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TEEB Training Session 2: Instruments for Improved Stewardship of Natural Capital.

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Presentation on theme: "TEEB Training Session 2: Instruments for Improved Stewardship of Natural Capital."— Presentation transcript:

1 TEEB Training Session 2: Instruments for Improved Stewardship of Natural Capital

2 TEEB Training Instruments for improved stewardship of natural capital Part 1: Recognizing the value of Protected areas Part 2: Reforming subsidies Part 3: Addressing losses through Regulation and Pricing Part 4: Rewarding benefits through payments and markets Part 5: Investing in Ecological Infrastructure

3 TEEB Training Part 1: Recognizing the value of Protected Areas Some definitions A protected area (PA) can be defined as: A geographically defined area which is designated or regulated and managed to achieve specific conservation objectives (CBD) A clearly defined geographical space, recognised, dedicated and managed, through legal or other effective means, to achieve the long-term conservation of nature with associated ecosystem services and cultural values (IUCN World Commission on Protected Areas)

4 TEEB Training Protected Areas Quick Facts Over 120,000 designated protected areas covering around 13.9% of the Earths land surface. Marine protected areas cover only 5.9% of territorial seas 0.5% of the high seas but are increasing rapidly in number and area Worldwide, nearly 1.1 billion people depend on protected areas for a significant percentage of their livelihoods ©

5 TEEB Training Providing a case for PAs Protected areas are central to global efforts to conserve biodiversity and safeguard biodiversity Their benefits include : Provide a supply of clean drinking water Reduce risk from unpredictable events and natural hazards Maintain food security by increasing resource productivity and sustainability Contribute to climate change mitigation and adaptation Protect cultural and spiritual resources Provide potential source of economic development ©Grida Ardenal

6 TEEB Training Challenges for PAs external pressures from distant sources direct pressures local conflicts lack of financial resources poor capacity Inappropriate institutional structures unclear or insecure land rights ©

7 TEEB Training Improving PA effectiveness through economic valuation Results of economic valuation need to be appropriately interpreted and embedded in sound management processes Valuing ecosystem services can support sound decision- making by helping to assess the costs and benefits of different options Valuations can inform the debate amongst those responsible for a protected area and those affected Valuation helps to analyze the social impacts of conservation

8 TEEB Training The cost of PAs These can range from: PA management costs, loss of access to resources, forgone opportunities, human-wildlife conflicts, displacement etc Cost estimations for global protected areas vary significantly between different studies: Cost estimates range from US$ 1.2 billion/year for a fully efficient protected area network in developing countries to US$ 45 billion/year for a global marine and terrestrial network that covers 30% of marine area and 15% of terrestrial area The EC report focuses on the costs of Natura 2000, the EU network of areas managed for specific conservation objectives, which are estimated to be 5.8 billion for the EU-27 countries

9 TEEB Training Mobilizing Funds and Financing PAs Biodiversity financing estimated to be around US$ 4 to 5 billion a year, with some 30-50% going to finance protected areas There is severe competition for available funds Funding by non-profit organizations probably contributes more than US$ 1 billion/year to international biodiversity protection Biodiversity is losing ground to climate change funding Market-based sources of protected area income could contribute between US$ 1-2 billion annually Financing for protected areas can also be obtained via new innovative mechanisms and instruments

10 TEEB Training A Framework for Successful Financing Create markets and promote market-based tools Create a diverse portfolio of funding (as sources may fail along the way) Address the social impacts of PAs (demonstrate relative costs and benefits to stakeholders to garner support) Making available funds work better

11 TEEB Training Case study; Using economic arguments to support protected area strengthening in Indonesia Acheh province in Northern Sumatra has one of the largest continuous forest ecosystems remaining in South-East Asia. Forest sustains livelihoods by retaining water in the rainy season, providing continuous water supply throughout the dry season, mitigating floods and erosion Since 1980, due to illegal logging threatening parks ecosystems, Leuser national park has sought to protect this rich natural heritage ©

