Implications for donor assistance: Draft recommendations from Danida commissioned study on pro-poor payments for environmental services Helle Munk Ravnborg Mette Gervin Damsgaard Kim Raben October 2006 Danish Institute for International Studies

About the study: Danida commissioned desk study to review documented experiences of payment for environmental services in order to develop recommendations for how and in which contexts development assistance may contribute to facilitate payment for environmental services

Time schedule for the study: December 2005 – mid May 2006 Phase I - Inception phase  literature review (120+ references identified) & clarification of concepts June – September 2006 Phase II - Analytical phase September – December 2006 Phase III - Synthesis phase  drafting report and public seminar  publishing study report

Our understanding of payment for environmental services: “voluntary, conditional transaction with at least one seller, one buyer, and a well- defined environmental service” (Wunder, 2005)

Are there specific features of pro-poor payments for environmental services? poverty impact depends more on design and context than on the nature of environmental service

6 recommendations

1. Always see PES as one among a number of conservation instruments PES is a doubtful instrument in situations where potential providers have real but not legal natural resource use choices  affects willingness to pay  legitimizes illegal resource use  impedes the effectiveness of other instruments... to be continued

1. Always see PES as one among a number of conservation instruments.... continued different opportunity costs to potential service providers – one size doesn’t fit all but having more sizes is morally dubious!  PES might be attractive to regulate the natural resource use of the poorer segments of potential providers  other instruments have to be applied to regulate the natural resource use of more resourceful natural resource users (taxes or bans on specific land use types, e.g. livestock herds above certain sizes; cultivation of specific crops; use of specific types of irrigation)

2. Beware that PES might be used to strengthen – or weaken – contested claims to natural resources ”The sale of environmental services is presented as an opportunity according to which local communities are compensated in return for protecting ecosystems but in practice it represents a sale of the right to use the territory” (CONAIE, Ecuador, 2006) … to be continued

2. Beware that PES might be used to strengthen – or weaken – contested claims to natural resources … continued In situations where access and property rights to natural resources established through multiple legal frameworks and authorities PES represents an additional source for defending access or property claims  in the case of hydrological services, do buyers of hydrological environmental services have more right to water than other users?  do providers of environmental services have rights to exclude others of accessing the natural resources involved?

3. Recognize that intermediaries may be needed to fill the following roles: 1.acting on behalf of numerous individual consumers of environmental services  to bring down transaction costs 2.acting on behalf of numerous individual environmental service providers either  to bring down the costs of the transaction; or  to ensure coordinated natural resource management among environmental service providers needed to provide the demanded environmental service 3.acting as transfer agents  to broker between potential service providers (or their representative) and potential service users (or their representative)

4. Clearly delimit the role of transfer agents often transfer agents are not directly accountable to environmental service users or providers transfer agents may impede the development of a true PES scheme by  imposing rather than facilitating a voluntary agreement  obstructing the direct contact – and contract – between buyers and providers or their direct representatives  obstructing or putting extra-PES conditions on the payment transfer

5. Carefully design a monitoring system reflecting the PES agreement what to monitor:  the number, location and characteristics of participating service providers  compliance with specified resource management  environmental service provision  payment is made, transferred and received who should monitor:  agent(s) trusted and working on behalf of buyers and providers who should pay:  ideally environmental service buyers but third party financing might be needed to protect providers as well as users

6. Provide support to ensure that the public interest is promoted ensure that the agreement is based on sound assumptions and conservation objectives that it won’t produce (unintended) perverse incentives that it won’t restrict resource access in ways which are in conflict with national priorities  e.g. World Bank/Japanese funding to INE & Berkeley through the National Forestry Commission (CONAFOR) for background analysis and design of the Payment for Hydrological Environmental Services programme in Mexico

Design and context for pro-poor payments for environmental services? keep payment amount in the lower range of opportunity cost to target poor providers combine PES with other instruments to regulate natural resource use of users who don’t enter the PES scheme support the organization of providers (and buyers) to reduce transaction costs, while minimizing the loss of representation and accountability ensure that information about PES opportunities reaches the poor and encourage discussion about implications

Recommendations: 1.Always see PES as one among a number of conservation instruments 2.Beware that PES might be used to strengthen – or weaken – contested claims to natural resources 3.Recognize that intermediaries may be needed to fill the following roles 4.Clearly delimit the role of transfer agents 5.Carefully design a monitoring system reflecting the PES agreement 6.Provide support to ensure that the public interest is promoted