1

Incentives for Ecosystem Services Spectrum

Incentives for Ecosystem Services in Agriculture (IES)

Lucy Garrett October 2015Incentives for Ecosystem Services (IES)

Incentive SpectrumProhibition of use

Taxes/ Charges

Property use rights

Mandatory farm set-asides

Subsidies

Conservation easements

Permits and quotas

Marketing labels – Certificates/ Standards

Offsets

Green Public Procurement

Voluntary farm set-asides

Conservation concessions

Direct Payments for Ecosystem Services

Corporate Social Responsibility

Marketing labels (without certification/ standards)

Rewards for Ecosystem Services (RES)

Cultural and social norms

2

Incentives for Ecosystem Services in Agriculture (IES)

Mandatory Regulations

Flexible Regulations

Voluntary investments – Linked to input

Voluntary investments – De-linked to

input

RegulatoryPolluter-pays principle

Voluntary Provider-gets principle

Garrett, L. (2015)

RegulatoryPolluter-pays principle

VoluntaryProvider-gets principle

3

Mandatory Regulations

Flexible Regulations

Voluntary investments –

Linked to input

Voluntary investments – De-linked to

input

Incentives Spectrum

Voluntary farm set-asides

Green Public Procurement (GPP)

Conservation concessions

Direct Payments for Ecosystem Services (PES)

Conservation Easements

Subsidies

Permits and Quotas

Marketing labels – Certificates and Standards

Taxes/ Charges

Prohibition of use

Property use rights

Mandatory farm set-asides

Rewards for Ecosystem Services (RES)

Cultural and Social Norms

Marketing Labels (without certificates / standards)

Offsets

Corporate Social Responsibility (CSR)

Incentives for Ecosystem Services in Agriculture (IES)

Garrett, L. (2015)

Incentives for Ecosystem Services (IES)

Mandatory Regulations

4

Incentives for Ecosystem Services in Agriculture (IES)Incentive SpectrumProhibition of use

Taxes/ Charges

Property use rights

Mandatory farm set-asides

Subsidies

Conservation easements

Permits and quotas

Marketing labels – Certificates/ Standards

Offsets

Green Public Procurement

Voluntary farm set-asides

Conservation concessions

Direct Payments for Ecosystem Services

Corporate Social Responsibility

Marketing labels (without certification/ standards)

Rewards for Ecosystem Services (RES)

Cultural and social norms

Prohibition of useCommand-and-control measures prohibiting negative impacts on ecosystem goods and services, e.g. in protected forest, coastal areas, and river buffer zones.

Taxes/ ChargesEnvironmental or green taxes levied on ecosystem “bads” that can be used to correct or modify existing land-use practices.

EG Green Dot, Germany – Imposes a payment per unit of packaging, to encourage reductions in solid waste.

Property use rightsControlled or regulated use through different ownership and management; Exclusion of non-owners or marginal groups.

EG Indonesia – Different forest ownership and management rights ranging from production and community forest to conservation and protected forests.

Mandatory farm set-asideLegislation requiring landowners to give up the right to use part or all of their farmland for land restoration, forest and riparian conservation or habitat connectivity.

EG Brazil’s Forest Code - Legislation denoting up to 80% (dependent on State) of private properties must be retained as forest, riparian forest habitat (along water bodies and around headwaters) must also be protected..

Regulatory measures, however, are costly for governments to implement and enforce. They also pose social costs to farmers through restricted and lost livelihood opportunity costs. More flexible regulations or voluntary investments may, therefore, be needed to provide incentives to assist compliance.