12 TEEB Training National Park managers commissioned a valuation study of impact of biodiversity loss and found: 1.Conserving the forest and its biodiversity would provide the highest long-term economic return for the province 2.Continued deforestation would cause ecosystem service degradation and generate lower economic return for the province 3.Short term benefits for logging industry BUT more long term negative impacts for most other stakeholders Leuser National park on Sumatra, Indonesia The Political Economy of Conservation Figure1: Benefit distribution among stakeholder under different land use scenarios in the the Leuser Ecosystem(25,000 sq km), Indonesia, in Net Present Value (NPV) in billion US$ over 30 years, at a discount rate of 4%. Source: van Beukering, P.J.H., H.S.J. Ceasar, M.A. Janssen(2003). Economic valuation of the Leuser National Park on Sumatra, Indonesia. Ecological Economics 44,pp 43-62

13 TEEB Training Part 2: Reforming subsidies What are subsidies? OECD a government action that confers an advantage on consumers or producers in order to supplement their income or lower their cost WTO: a financial contribution by a government, or agent of a government, that confers a benefit on its recipients. ©OECD ©WTO

14 TEEB Training The magnitude of Global Subsidies from selected economic sectors Source: TEEB, 2010

15 TEEB Training Subsidies and the environment An Environmentally Harmful Subsidy (EHS) is... a result of a government action that confers an advantage on consumers or producers, in order to supplement their income or lower their costs, but in doing so, discriminates against sound environmental practices (OECD, 2005) Some subsidy types have been identified as critical drivers of activities harmful to ecosystems and biodiversity, resulting in losses of ecosystem services by enabling: Under-pricing the use of natural resources Increasing production

16 TEEB Training Case study: The environmental impact of subsidies to the small scale sector in Senegal In the late 1970s, Senegalese authorities provided direct support to fisheries including small scale fisheries. Small scale sectors starting producing more for export than domestic markets and fishing efforts of small scale units intensified By 2003, factories received 60% of their supply from small-scale fishing units. Most marketed species in this category are now in danger of biological collapse © Mora

17 TEEB Training Subsidy reforms Phasing out subsidies can alleviate environmental pressures, increase economic efficiency and reduce the fiscal burden Freed funds can be used for more pressing funding needs, like rewarding those who provide biodiversity benefits (via PES schemes for example) Some successful but relatively small subsidy reforms can now been seen around the world – but progress is too slow and protracted - Why?

18 TEEB Training Analytical Tools for Subsidy Reforms The quick scan model (OECD 1998) The checklist (Pieters 2003) Integrated assessment methodology (OECD 2007a) Green subsidies checklist (UNEP 2008b)

19 TEEB Training Criteria for Subsidy Programme Design Targeted Efficient Soundly based Practical Transparent Limited in time ©

20 TEEB Training Part 3: Addressing the losses through regulation and pricing Rewarding benefits and reforming subsidies are important components of policy reform because their measures are explicitly designed to avoid ongoing losses Decision-makers and resource users will only take such losses into account if confronted with the real costs involved A coherent strategy to make the full costs of loss visible and payable should form the backbone of new biodiversity policies We therefore need instruments that reflect and incorporate the cost of such losses

21 TEEB Training Fundamental principles for incorporating costs Three closely related principles should guide the choice and design of policy instruments: The polluter pays principle (PPP) The user/beneficiary pays principle The full cost recovery principle

22 TEEB Training Regulating to avoid damage: Environmental standards Regulation is the most widely used instrument for environmental protection Regulation of emissions: emissions standards, ambient quality standards and technical standards, and performance management prescriptions for good practice Regulation of products: sets restrictions on the use of products (e.g. illegally logged timber, activities damaging to endangered species etc.) establishes production standards (certification, best practice codes, etc) Spatial planning: involves regulation of land uses that have direct implications for ecosystem services or habitats (e.g. protected areas)

23 TEEB Training Setting more accurate prices; Market Based Instruments Market based instruments (MBIs) can change the incentives available to private actors when deciding upon resource use MBIs work in 3 ways: Control prices Control quantitative Set liability rules and can be adjusted to discourage harmful activities Examples of MBIs include: taxes, charges, fees and fines, permits etc MBIs give private actors more choice in selecting the most cost- efficient option.

