, efficient, sustainable and equitable mechanisms to avoid environmental degradation beyond thresholds of sustain-ability? Are pro-poor market-based mechanisms possible? We set out to identify mutually beneficial opportunities for ‘modifiers’ and ‘beneficiaries’ of environ-mental services to interact as an alternative to a purely regulatory approach to environmental issues. The domain for voluntary, conditional rewards for environ-mental services (ES) is constrained by existing regulations and the rights it spe-cifies to a share in the available ES (including the ES of buffering against pollu-tion or the transfer of rainfall to usable water flows).

Table 2. Four categories of criteria for CRES, viewed from the perspective of buyers, intermediaries, sellers and regulators

A. Effectiveness, Efficiency and Sustainability B. Equity Criterion Stage Role

I. Realistic Scoping

II. Voluntary Stakeholder analysis

III. Conditional Negotiation & implementation

IV. Pro-poor All stages

General criterion

Effectively miti-gates, reduces or avoids threats to ES for all parties involved

Engagement in-volves choice rather than being the object of regulation

Service and re-wards or com-pensation are dy-namically linked

Mechanisms se-lected are posi-tively biased to-wards disadvan-taged stakehol-ders

Modifier/Seller: As guardian or steward of environmental services Seeking Local ES plus livelihood options with minimum reduction in freedom and opti-mum rewards for efforts and assets

Sellers also may have a stake in tangible, sustain-able environmental services. For true public goods, for example, sellers also have a stake as beneficiaries.

Rewards offset (at least) the real opportunity costs and any organizational costs or risks of providing the ES that are born by sellers.

Monitoring and enforcement me-chanisms retain discretion regar-ding production and investment decisions, Sellers’ obliga-tions end if con-ditions governing rewards for ES are not met... Risks are born by intermediaries or buyers.

Potential sellers may be poor, but otherwise be excluded. Relatively well-off sellers may seek to include the poor if poor people can threa-ten process of reaching or sustaining CRES programs.

Beneficiary/ buyer:

Tangible, sustain-able

Costs of obtain-ing ES benefits

Efficient, effec-tive and transpa-

Positive: buyers benefit (ethically,

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Seeking Actual flows of environ-mental services and/or ‘Certified / trada-ble units of pollu-tion abatement’ and/or ‘Market share based on social and environmen-tal reputation’

environmental service benefits of the ES exist

and associated risks are less than comparable alternatives. Although impo-sition of re-gulation might appear to be an easier route to obtaining ES, voluntary agreements may be more sustainable.

rent: mechanisms for monitoring, verification, and enforcement are needed. Buyers’ obliga-tions end if con-ditions governing supply of ES are not met. Risks are born by intermediaries or sellers.

politically or by reputation) from beneficial social as well as envi-ronmental impacts. Negative: If not included in RES, poor people may constitute an additional threat to ES supply.

Intermediary/ broker/certifier Matching buyers and sellers, effi-cient handling of all steps to reduce transaction costs and risks and/or Providing credi-bility and legiti-macy based on capabilities, repu-tation and trust’ and/or Concern with environmental issues

There are suffi-cient values accruing from environmental services to support the development of a market or payment mechanism.

Sufficient values can be captured from the bene-ficiaries of en-vironmental services to cover the transactions costs of imple-menting CRES and cost of re-wards to sup-pliers. and/or Other organiza-tions are willing to subsidize these services in the public interest.

Monitoring and enforcement me-chanisms are ef-ficient and effec-tive, thereby re-ducing transac-tion costs. If intermediaries bear risks for non-compliance from either side, they are compen-sated for those risks or can insu-re against them to reduce exposure to risks.

Social conditions that induce intermediaries to seek pro-poor re-sults are similar to those for buyers. Intermediaries may have an interest in promo-ting pro-poor RES if they be-lieve this will increase subsi-dies from govern-ment or donor organizations that, in turn, will expand opportunities for intermediation.

Regulator: securing broader public interests in social, economic and environmen-tal outcomes. (Role may be filled by govern-ment or informal parts of civil society.)

