CIFOR Presentation: OECD Paris 010
Center for International Forestry Research
Sven Wunder Principal Economist Payments for Environmental Services: Achieving Efficiency in Practice
Our PES definition 1. a voluntary transaction where. a well-defined environmental service (ES) - or a land-use likely to secure that ES -. is being bought by a (min. one) ES buyer. from a (min. one) ES provider. if and only if the ES provider continuously secures ES provision (conditionality). - Four areas of application: carbon, watershed, biodiversity, landscape beauty - User vs. gov t financed PES
Vital concepts from theory Baselines Additionality Leakage Permanence
A) Static Baseline: ex forestry CDM Forest Carbon Stock Additionality With payment Without payment PES Time
) Deteriorating baseline: ex REDD Forest Carbon Stock Additionality With payment Without payment REDD Implementation Time
C) Improving baseline: ex C. Rica PSA Forest Carbon Stock Additionality With payment Without payment PES Time
Leakage: -Def: Effectiveness loss due to threat displacement in space - When target and intervention areas coincide, no leakage - On-farm leakage - Leakage belt - GE effects (price)
Permanence: -The option of maintaining a service beyond of the temporal payment horizon - Cannot normally be expected in PES implementation: you tend to get what you pay for, as long as you pay externality persists
Design Lessons: 1. Focus on threat/ leverage areas. Pay acc. to customized cost levels. Focus on high-service areas. Strengthen conditionality
1. Variable threat leverage =>Watch out for adverse selection bias! => especially in conservation PES Of 1000 forest plots, only go (0.%) Threat very unequally distributed in space!
. Customize payments to costs
REDD Conservation Opportunity Costs Brazilian Amazon, 007-16
Costos de oportunidad REDD Conservation Opportunity Costs 0 0 1 10 0 Brazilian Amazon, 007-16 Extensive cattle CCX temporario Annual crops CCX permanente Intensive cattle Oil palm Soy Precious timbers Remotest 0 000000 10000000 1000000 0000000 areas Deforestacion evitada (ha)
Costos de oportunidad Costs with a uniform payment rate 0 0 CCX temporario CCX permanente 1 10 0 0 000000 10000000 1000000 0000000 Deforestacion evitada (ha)
Costos de oportunidad Costs with differentiated payments 0 0 CCX temporario CCX permanente 1 10 0 0 000000 10000000 1000000 0000000 Deforestacion evitada (ha)
. Pay according to service levels - What we want eventually is not just additional forest cover (=proxy), but additional forest environmental services (=output)
Costa Rica study (ZEF, CIFOR) T. Wünscher: Targeting potential in PSA (ES delivery, threat, opp costs (Nicoya Peninsula)
a) Nicoya: watershed protection Criteria: a) water consumers b) slopes
b) Nicoya forest carbon Criterion: tco /ha
c) Nicoya services aggregated Equal weights assigned
Can we combine three spatial targeting criteria? 1. Benefits. Threat Yes we can!. Costs PES in Costa Rica Problem Concept Data & Methodology Results Conclusions
Service provision at plot level Site 1 Site Site Site Delivered Services (quantified) PES in Costa Rica Problem Concept Data & Methodology Results Conclusions
Threat / leverage of plots e.g. risk of deforestation Services Risk Additionality Site 1 x 0. Site 1 Site x 0.1 Site Site x 1.0 Site Site x 0.0 Site Delivered Services Additionality PES in Costa Rica Problem Concept Data & Methodology Results Conclusions 6
Costs of plots Participation/social costs (opportunity + transaction + conservation costs) Program costs (social costs + rents) Participation Costs 6$ Site Site 1 Site Site Site PES in Costa Rica Problem Concept Data & Methodology Results Conclusions 7
8 GIS as Data Facilitating Framework Biodiversity Watershed Carbon Landscape 8 6 8 7 6 1 7 0. 0. 0.1 0.9 0. 0.7 0.6 0. 0.8 0. 0.8 0.1 0.8 0. 0. 0. 0. 0. 0. 0. 0.7 0. 0. 0. 0.7 0. 0.6 0. 0. 0. 0. 0.1 0.6 0. 0. 0. $ $ 1$ 9$ $ 17$ 16$ $ 81$ $ 8$ 1$ 88$ $ $ 0$ 7$ 0$ $ $ 70$ $ 1$ 1$ 7$ $ 6$ $ $ $ 1$ 10$ 6$ 0$ 0$ $ Threat Provision Cost 1 9 7 6 8 8 1 8 7 7 6 1 6 1 9 7 6 8 8 1 8 7 7 6 1 6 6 9 7 8 7 8 1 8 6 6 6 8 6 1 9 7 1 9 7 6 8 8 1 8 7 7 6 1 6 Selected Sites Problem Concept Results Data & Methodology PES in Costa Rica Conclusions
. Enforce conditionality Best of all worlds for PES recipients: cash in payments, while making little or no adjustments to business as usual (=e.g. deforest) Monitoring : probability of detecting non-compliance Sanctions : low sanctions => low expected penalty => low probability of losing payment Timing payments, ex ante vs ex post: keep leverage vs. frontloading
Conclusions & perspectives 1. PES have good preconditions for being effective and efficient: performance-based (=direct), voluntary, customizable => desirable market-based features. PES are also institutionally demanding (e.g. secure land tenure) and sometimes costly (e.g. negotiation). Concerns about leakage and permanence can be valid, but don t over-emphasize them!. Heterogeneities in space (services, leverage, cost) are usually much more important efficiency drivers!. Conditionality is the key to PES enforce it!
www.cifor.cgiar.org/pes/_ref/home/index.htm
Ex: Costa Rican gov t PES what lessons? (+A.Pfaff) Pioneer showcase, learning by doing Uniform prices, self-selection, low targeting Little forest cover additionality of PES: A) Other factors had already slowed defor. B) Self-selection of low-threat areas, but C) PES supplemented other policies (c & c) D) Forest quality outcome
I. User-financed schemes - Examples: many watershed (Vittel, Catskills, Pimampiro ) and carbon schemes (Scolel Te, FACE ) - Characteristics: mostly small-scale, single service - single buyer, seldom side objectives; focused - Pros: targeting to high-service, high-threat & low-cost areas (e.g. differentiated payments), often close to pure PES ; => effective - Cons: a) hard to get voluntary buy-in for multiple-user externalities (biodiversity) free riding; b) tend to have large start-up costs => maybe not cost-effective? challenge to make them cheaper to install (=costefficient)!
II. Gov t-financed schemes - Ex: PSA Costa Rica, Mexico, agri-envir (EU,US, China) - Characteristics: large scale (nation-wide), many services, state acts as ES buyer, multiple sideobjectives (politics), less focused - Cons: often flat uniform payments, non-targeted, widespread money for nothing (low additionality) => often less effective in ES delivery - Pros: a) adequate for ES with free riding dominance (biodiv, multi-service layering); b) admin economies of scale => low-cost potential challenge to make them more targeted and effective!
PES & legality: theory vs. practice Source: Adapted from TEEB (009) Service values, provision costs (or increase forest cover, biodiv ) No ES