Garrett, L. (2015)Incentives for Ecosystem Services (IES)

Mandatory Regulations

5

Incentives for Ecosystem Services in Agriculture (IES)Incentive SpectrumProhibition of use

Taxes/ Charges

Property use rights

Mandatory farm set-asides

Subsidies

Conservation easements

Permits and quotas

Marketing labels – Certificates/ Standards

Offsets

Green Public Procurement

Voluntary farm set-asides

Conservation concessions

Direct Payments for Ecosystem Services

Corporate Social Responsibility

Marketing labels (without certification/ standards)

Rewards for Ecosystem Services (RES)

Cultural and social norms

Flexible Regulations

Conservation EasementsA voluntary agreement between landowners and GOVT, industry or NGO transferring the development rights of properties to force it out of production. The type and extent of future development is then limited on the property. Purchased development rights can be traded in a market for offsetting etc.

EG Blackfoot Valley Wildlife Management Area, Montana, USA.

OffsetsSeek to ensure that unavoidable adverse environmental impacts of development are counterbalanced by environmental gains as a compensatory measure. The overall aim of offsets is to achieve a net-neutral or -beneficial outcome. Offsets can be made through habitat restoration, biodiversity, water, carbon (see below) etc. Can be traded – Markets for pollution/ emissions reduction.

EG Business and Biodiversity Offsets Programme (BBOP) - A collaboration between companies, financial institutions, government agencies and civil society organizations to develop best practice for mitigation (avoid, minimize, restore, offset) to achieve no net loss or gain of biodiversity, while addressing the needs of local communities.

SubsidiesGovernments provide direct subsidies to those who implement SLMPs or other environmental technologies.

EG METSO II, Finland – Provides subsidies to compensate commercially managed forest-owners for safeguarding areas of ecologically valuable forest habitat types.

Garrett, L. (2015)Incentives for Ecosystem Services (IES)

Mandatory Regulations

6

Incentives for Ecosystem Services in Agriculture (IES)Incentive SpectrumProhibition of use

Taxes/ Charges

Property use rights

Mandatory farm set-asides

Subsidies

Conservation easements

Permits and quotas

Marketing labels – Certificates/ Standards

Offsets

Green Public Procurement

Voluntary farm set-asides

Conservation concessions

Direct Payments for Ecosystem Services

Corporate Social Responsibility

Marketing labels (without certification/ standards)

Rewards for Ecosystem Services (RES)

Cultural and social norms

Flexible Regulations

Marketing labels – Certificates/ StandardsMarketing labels can also be used to promote products, processes or services that comply with specific environment and/ or social standards. Compliance with these standards is certified by verification methods recognised and approved by a third party certification body that has no direct interest in the economic relationship between the supplier and the buyer. Marketing labels and certification of products, processes or services that are linked to ecosystem input factors are more likely to require rigorous MRV. When de-linked to ecosystem input factors, assessment criteria are more likely to be less onerous.

The use of marketing labels and certification/ standards for agricultural products can enable farmers to access higher-value markets. The transition to more sustainable agricultural production to reach these standards and obtain certification and/ or marketing labels is, however, costly for farmers. They, therefore, require incentives, such as access to capital to invest in improved technologies

Third party assessment can be:With the GOVT EG International Federation of Organic Agriculture Movements (IFOAM certification), International Organisation for Standardisation (ISO) By Industry, including exporter/ retail groupsBy NGOs EG Forest Stewardship Council (FSC), Rainforest Alliance, FairTrade®, Wildlife Friendly - Ibis Rice™, Cambodia– Through improved farming practices and access to higher value markets, Ibis Rice™ are able to conserve Giant Ibis habitats and earn a better living.

By Industry, including exporter/ retail groupsEG Global Good Agricultural Practice (GLOBALG.A.P.), Marine Stewardship Council (MSC) - for fisheries from sustainable stocks, with operations that have minimal environmental impact, and fisheries that have effective management.