At any relevant scale (interna-tional, regional, local), resulting patterns of acti-vities and invest-ments induced by CRES schemes need to be compatible with broader en-vironmental ob-jectives (avoid-ance of leakage and/or perverse effects on ES).

Social and poli-tical legitimacy of negotiation and implemen-tation.

Mechanisms for negotiation, veri-fication, monito-ring, enforce-ment, and con-flict resolution must conform with applicable legal and admi-nistrative frame-works and with social norms.

Protect from ne-gative distribu-tional effects and elite capture. Fundamental question: why combine envi-ronmental and poverty object-tives? Positive: more resources in combination than sum of each taken alone. Negative: avoidance of potential social conflict and political spillover.

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These criteria refer to the full cycle of a reward scheme, starting in the ‘scoping stage’ (is there a real service worthy of reward?), through the stakeholder identification and negotiation stage to the implementation + monitoring and periodic evaluation. As the scoping stage is the start of the cycle, the methods for this phase have been a major focus of our work (Table 3).

Table 3. Flow chart of a toolbox of appraisal methods currently under development at the World Agroforestry Centre (www.icraf.org/sea)

Participatory analysis of landscape

Appraise land use, stakeholders and issues that require attention; review of secondary data, stakeholder appraisal of landscape, scoping of issues and perceived solutions, livelihood strategies; emerging technological innovations

Land tenure Rapid tenure (RTA) claim survey to be followed by in depth exploration of strongly contested claims; links to collective action, property rights; revise ‘stakeholder’ lists

Market access

Rapid market appraisal (RMA) of options for local products

Land use change analysis

Changes in market access (physical access, increase or decrease in policy constraints)

Spatial analysis of recent changes and current trends within the focal area and its wider context (accessibility)

<== Key driver of change ==>

Main environmental service of concern

Priority issues T: Change in AF

technology

I(m): Major change in in-frastructure or market access

RHA: Hydrologi-cal services * Productivity

RABA: Agrobio-diversity * Productivity

RaCSA: Carbon stocks * Productivity

LEK = local ecological knowledge & values

Perceived benefits/ weaknesses and op-tions for Participatory Technology Development

Local expec-tations of res-ponsiveness

Interviews, local

Interviews, ethnoecology

Soil + vegetation typology

PEK = policy ecological knowledge, perceptions& values

Perceived benefits/ weaknesses : Interviews, sec. Data

Macro economic drivers of access & commodity markets

Interviews, sec. data

Interviews, sec. Data

Check Kyoto eligibility, Designated National Authority, local govern-ment support, transaction costs

MEK = modellers ecological knowledge

Technical AF sustainability appraisal of soil, nutrient, water balance, biological interactions

Market chain analysis

Landscape hydrological models

Survey + scaling rules

Measure carbon stocks

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Scenario analysis using FALLOW (validated on past decade of LU change), with boundaries of plausible price trajectories: predicted welfare and ES indicators; tradeoff analysis

Plausible ∆LU scenarios + indicators: tradeoffs

Local negotiation processes – based on local/national modalities

Table 4. Classification scheme for different CRES schemes based on scale, conditionality, time frame and nature of ‘reward’

Conditionality: A = activity: agreed effort in rehabilitation, C = condition of the landscape: voluntary restrictions on land use change, I = input use: Voluntary restriction on input use, O = outcome: specified C&I of the ES delivery, Z = general commitment without specific conditions

Scale: A C I O Z

C = community (>50 households),

Agreed effort to reha-bilitate land-scape at community scale

Voluntary restrictions on land use change at community scale

Voluntary restrictions on intensity of land use and use of inputs at community scale

Specified delivery of ES based on agreed C&I at community scale

General commit-ment at commu-nity scale to pro-tect environmen-tal services

G = farmer group (5 – 50 households),

Agreed effort to reha-bilitate land-scape by far-mer groups

Voluntary restrictions on land use change by farmer groups

Voluntary restrictions on intensity of land use and use of inputs by farmer groups

Specified delivery of ES based on agreed C&I at farmer group scale

General commit-ment at farmer group scale to protect environ-mental services

I = individual farmer or household

Agreed effort to reha-bilitate at farm level

Voluntary restrictions on land use change at farm level

Voluntary re-strictions on intensity of land use and use of inputs by individual farmers

Specified delivery of ES based on agreed C&I at farm scale

General commit-ment of farm households to protect environ-mental services

A = Annual S = Short term M = Medium term L = Long term Time frame of contracts:

With annual accounting.