24 TEEB Training Biodiversity Offsets and biodiversity banks and the compensation of losses Biodiversity offsets: measurable conservation outcomes resulting from actions designed to compensate for residual adverse biodiversity impacts which arise from project development and persist after appropriate prevention and mitigation measures have been implemented. Biodiversity banking: is a market system, based on biodiversity offsets, for the supply of biodiversity credits and demand for those credits to offset damage to biodiversity (debits).

25 TEEB Training Offsets and biodiversity banks; Advantages Advantages: Help balance development and conservation Generate funds for conservation Mainstream biodiversity into business and regional planning Reverse some past losses of restorable but threatened habitats Reduce habitat fragmentation Be more cost effective than avoidance and mitigation measures

26 TEEB Training Disadvantages Offsets can only deliver benefits where there are significant areas of remaining habitat that are: Worth maintaining Unprotected and likely to remain so in the future (to ensure additionality) Subject to significant levels of loss and degradation Cause the displacement of threats from one area to another (leakage) Offsets and biodiversity banks; Disadvantages

27 TEEB Training A case study – biodiversity compensation and offsets in Australia and the US In Australia Their bio-banking system intends to restore alternative sites to where land-use conversion and associate biodiversity loss are inevitable Provides an incentive to encourage conservation on private land No economic data available yet as the programme is in an early stage In the US More than 400 wetland banks have been established More than 70 species banks which can trade between US$100 million and US$370 million in species credits each year. ©

28 TEEB Training Part 4: Rewarding benefits through payments and markets Biodiversity provides a range of ecosystem services that benefit people locally, nationally and internationally The provision of these services stems directly from natural processes Many services are not priced or are underpriced in the markets Existing economic signals may not reflect the true value of natural capital Focus on payment and market-based tools to reward private and public actors who maintain the flow of services that benefit society

29 TEEB Training Payments for Ecosystem Services Definition: PES can be defined as a voluntary transaction where a well-defined ecosystem service (ESS) is bought by at least one ESS buyer from at least one ESS provide, if – and only if – the ESS provided secures ESS provision. Adapted from Wunder, 2005 ©

30 TEEB Training PES Quick facts In 2010 over 300 PES programmes existed globally Broad estimate of the value being captured: USD 8.2 billion USD 6.3 billion in China, Costa Rica, Mexico, US and UK alone

31 TEEB Training The structure of PES Highly flexible; there is no one model or blueprint Many ways to structure schemes, depending on the specific service, scale of application and context for implementation Some are based on legal obligations whereas private PES schemes are voluntary with little government involvement Sources and mechanisms for payments vary as do the providers and the beneficiaries

32 TEEB Training Source: World Bank 2002 Illustrating Payments for Ecosystem Services (PES)

33 TEEB Training PES stakeholders and their interactions Source: Adapted from Pagiola, 2003

34 TEEB Training PES at different scales PES can be implemented at different geographic scales If a site provides a service that is mainly useful locally (e.g. pollination of crops), then a local PES makes sense If it provides national benefits (e.g. pest control), then national government should initiate the appropriate PES Provision of global benefits (e.g. as in the case of biodiversity and carbon services) may require an internationally coordinated approach

35 TEEB Training PES with multiple co-benefits PES schemes can: Be designed to create or support employment related to the provision of ecosystem services Combine protection for a wider set of ecosystem services with poverty concerns and addressing climate change PES can offer major win-win opportunities PES can involve non-monetary benefits rather than a monetary reward e.g. reducing tensions across boundaries and protected areas

36 TEEB Training PES; Opportunities and challenges The voluntary aspect of PES is a key feature BUT legal/regulatory underpinning is essential if their full potential is to be realized If private sector involved, can offer the potential to raise additional finance and complement public conservation funding Requires significant investments in information and capacity building Difficult to implement where: Resource tenure or use rights are insufficiently defined or enforced Institutional capacity and transparency are lacking or where resource access and ownership are in dispute, PES buyers have little incentive to participate

