1. The EU Policy Framework
Policy Workshop – Designing PES Schemes and Markets for Ecosystem Services
Laure Ledoux, DG Environment Brussels, 6 July 2012

2. Content EU Policy Context
Progress in implementing the Biodiversity Strategy
Outstanding issues and next steps

3. The EU mandate (March 2010) 3 Adoption of a long term (2050) vision
By 2050, European Union biodiversity and the ecosystem
services it provides – its natural capital – are protected, valued and appropriately restored for biodiversity’s intrinsic value and for their essential contribution to human well-being and economic prosperity, and so that catastrophic changes caused by the loss of biodiversity are avoided
Adoption of a mid term (2020) headline target
Halting the loss of biodiversity and the degradation of ecosystem services in the EU by 2020, and restoring them in so far as feasible, while stepping up the EU contribution to averting global biodiversity loss 3

4. International biodiversity policy framework
Adoption of EU post biodiversity vision & headline target
Adoption (15-26/03/10)
Adoption of new global Strategic Plan (vision, mission, 20 targets)
CBD COP10 (10/2010)
Development and adoption of post-2010 EU Biodiversity Strategy
Adoption by Commission (05/ 2011), endorsed by Council (06/2011)

5. ES reflected throughout 6 targets
2050 Vision
2020 headline target
6 Targets: 1
Enhance implementation of nature legislation 2
Restore ecosystems
est. Green Infrastructure 3
Sustainable
Agriculture
&
Forestry 4
Achieve Maximum sustainable yield 5
Combat
Invasive Alien
Species 6
Contribute to averting global biodiversity
loss
ACTIONS

6. Target 2 in the Biodiversity Strategy
Target 2: By 2020, ecosystems and their services are maintained and enhanced through the establishment of Green Infrastructure and the restoration of at least 15% of degraded ecosystems.
Action 5: Improve knowledge about ecosystems and their services in the EU
Action 6: Establish priorities for restoration and promote the use of Green Infrastructure
Action 7: Ensure no net loss of biodiversity and ecosystem services

7. Principles for EU Biodiversity financing
Biodiversity Strategy:
Diversify and scale up financing sources (public and private)
Role of innovative financing instruments, including market-based instruments, e.g. PES, PPP for green infrastructure, biodiversity offsets (no net loss initiative)
June 2011 MFF communication:
Mainstream biodiversity throughout the EU budget, including main financing instruments
Efficiency: maximising co-benefits of various funding sources (climate change)
Implemention: benchmarks, monitoring and reporting rules and tracking procedure

8. 2020 roadmap to a resource efficient Europe
Promote the use of innovative financial and market-based instruments and explore their wider potential […]
Put forward proposals to foster investments in natural capital, to seize the full growth and innovation potential of GI and the ‘restoration economy’ through a Communication on GI (2012) and a ‘No net loss’ initiative (2015)