Garrett, L. (2015)Incentives for Ecosystem Services (IES)

Mandatory Regulations

7

Incentives for Ecosystem Services in Agriculture (IES)Incentive SpectrumProhibition of use

Taxes/ Charges

Property use rights

Mandatory farm set-asides

Subsidies

Conservation easements

Permits and quotas

Marketing labels – Certificates/ Standards

Offsets

Green Public Procurement

Voluntary farm set-asides

Conservation concessions

Direct Payments for Ecosystem Services

Corporate Social Responsibility

Marketing labels (without certification/ standards)

Rewards for Ecosystem Services (RES)

Cultural and social norms

Flexible Regulations

Permits and quotasPermits - The right to emit a specific volume of pollutant/ extract a specific amount of natural resource.

Quota – The cap or specific amount of allowed emissions or extractions.

Emissions permits and quotas can be traded to distribute the amount of the total allowance. Parties can use their own, buy or sell allowances.

Includes Compliant Carbon Market - Regulated (Kyoto Protocol) formal carbon-trading mechanism and market, such as Carbon Development Mechanisms (CDM), referred to as Compliant Emissions Reductions (CERs). Driven by mandated caps on greenhouse gas emissions.

Includes Voluntary Carbon Market - A form of CSR (see above), with a focus on carbon offset transactions. Also includes speculative pre-compliance offsets. Two primary methods for trading voluntary carbon credits are: Chicago Climate Exchange (CCX)Voluntary but legally binding.‘Over-the Counter’ (OTC)Non-binding off-set market, referred to as Voluntary Emissions Reductions (VERs).

EG Individual Fisheries Quotas (IFQ) – quota allocations are granted to certain fisheries, determined by assessment of Total Allowable Catch (TAC) for a specific fishery per year.

EG EU Emissions Trading Scheme (EU ETS) – A market-based regulatory compliance mechanism that allows carbon-polluting industries to buy and sell credits to offset their carbon dioxide emissions to comply with EU-mandated targets based on the Kyoto Protocol.

EG REDD/ forest carbon

Garrett, L. (2015)Incentives for Ecosystem Services (IES)

Mandatory Regulations

8

Incentives for Ecosystem Services in Agriculture (IES)Incentive SpectrumProhibition of use

Taxes/ Charges

Property use rights

Mandatory farm set-asides

Subsidies

Conservation easements

Permits and quotas

Marketing labels – Certificates/ Standards

Offsets

Green Public Procurement

Voluntary farm set-asides

Conservation concessions

Direct Payments for Ecosystem Services

Corporate Social Responsibility

Marketing labels (without certification/ standards)

Rewards for Ecosystem Services (RES)

Cultural and social norms

Flexible Regulations

Corporate Social Responsibility (CSR)A business strategy to participate in or integrate initiatives that benefit society and the environment into their operations. Driven by a variety of considerations related to green philanthropy and sponsoring, insetting: integrating business value chain or impact marketing. CSR can incorporate issues ranging from prevention of environmental pollution, sustainable use of resources, climate change mitigation, supply chain eco-efficiency and responsible sourcing to improved stakeholder engagement, sustainable consumption, social equity and good governance.

ISO 26000 provides guidance on how businesses and organizations can operate in a social responsible way.

EG. Häagen-Daz and Honeybee preservation – The company is donating a portion of profits from Haagen-Daz honeybee brand to UC Davis, USA to research the topic.

Garrett, L. (2015)Incentives for Ecosystem Services (IES)

Mandatory Regulations

9

Incentives for Ecosystem Services in Agriculture (IES)Incentive SpectrumProhibition of use

Taxes/ Charges

Property use rights

Mandatory farm set-asides

Subsidies

Conservation easements

Permits and quotas

Marketing labels – Certificates/ Standards

Offsets

Green Public Procurement

Voluntary farm set-asides

Conservation concessions

Direct Payments for Ecosystem Services

Corporate Social Responsibility

Marketing labels (without certification/ standards)

Rewards for Ecosystem Services (RES)

Cultural and social norms

Voluntary Investment – Linked to input factor

Green Public Procurement (GPP)Public authorities use of environmental criteria to procure goods, services and works with a reduced environmental impact throughout their life-cycle. GPP concerns both contracting authorities and entities.