37 TEEB Training The role of valuation in PES The ability to quantify, monetize and communicate the values of ecosystem services to key stakeholders can help build support for PES The lack of a biophysical assessment and economic valuation of an ecosystem service need not preclude PES Precise quantification of the service can be prohibitive (e.g. for small watershed schemes) Arguments based on the precautionary principle may be enough to justify starting PES

38 TEEB Training PES needs to be: Based on detailed, scientific understanding of the ecosystem services Tailored to the particular socioeconomic and political context of the site and anticipates changes Actively involved all stakeholders in the design and implementation process Considering market development and funding opportunities Based on an integrated, holistic and flexible approach, that can be adapted over time Recommendations for PES Schemes

39 TEEB Training Example of a PES Scheme; Incentives to conserve agricultural services in Japan Japanese government reward local communities and farmers in mountains areas for conserving agricultural services Direct payments are made to farmer local groups to motivate them not to abandon farmlands and to conserve the associated ecosystem services To conserve paddy fields, PES operate to; Improve landscape amenity, species Ecosystem diversity and land conservation Prevent water pollution by encouraging less use of chemical inputs for agriculture © Punya

40 TEEB Training Part 5: Investing in ecological infrastructure Ecological infrastructure - worthwhile investment? Investing in ecological infrastructure makes economic sense in terms of cost-effectiveness because it is cheaper to avoid degradation than to pay for ecological restoration Investments in ecosystem restoration can benefit multiple policy sectors and help them achieve their policy goals e.g. Wetlands and forest protection: reduced risk of flooding impacts Restore forest, lakes and wetlands: to address water scarcity and/or water purification Coral reefs as fish nurseries: fisheries productivity/food security Investing in restoring degraded ecosystems is directly relevant to many policy sectors affected by climate change

41 TEEB Training Step 1: Identifying priority candidates (15 minutes) First phase (5 minutes): please work separately and in parallel: Assignment for the environment representative: please identify 3 programmes or policies in your country which you believe generate (the most) important harmful incentives for biodiversity and the environment. Assignment for the finance/economic/planning representative: please identify 3 programmes or policies which you believe are not very (or even: the least) effective/targeted. Second phase (10 minutes): Please compare notes. Do you have some overlap? If yes: congratulations! You found natural candidates for prioritized removal or reform. If no: please have a look at each others notes and identify (5 minutes): Any cost-ineffective programmes with environmentally harmful effects? Any environmentally harmful programmes which are not very cost-effective? If yes: these could be interesting candidates for prioritized reform. Group Exercise 1 (in country teams): Harmful incentives

42 TEEB Training Group Exercise 1 (in country teams): Harmful incentives continued… Step 2: Designing phase out or reform (30 minutes) Identify one or (time permitting) two programmes which you believe are in need of reform, and develop (tentative) answers to the following questions (30 minutes): 1.Which stakeholders are relevant? Are there stakeholders who could act as champions for removal, phase out, or reform? 2.How could stakeholders interests be addressed (compensation, gradual phase out, …)? What are the pros and cons of the different options in the specific case at hand? 3.Are there opportunities for enhancing the effectiveness of the programme while reducing environmental damage? 4.Are there opportunities to mitigate harmful impacts? 5.Based on the answers, develop a roadmap and timetable for phase out or reform.

43 TEEB Training Group Exercise 2 (in country teams): Positive incentives Reviewing existing incentive programmes (20 minutes) Review existing incentive measures in your country and identify opportunities for 1.replication or scaling up of existing programmes; 2.improving targeting/effectiveness 3.improve social/equity impacts 4.improving financial sustainability

44 TEEB Training Group Exercise 2 (in country teams): Positive incentives continued… Opportunities for new incentive programmes (20 minutes) Discuss and agree on criteria that are most relevant to identify high potential or high priority for introducing positive incentives. Existing threats to biodiversity? Economic values of biodiversity? Social development concerns? Based on the above, identify critical gaps where introducing new incentive programmes could be helpful. What do you think are the key steps required in introducing these new programmes?

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