With a 2-5 year contract period.

With 6-20 year contracts.

With contracts of >20 year duration.

Rewards E Rewards are in the form of esteem and respect F Rewards are in the form of financial payments I Rewards are in the form of investment in public services (healthcare, education, road access,…) L Rewards are in the form of land tenure R Rewards are in the form of rights to use natural resources T Rewards are in the form of tax reduction

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Based on the various criteria, a simple classification scheme for reward mechanisms (Table 4) has been formulated, which allows for more direct comparison between various experiences. A number of pathways have been identified for poverty reduction through ES rewards (Table 5). The relative importance of these pathways in different circumstances is a major thrust of our current research. Table 6 provides a list of 12 sub-criteria that derive from the four main ones. Indicators for these sub-criteria will have to be adjusted to and negotiated by the stakeholders of specific mechanisms on specific situations. Table 7 describes 12 prototypes of ES reward situations as basis for synthesis.

Table 5. Pathways for ES Reward schemes to alleviate poverty as recognized in the RUPES program

Pathway Poverty dimension

1 Stop negative 'drivers' that enhance poverty and degrade environmental services ('PUPES')

Assets, Risk, Health, Indirect income

2 Enhance local environmental services and resources (e.g. regular supply of clean water, access to beneficial plant & animal resources)

Health, Assets

3 Enhanced security of tenure, reduced fear of eviction or 'take-over' by outsiders, allowing investment in land; increased asset value Assets, Risk, Indirect income

4 Enhanced trust with (local) government, increased 'say' in development decisions

Empowerment, Reduced informal taxes (corruption)

5 Increased access to public services (health, education, accessibility, security)

Health, Education, Indirect income

6 Payment for labour invested at a rate at least equal to opportunity cost of labour Direct income (labour based)

7 Increased access to investment funds (micro credit or otherwise) for potentially profitable activities Indirect income

8 Entrepreneurism in selling 'commoditized' environmental services Direct income

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Table 6. Criteria for reward mechanisms for environmental services

Stage Criteria Sub-criteria A. Effectiveness, Efficiency and Sustainability

1. A broadly shared perception of cause-effect relations links threats to ES or to the ecosystem that provides ES, to potential activities to reduce or avoid these threats by identifiable actors at a relevant temporal and spatial scale 2. The value to ES-beneficiaries of reduction or avoidance of the threats, relative to alternative ways to meet their needs, is substantive (within the context of the key actors)

3. There are opportunity costs and/or resource access constraints for the potential ‘ES providers’ that can be off-set or overcome without major negative ‘external effects’ (leakage)

I. Rea-listic

Scoping Effectively mitigates, reduces or avoids threats to ES for all parties involved

4. The threat to the ES and its reduction (or avoidance) by ES providers can be assessed and monitored in a transparent way, as a basis for conditional incentives 5. Legitimacy at individual level

6. Effective voice

II. Volun-tary

Stake-holder analysis

Engagement involves choice rather than being the object of regulation

7. Adaptiveness

8. ES-reward agreements strike a balance between outcome-based rewards, activity-centered incentives, support for community-scale resource management and establishment of trust 9. Sanctions exist to deal with non-compliance by contract partners, within the human and legal rights of both sides (linked to exit strategy in 7)

III. Condi-tional

Negotia-tion & imple-menta-tion

Service and rewards or compensation are dynamically linked

10. ES reward agreements acknowledge the potential of environmental variability and change, ‘third-party roles’ (incl. climate change) to affect the ecosystem and its ES provision

B. Equity

11.ES reward mechanisms support ‘sustainable development’ pathways out of poverty for achieving Millennium Development Goals, by addressing the priorities (and criteria…) of ‘poor’ stakeholders

IV. Pro-poor

All stages

Mechanisms selected are positively biased towards disadvantaged stakeholders 12. ES reward mechanisms reduce asset insecurity