9. EC study - IFM to enhance biodiversity private sector finance
Study objectives:
Analyse conditions, opportunities and limitations for private sector biodiversity finance
Provide advice on future policy options - EU and international if possible
Investment Options analysed:
Pro-biodiversity businesses
Supporting carbon storage actions
MBI: Biodiversity Offsets, Payments for Ecosystem Services (PES)
Green infrastructure projects
Cross-cutting issues: Risk, and Information
Challenges:
Need for strong policy signals/regulatory framework in order to scale up to full potential
Need for pilot/demonstration projects
Recommendations for further work and potential policy development to increase private sector funding into biodiversity conservation in each of the main areas of analysis in turn, and for the main principles covered and future activity at European level.
Bio-Carbon Credits
1. EU institutions can support research and pilot projects to developed monitoring and verification of biodiversity impacts from high-biodiversity carbon (bio-carbon) credits, and test safeguards and standards.
2. The EU should send the clearest possible policy signals about future demand for biodiversity carbon credits. It could consider linking a small percentage of existing EU carbon emissions reductions requirements to bio-carbon credits.
3. EU financial institutions can stimulate supply of bio-carbon credits, for example, through coordinating forward market commitments.
4. Financial risk sharing approaches can be used to support increased demand for bio-carbon credits. For example, by coordinating forward market commitments of soft money, and maximising the leverage of private sector investments from these. The EIB’s experience with ‘conventional’ carbon funds means it is well placed to do this.
5. The EU should explore opportunities to sell carbon credits from biodiversity conservation activities in the EU and neighbouring countries (e.g. from peat-habitat restoration projects).
Biodiversity Offsets
6. A coordinated package of measures EU level within the context of Action 7 of the EU Biodiversity Strategy (2015 No Net Loss Initiative), could involve: regulation and/or policy guidance; expansion of offsetting requirements for EU-funded projects; and sharing of best practice among Member States (e.g. institutional arrangements for offsetting, strategic land-use planning for offsets – which can be supported by technical assistance).
7. While a range of activities and issues are necessary to the successful increased use of offsets, the key factor is a strengthened requirement for no net loss in economic development and land use policies.
8. Financial instruments could support offsets through seed market investment, for example in the form of equity to cover the long return periods for initial private investors in credit creation, or as co-funding for national or local government advance purchase commitments to guarantee a minimum price and volume of future demand for offsets.
Supporting Green Infrastructure
9. GI is a relatively new concept so the EU should aim to communicate both a clear definition of what green infrastructure constitutes, and how it offers an asset against which to generate profits based on PES, to the private finance sector and other stakeholders.
10. There is a need to develop pilot GI projects, in particular that deliver multiple ecosystem services, and to consider the use of risk sharing instruments that could underwrite/lever investment in multilateral deals to manage GI.
Risk
11. As risk is a cross-cutting barrier to private sector investment in pro-biodiversity projects, the response to it must also be cross-cutting.
12. An initiative could be developed to support EU environmental policy-makers in understanding and managing their impacts on environmental compliance markets.
13. Financial instruments need to be flexible enough to adopt different risk-sharing practices in order to lever large-scale private investment and/or allow pilot pro-biodiversity investment projects to be undertaken.
Information
14. Information failure is another cross-cutting issue and addressing it will facilitate easier adoption of action in all areas. The EU can support better the provision of biodiversity and ecosystem services information that is relevant to private sector finance by using the outcomes of current global research and development initiatives in this area, as well as state of the art reporting based on EU legislation requirements.
15. The EU should consider developing, within the context of the Innovation Union and Resource Efficiency Flagship Initiatives, a research and innovation partnership on innovative financial instruments for biodiversity and ecosystem services (this might also address the issue of policy risk in relation to compliance markets).
16. Policies on biodiversity can seek to adopt (and pilot) appropriate measurement and reporting systems. The EC should monitor the development and use of such systems, with a view to endorsing their use for specific future purposes.
Supporting Pro-Biodiversity Business
17. Pro-biodiversity business are an area where public funds can be used effectively to support biodiversity objectives through involvement of the private sector (e.g. SMEs that manage high-biodiversity value land).
18. Within Europe, biodiversity businesses should be supported through policy coordination across financing streams that can tackle barriers created by environmentally harmful subsidies, and by establishing biodiversity business technical assistance units.
Underlying Principles
19. The EU should review the legislation that underpins (e.g. Environmental Liability Directive) or could underpin (e.g. EIA Directive, EU ETS) biodiversity and ecosystem services markets in Europe to assess whether they could better encourage private sector investment, and if so how.
20. The most promising areas are those that offer flexible investment proposals, i.e. they have more than one possible business or transaction model. Therefore, policy instruments should be inclusive and allow for different sizes of business and types of sectors. They also have a mixture of public and private goods characteristics, and therefore justify public support, but also provide potential returns to private investment. Smart and clear regulation is needed to drive many aspects of private sector investment in biodiversity, and to make them viable.
21. Consideration should be given to bring together EU-level actions for investments in biodiversity and ecosystem service markets by establishing an EU biodiversity finance facility. It could be core-funded through EU LIFE funds, and/or by taking a small fraction of the funds that flow through it as a fee.

