making environmental service payments work for the poor maryanne grieg-gran environmental service...
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Making Environmental Service Payments Work for the Poor
Maryanne Grieg-Gran
Environmental Service Payments for the Poor-Contributing to the Milennium Development Goals
IFAD Governing Council Side Event
20 February 2004
Some experiences from Latin America
Outline
• How payments for environmental services might reduce poverty
• The constraints • Some positive examples from Latin America
– Watershed services• Pimampiro, Ecuador
– Carbon sequestration• Northern region, Costa Rica
– Biodiversity conservation• ICMS ecologico, Brazil
How PES might reduce poverty
• Direct– Payments increase household income
• Other more indirect channels– Generation of new productive activities and
employment – Reducing the cost for the poor of meeting basic
needs– Increasing the asset base of the poor – natural,
social, human, physical capital– Reducing vulnerability– Increasing government revenue for expenditure on
the poor
The Constraints
• Insecure land and resource tenure – May affect eligibility– Pressures for expropriation
• Small and dispersed producers– High transaction costs– Little bargaining power
• Market access– Lack of skills, education, finance, information
• Little voice in the formulation of rules
Whether environmental service payments reduce poverty depends on:
•The context in which they are introduced
•The driving motivation behind them
•How they are designed
•The package of accompanying measures
Ecuador: Pimampiro
Pimampiro
Pimampiro Municipality• Population of 17,000 - 6,000 live in town• Motivations for the Payment Scheme:
– Problems of water shortages for town supply– Estimated 13,000ha of forests lost since 1985– Decentralisation of environmental management
• Pilot scheme: Nueva America Association – 27 families with an average of 2-3 ha of
agricultural land and 20 ha of forest or paramo
• Aim: protect forest in the headwaters of the municipality´s water system
Payment Mechanism
PES
FUND
20% increase in water
price
Seed capital
US$15,000 USD UMAT
CEDERENA
Payment to Nueva
America Association
Payment Categories
0Degraded Land
0Agriculture and Livestock
0.50New Secondary Forest
0.75Old Secondary Forest
0.50Intervened Primary Forest
1.00Primary Forest
0.50Intervened Paramo
1.00Primary Paramo and Forest
Payment ($/month/ha)Payment Categories
PES and poverty reduction in Pimampiro
• Mainly through raising income– Mean payment of US$21 per family per month
• Equivalent to 30% of monthly household expenditure
• Benefits from projects accompanying PES– Formalisation of land tenure– Technical assistance and training
• Agricultural productivity
– Improved access to NTFP markets• eg:medicinal plants
Some key issues
• Early to judge success – Payments started in 2001
• Institutional sustainability– Supporting project will finish soon
• Improvements to water supply infrastructure helped acceptability
Northern RegionCosta Rica
Pre-1980 deforestationto create large farms
1980s: Land invasionsand land reform
1990s: promotion of forestry and PES
FONAFIFO/ Ministry of Environment
PooledDEMAND
SUPPLY
Carbon SalesHydrological services
Biodiversity Landscape beauty
Forest owners: public and private(payments per ha for 5 years contract)•$200 conservation•$500 reforestation•$300 forest management
Transfer Payments: FONAFIFO
IndependentMonitoring
PES and Poverty Reduction in Northern Region
• Mainly through making a new activity viable:– Main benefit is from sale of thinnings and timber
• Other benefits– Employment creation in wood processing– Human capital
• forestry skills, intermediary skills (monitoring, training, support, etc)
– Social capital • encouraged the creation and strengthening of
community associations
Room for improvement• Inadequate returns for some farmers
– Lack of information about costs involved • Considerable “learning-by-doing”
– Losses for early participants discredited the system. • Restriction of access to other public funds
– PES participants not eligible for housing bonus or bank credit until recently
• Lack of government coordination– Land reform beneficiaries ineligible for PES
• Physical capital adversely affected– roads are deteriorating through increased use
ICMS Ecologico Brazil
• Sharing of state sales tax revenue • Criteria for distribution between local
governments typically:– Favours LGs with high economic production– Discriminates against LGs with protected areas
• Paraná introduced an ecological criterion– area, status and quality of management of
conservation units
• 10 other states in Brazil have followed.
ICMS and Poverty Reduction
• Increased revenue for some poor municipalities– Marlieria (Minas Gerais) had 2000% increase in
share of ICMS revenues 1995-1998
• Enables increased expenditure on basic services – eg: Alto Caparão (MG)- electrification
• Enables support to communities living in and around conservation units– Eg: NW Paraná –well-drilling, tractors
Room for improvement
• Effect on distribution depends on which other criteria are reduced– 40% of counties with conservation units
in Rondonia were worse off with the ICMS
• Revenue may not benefit those most affected by land use restrictions
Conclusions
• PES can benefit the poor if:– They are designed for this purpose– The context is favourable or effort is made to
overcome constraints
• Many PES schemes are being introduced in Latin America eg: Mexico
• It is important to ensure that these emerging schemes do not exacerbate poverty
For more information on IIED’s case studies on environmental servicessee www.iied.org/eep or write [email protected]