(including access to land)

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Table 7. Environmental service reward prototypes

Environmental service

Code Providers/ sellers Users / buyers Main issue

1. Total water yield for hydroelectricity via storage lake

Wcons_1 Impacts on total water yield small; reservoir sedimentation issue may dominate the debate; option for sediment traps and landscape filters

Consumer satisfaction depends on continued functioning; high project investment costs, little subsequent management flexi-bility

Intercepting sediment flows rather than avoiding them is generally easier to accomplish; sediment flows out of well-managed upper catchments may still be high because of geological and geomor-phological processses

2. Regular water supply for hydro-electricity via run-off-the-river

Wcons_2 A change from soil quick flow (saturated forest soils) to overland flow will have some effect on buffering of river flows and hydroelectric operation time

Consumer satisfaction depends on continued functioning; high project investment costs, little subsequent management flexi-bility

Interventions influencing the speed of drainage (linked to paths, roads and drains) have the most direct effect on buffering at larger scales

3. Drinking water provision (surface or groundwater)

Wcons_3 Intensive agriculture and horticulture will cause rapid pollution of surface flows and slow but persistent pollution of groundwater flows with nitrogen and pesticides; people residing around streams cause pollution E.coli and diseases

Willingness to pay for drinking water depends on quality assurance from medical perspective, as well as taste

Slow response of groundwater flows to changes in the pollutant status make ‘regulation’ a more effective solution than results based markets

4. Flood prevention

Wcons_4 Land use effects strongest for flow buffering of small-to-medium sized events, with saturation dominating the large events

Relevance of upland land use depends on location (‘flood-plains’) and engineering solutions (dykes, storage reservoirs)

Risk avoidance for the rare category of large events

5. Landslide prevention

Wcons_5 Mortality of deep-rooted trees (‘anchors’) causes temporary increase in landslide risk

Relevance depends strongly on location in the flow paths

Deep landslides are little affected by land cover


6. General watershed rehabilitation and erosion control

Wreh Promoting tree cover and permanence of litter layer protecting the soil is a good precaution

‘Holistic’ perception of watershed functions survives despite the lack of clear impacts on specifics

Communication gap with scientists who try to enhance clarity

7. Biodiversity bufferzones around protected area

Bcons_1 Use value of buffer zones depend on hunting restrictions, presence of human-life threatening species

Flagship species still dominate the public perception of value

Push and pull factors in human land use; livelihoods operate at larger scales than most conservation plans acknowledge

8. Biodiversity landscape corridor

Bcons_2 Still new concept in agriculture/forest land use mosaics in the tropics; use value of patches in the ‘stepping stones’ similar to the buffer zone case

Relevance depends on dispersion properties of the species of main interest; some-times higher connectivity not desirable; relevance increases with climate change concerns

Ex ante impact assessment of effectivity is still difficult

9. C restocking degraded landscapes

Cdreh Options for profitable tree restocking primarily depend on policy reform

Demand is for Certified Emission Reduction (CER) rather than carbon

Additionality issues in CDM; high transaction cost

10. C protecting soil and tree stocks

Cscon Road construction (accessibility) is main determinant of ‘opportunity costs’ for non-conversion

Demand is for Certified Emission Reduction (CER) rather than carbon

Not recognized as part of CDM

11. Guaranteeing production landscapes meet environmental standards

Ecolabel Where the ‘ecolabel’ process starts from the consumer side, there can be a sub-stantial gap in communication and trust, leading to high transaction costs

Consumers with high sense of personal responsibility; gradually replaced by the introduction of standards and the raising of baselines of ‘acceptable’ behaviour

Relevance of global standards in the face of variation in local conditions; transparency of the standards and compliance monitoring; transaction costs

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12. Providing guided access to landscapes of beauty/ heritage/ recreational value

EcoTourism The local and international appreciation for landscape beauty depends on culture and time (fashion); rewards are for roles as guide and provider of accommodation, food, transport and handicrafts ; gender aspects of provider roles may be promi-nent

The appreciation of landscape beauty and cultural traditions does not reduce the need to provide security and comfort to potential tourists