10. Council Conclusions 21 June 2011
WELCOMES the focus of the Strategy on biodiversity as a whole and ecosystems services - within but also beyond protected areas – in recognition of the essential services they provide as well as their intrinsic and economic value;
WELCOMES the emphasis on maintenance, including management, and cost-effective restoration of ecosystems to ensure the continued provision of ecosystem services, in particular given the climate change mitigation and adaptation benefits of many ecosystems and the relevance for human well-being; UNDERSCORES the importance of green infrastructure also as a contribution to further integrating biodiversity considerations into other EU policies; and WELCOMES the Commission’s commitment to develop a Green Infrastructure Strategy by 2012;
‘STRESSES the importance of further work to operationalise the 'no net loss' objective of the Strategy for areas and species not covered by existing EU nature legislation and of ensuring no further loss or degradation of ecosystems and their services’ 10

11. Council Conclusions 19 December 2011 (1)
STRESSES the need of maintaining, restoring as far as feasible and enhancing ecosystems and their services;
REITERATES that properly valuing biodiversity and ecosystem services can contribute to their conservation and sustainable use;
RECOGNISES the importance of promoting the integration of these values into decision making processes and accounting and reporting systems at EU and national level by 2020;
and ACKNOWLEDGES that this work should be supported by the results of ecosystem mapping and assessment of the state of ecosystems and their services. In view of the short timeframe for initiating this work, URGES the Commission and Member States to determine the modalities for and scope of these tasks building upon the work carried out by the Member States;
'agrees that a common approach is needed for the implementation in the EU of the NNL principle and invited the Commission to address this as part of the preparation of its planned initiative on NNL by 2015, taking into account existing experience as well as the specificities of each Member State, on the basis of in-depth discussions with Member States and stakeholders regarding the clear definition, scope, operating principles and management and support instruments in the context of the common implementation framework of the Strategy'. 11

12. Council Conclusions 19 December 2011 (2)
CALLS UPON the Commission to consider, within the scope of the Green Infrastructure (GI) Strategy under preparation, among others, the following issues:
a) possible scope and key components of GI;
b) possible framework for GI implementation based on existing experience, particularly in spatial planning, including coastal;
c) methodological issues related to GI, including with regard to spatial connectivity between protected areas and basic requirements for the delivery of the necessary ecosystem services;
d) options to integrate GI in existing policy instruments and importance of GI in terms of climate change adaptation;
e) identifying opportunities for financing GI;
f) communication and promotion of GI targeting different stakeholders and sectors, and in particular local authorities;

13. EP Resolution April 2012 (1)
Payment for ecosystem services (PES) is a promising, innovative financial tool for biodiversity conservation;
Stresses that protecting, valuing, mapping and restoring biodiversity and ecosystem services is essential in order to meet the goals of the Roadmap to a Resource-Efficient Europe, and calls on the Commission and the Member States to consider, as part of specific measures, presenting a timetable for mapping and assessing ecosystem services in the EU which will enable targeted and efficient measures to be taken to halt the degradation of biodiversity and ecosystem services;
urges the Commission and the Member States, therefore, to value ecosystem services and to integrate these values into accounting systems as a basis for more sustainable policies;

14. EP Resolution April 2012 (2)
Wishes the EU to set a considerably higher restoration target reflecting its own more ambitious headline target and its 2050 vision, taking into account country-specific natural conditions; urges the Commission to define clearly what is meant by ‘degraded ecosystems’ and to set a baseline against which progress can be measured;
Urges the Commission to adopt a specific Green Infrastructure Strategy by 2012 at the latest, with biodiversity protection as a primary objective; underlines that this strategy should address objectives relating to urban as well as rural areas, inter alia in order better to fulfil the provisions of Article 10 of the Habitats Directive;
Urges the Commission to develop an effective regulatory framework based on the ‘No Net Loss’ initiative, taking into account the past experience of the Member States while also utilising the standards applied by the Business and Biodiversity Offsets Programme; notes, in this connection, the importance of applying such an approach to all EU habitats and species not covered by EU legislation;