Voluntary farm set-asidesLandowners voluntarily give up the right to use part or all of their farmland, in exchange for payments.

EG EU Green Public Procurement policy A voluntary policy to support the implementation of GPP within Member States. Life-cycle costs (LCC) form a central part of the approach to GPP to award contracts by public authorities

Conservation concessionsLand management contracts between a GOVT or landowner and a conservation-minded buyer to use a territory for conservation processes and guarantee that the land will be protected, at least during the period considered, in exchange for

compensation.

EG Costa Rica - National forestry fund pays up to USD 50/ha/year to landowners who promise to preserve existing forests to allow natural regeneration.

EG Conservation International (CI), Guyana –CI paid market rates to protect the land for 30 years, with the funds intended to regulate logging in timber concessions, to prevent illegal logging, and to ensure the preservation of biodiversity and wildlife within the forest ecosystem.

Direct Payments for Ecosystem Services (PES)Beneficiaries of ecosystem services directly pay/ compensate providers to sustainably manage land to provide ecosystem services. Payments are conditional on specific ecosystem services outcomes and/ or performance of agreed actions to enhance ecosystem services

EG Vittel – Nestle Waters finances farmers in the Vittel catchment to adopt improved dairy farming practices, such as reduction of stocking rates and agrochemical use, improved waste management and animal feed, to reduce nitrate contamination of the aquifer from agricultural intensification.

Garrett, L. (2015)Incentives for Ecosystem Services (IES)

10

Incentives for Ecosystem Services in Agriculture (IES)Incentive SpectrumProhibition of use

Taxes/ Charges

Property use rights

Mandatory farm set-asides

Subsidies

Conservation easements

Permits and quotas

Marketing labels – Certificates/ Standards

Offsets

Green Public Procurement

Voluntary farm set-asides

Conservation concessions

Direct Payments for Ecosystem Services

Corporate Social Responsibility

Marketing labels (without certification/ standards)

Rewards for Ecosystem Services (RES)

Cultural and social norms

Voluntary Investment – De-linked

to input factor

Rewards for Ecosystem Services (RES)Rewards for the protection, restoration or enhancement of ecosystem services by providers. They can include access to markets, social recognition, assistance with community projects, such as schools, and land tenure, etc.

EG Peru – Communities are rewarded with in-kind benefits such as agricultural equipment and school materials to preserve agricultural biodiversity by cultivating threatened varieties of quinoa and collecting 2% of production for seed conservation.

Marketing Labels (without certificates or standards)Eco-labelling of sustainably produced products or services sold to consumers or retailers who prefer to support responsible suppliers. Criteria can be focused on social benefits (equitable and just remuneration of producers) and/ or environmental health (organic production without use of pesticides or herbicides).

EG Rainforest Alliance – Conserves valuable forest land by promoting sustainable farming practices for coffee, cocoa and black tea

EG Ghana and Republic of Congo partnership agreement with the EU to ensure timber exports are legally harvested and can be allowed entrance to the EU market.

Cultural and Social NormsCultural and social norms, traditions and customs provide incentives for pro-environmental behaviours.

EG Lombok, Indonesia – traditional customs, ‘adat’ and social norms are used by community leaders to motivate communities to protect upland forests to ensure the continued supply of water for downstream communities.

Garrett, L. (2015)Incentives for Ecosystem Services (IES)

Incentives for Ecosystem Services in Agriculture (IES)

11

What opportunities are there for private sector engagement?

Incentives for Ecosystem Services (IES)

Lucy Garrett Food and Agriculture Organization of the United Nations

Citation: Garrett, L. (2015) Spectrum of Incentives for Ecosystem Services. Food and Agriculture Organization of the United Nations, Rome [PowerPoint slides] Retrieved from: http://www.fao.org/ecosystem-services-biodiversity/incentives/ies-step-by-step/sources-of-incentives/en/

Incentives Spectrum - Author