Global ecotourism is a highly volatile market where security and political concerns can interfere

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Table 8. Four paradigms (linked to the levels in Figure 10) for the interaction between local natural resource managers (farmers) and external stakeholders

Markets Regulating Payments for actual Environmental Servi-ces provided (PES) –level 1

Rewarding/Paying Land Users for Accepting Restrictions on their Land

Use –level 2

Co-Managing Landscapes for Reducing Poverty and Enhancing

ES - level 3

Integrated Conservation and Development Projects (ICDP’s) --

interactions at level 4

Type and Level of Rewards/Payments Recurrent monetary

payments

Recurrent monetary payments

Negotiated, conditional tenure security

Reduction of current land use conflicts

Investment in ecofriendly enterprises will lead to long-term payoffs for both rural welfare and conservation

New flows of income Substantial new funding & invest-ment resources for poverty reduction

Reduction of conflicts and colla-teral damage to both environment and rural welfare

Modest new financial transfers

Trust between conservation agencies and rural communities will allow for mutual benefit

Price level is fully negotiable, the market price is the right one (by definition)

Fair price for sellers depends on knowledge of opportunity costs for the land user

Buyers ‘efficiency’ is protected by requiring ‘additionality above baselines’

Improved public services (above baseline) can be a suitable form of rewards

Essentially public investment to enhance welfare at the level of society

Target Population; Poverty Effects

Land owners or at least persons/agencies with secure de facto control

Land owners or at least persons/agencies with secure de facto control

Any marginalized communities, incl. migrants

Uplands and ‘indigenous’ people in and surrounding areas of high conservation value

No explicit poverty target, but trickle down economic benefits are expected

Money is the most universal form of payment; anything else is ‘patronizing’

Pro-poor mechanisms can be constructed through targeted financial transfers

Monetary flows can be captured by local elites and diverted

Disadvantaged groups prefer ‘public services’

Rewards based on health, education, roads, access may be effective and ‘pro poor’

Poverty targets are embedded in the choice for the site

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Assumed characteristics of the environmental service The ES is ‘divisible’ and at

least proportional to the activity of providers

Exclusion from the service is possible

‘Optimum levels of threat’ are the main selling point for providers

Land use prescriptions are the most effective way of guaranteeing persistence of the service, as they can be easily monitored and understood

Environmental services are ‘emer-gent properties’ and only exist if all land users are involved

ES thus require land use planning & management

Need trust, shared responsibility for effective co-management of land-scapes

Integrity of the core protected area implies continuity of the environmental services

The main function of the ‘buffer zone’ is provide local income while protecting integrity of the core area

Attribution of ES; Conditionality of ‘Rewards’ No LU prescriptions/ micro-

management as long as the service is there payments will continue ; stimulates local inventiveness and increase in efficiency of ‘producing’ the service desired

Clear, identifiable ES can be attributed to providers & activities

Complex causality, no simple attribution possible in many cases

Public funding justified when ES provision (result) depends on level of participation

(Broader ‘emergent properties’ of ES provision)

Integrity of the core area is the target

Potentially any positive exter-nality (lateral benefit flow) or desirable condition can be rewarded

Payments are conditional to ‘service indicators’

Only those land use prescriptions that generate lateral benefit flows that exceed a baseline of ‘business as usual’ can be rewarded

Must have (enforce) baseline of ‘good’ behaviour

Expected/normative quality standard is non-trivial

Rewards must build on standard of improved care

The investment cannot be withdrawn, conditionality is replaced by ‘trust’ and self-interest in mutual goals

Local Institutions Local institutions can help

reduce transaction costs and provide economies of scale

Strong local organizations needed

Ready for project cycle transac-tions and negotiations

Local conflict resolution needed Access to info about landscape

level ES is priority Environmental education needed:

formal & informal channels

Environmental education needed: formal & informal channels

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Priority Actions Create replicable, payment

models Reduce transaction costs &

provide economies of scale

Establish clear guidelines of land use practices to be avoided/ promoted

Measure opportunity costs

Stop lose-lose scenarios for poverty & environment (Prevent/reduce “PUPES”)

Establish trust in clearly prioritized areas of high conservation value

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