15. Policy tools
Action 6a
Restoration prioritisation framework (by 2014)
Knowledge-base
Baseline
Target 2
By 2020, ecosystems and their services are maintained and enhanced by establishing green infrastructure and restoring at least 15% of degraded ecosystems
Policy initiatives
Target 1 Nature legislation
Target 3 Agriculture and forests
Target 4 Sustainable fisheries
Target 5 Invasive alien species
Other EU legislation, WFD, MSFD…
Action 5
Mapping & assessment of ecosystems and services (by 2014)
Economic value assessment and integration into accounting and reporting systems(by 2020)
Action 7a
Biodiversity proofing methodology (by 2014)
Strategic approach to compensation
Maintenance of ecosystem services
Action 7b
No Net Loss initiative (by 2015)
Action 6b
Green Infrastructure Strategy (by 2012)
Action 6a
By 2014, 'Member States, with the assistance of the Commission, will develop a strategic framework to set priorities for ecosystem restoration at sub-national, national and EU level'.
This should be based on the assessment of the current state of ecosystems and ES, which will need to be reflected in the prioritisation criteria.
The IA of the Strategy tentatively indicates that 'to ensure that restoration provides significant benefits in a cost-effective way, a prioritisation framework should also be developed that defines the scale of the restoration target and the criteria on which prioritisation should be based, which could include: relevance for biodiversity; extent of degradation of ecosystems; the provision of key ES and cost-benefit ratios of restoration'.
A call for tender to develop such framework within the EU and to develop scenarios and options for implementing the 15% restoration target will be launched during 2012.
Action 6b
'the Commission will develop a Green Infrastructure Strategy by 2012 to promote the deployment of green infrastructure in the EU in urban and rural areas, including through incentives to encourage up-front investments in green infrastructure projects and the maintenance of ES, for example through better targeted use of EU funding streams and Public Private Partnerships'.
objectives: to improve ecosystem resilience and habitat connectivity and enhance ES
use of planning tools such as integrated spatial planning, which requires action at Member State level.
foster synergies between existing and planned initiatives at local, regional or national level, and promote further investments, thereby providing added value to Member States action.
Action 6a and 6b are closely linked:
the prioritisation framework for restoration will be useful to guide investments in GI
the implementation of the GI Strategy will provide useful information for the development of the prioritisation framework.
'in collaboration with the Member States, the Commission will develop a methodology for assessing the impact of EU funded projects, plans and programmes on biodiversity by 2014'.
Action 7a
This 'biodiversity proofing' of EU financing instruments is needed to reduce the negative impacts of projects, plans and programmes, and is therefore a necessary step to achieve no net loss objectives
A study has been launched to look at possible levels of intervention within EU policies and EU funding streams
Mapping / assessing ES and their economic valuation are needed to feed into the assessment of impacts of EU funded projects
Action 7b
'the Commission will carry out further work with a view to proposing by 2015 an initiative to ensure there is no net loss of ecosystems and their services (e.g. through compensation or offsetting schemes)'.
Preliminary discussions on the No Net Loss initiative have started: 1st meeting of the Working Group on No Net Loss of Ecosystems and their Services on 17 February. Recommendations expected by mid-2013.
Mapping and assessment of ES are key to establish a baseline against which to assess net losses, and to undertake compensation or offsetting. However, need to consider issues of scale and level of precision required (may be higher than for overall mapping at EU scale)
Actions 6b and 7b will need to be developed in a mutually supportive way:
the Green Infrastructure Strategy will aim to maintain (and enhance) ecosystems and ES, and therefore contribute to No Net Loss.
A strategic and spatially planned approach to No Net Loss through the use of the restoration prioritisation framework can achieve net gains and support the establishment of Green Infrastructure. 15

16. Relevant studies Biodiversity proofing
Estimating Target 2 financing needs
TEEB follow-up study for the EU
Supply and demand of HB and design elements
Mapping of ecosystems and ES
Options for reaching restoration target
Options for NNL initiative

18. EU Target 2 Roadmap Mapping and Assessment of Ecosystems & Services
NNL
Green Infrastructure and Restoration
2012
- 3 Meetings MAES WG
- Stakeholder workshop
- Study on valuation
- 3 Meetings NNL WG
- Habitat Banking study
- Biodiversity proofing study
- Green Infrastructure Green Paper
- 1st Meeting of the GI&R WG
2013
- MAES WG meeting(s)
- Mapping study
- NNL WG Meeting(s)/ recommendations by mid-2012
- Formal consultation
- Impact Assessment Steering Group (IASG)
- NNL options Study
 - GI&R WG Meetings

19. NNL: Some issues raised
Need for gap analysis
Offsets in context of mitigation hierarchy and habitat banking just one of the options
From presentation of Member State experiences and concrete case studies
Additionality
Need for metrics – measuring losses and gains
Long term management issues
Availability of land
Different approaches to 'habitat banking'

20. Outstanding issues and next steps
Knowledge base: significant differences across MS – importance of action 5
Further development and implementation of policy initiatives
Importance of mainstreaming BES in all instruments in the next budget
Enabling conditions for private sector involvement?

21. Thank you for your attention
More information
EU biodiversity strategy
Ecosystem Assessment homepage
Environment and economics webpage
Bise
Contact: