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Markets for Ecosystem Services: An examination of alternative Payment for Ecosystem Services (PES) structures for Mui Ca Mau National Park
Linus HasselströmEnveco Ltd.
2013-10-15, Hanoi
• Why do we want markets?
• What is the role of policy?
• What are the necessary preconditions?
• What is the potential for markets in Mui Ca Mau?
• What could be some promising options for wetland PES in Vietnam?
Key questions
Linus Hasselströ[email protected]+46704987820www.enveco.se
Scott [email protected]+46702532883www.eesweden.com
Fanny [email protected]+46701482835www.fores.se
Tore Sö[email protected]+46704937473www.enveco.se
• Report focuses on how to expand the use of markets
• Published in June 2012
• Was basis for a 90 minute roundtable discussion at the UNCSD (Rio+20) Conference
FORES 2012 Report
OUR PROJECT:Piloting a model on payment for coastal wetland ecosystems of the Mui Ca Mau National Park in the context of climate change and contribute to reducing poverty for local community
PARTNERS:BCAISPONREMONREFORWETFORESEnviroEconomics Sweden (Enveco subcontracted by EES)Daxam
Markets – what are they?Transactions between buyers & sellers that benefit both
Two key features:
1. Voluntary
2. Aligns incentives
Habitat/Conservation Banking in California (Madsen et al 2010)
• BUYER: Developer that must compensate for environmental injuries (e.g., wetlands)
• SELLER: Entrepreneur that invests in wetland restoration and sells the ”compensation credit” to developer or other organization
Market to address eutrophication in the Baltic Sea (Zandersen et al 2009)
• BUYER: Wastewater treatment plant that must reduce Nitrogen emissions
• SELLER: Mussel farmer that contributes to nitrogen uptake
Market for clean water in France (Perrot-Maitre, 2006)
• BUYER: Mineral water producer that wants to avoid contaminated water sources
• SELLER: Farmers that change their farming practices
Market for Forest Ecosystem Services (Lam Dong Province, Vietnam)
• Payers: Hydropower, water supply, tourism industries
• Service providers: Local landowners
Overview of policy instruments
1. Direct regulation
2. Information
3. Support for research & development
4. Incentive-based instruments (”economic instruments”)
• Markets for ecosystem services fall under Category 4.• …are one of many possible policy instruments• …and should complement rather than replace other instruments
Why markets?
Economic reasons
• Rewards those who improve ES (e.g., planting trees)
• Penalizes those who damage ES (cutting trees)
• Provides environmental protection at lowest cost to society
Political reasons in Vietnam
• Biodiversity Law, 2008
• Decree 99 prefers market-based approaches, 2010
• Vietnam’s Biodiversity Strategy to 2030
What creates and drives markets?What creates and drives markets?
What creates and drives markets?
Compliance-driven• e.g., Habitat
banking California, PFES in Vietnam
• Based on gov’t regulations
• Heavily dependent on level of env. objective set by the government
What creates and drives markets?
Taxpayer-financed• e.g., subsidized
mussel farming.
• Heavily dependent on taxpayer funding
Kravuppfyllande• ex:
Biodiversitetsmarknader i Kalifornien
• Bygger på regleringar
• Starkt beroende av de mål som sätts
Compliance-driven• e.g., Habitat
banking California, PFES in Vietnam
• Based on gov’t regulations
• Heavily dependent on level of env. objective set by the government
What creates and drives markets?
Voluntary• e.g., drinking
water in France
• Dependent on that an ecosystem service provides a private profit
• Or benevolence & charity
Skattefinansiering• ex:
blåmusselodlingar som subventioneras.
• Starkt beroende av tillgängliga skattemedel
Kravuppfyllande• ex:
Biodiversitetsmarknader i Kalifornien
• Bygger på regleringar
• Starkt beroende av de mål som sätts
Compliance-driven• e.g., Habitat
banking California, PFES in VIetnam
• Based on gov’t regulations
• Heavily dependent on level of env. objective set by the government
Taxpayer-financed• e.g., subsidized
mussel farming.
• Heavily dependent on taxpayer funding
Conclusions – Market pre-conditions
• The report’s various conclusions underscore the importance of
MeasurabilityClear markets rules (”social acceptance”)Institutional capacityProperty rights
Policy Recommendations• Governments must clearly define market structure – both market
goals and rules of the game .. But let mature markets work without too much intervention.
• Report identifies 10 key things governments can do, including:
Stimulate Demand/Supply
Help reduce transaction costs
Maintain other regulatory policies
Inform market participants (about ES and about markets)
Create pilot studies/markets and evaluate outcomes before scaling up
1. Develop a livelihood model (20 HH)
2. Develop a PES mechanism
3. Improve capacity building & public awareness
4. Create long-term partnership
Description of the project
FORWET (Vietnam)• Develop livelihood model & PES model
FORES (Sweden)• Critic PES model & suggest PES alternatives– Identify ecosystem services & their value– Identify benefits of markets– Focus on MCMNP with International PES experience
Partner Contributions
1. Capacity assessment (Activity 3.1)2. Land use (Act 2.8)3. Desk study of climate change impacts (Act 2.1)4. Ecosystem service assessment (Act 2.6)5. Valuation of ecosystem services (Act 2.7)6. International PES case studies (Act 2.3)7. Alternative PES Structures Report (Act 2.12)
Draft late OctFinal Nov
FORES’ Project Deliverables
Objectives1. Propose alternative PES structures in MCMNP
2. Identify economic criteria to evaluate PES
3. Assess PES alternatives with criteria
4. Provide recommendations for next phase in MCMNP
Alternative PES Structures Report
How to identify alternative PES structures?
Ecosystem Service
Economic Good
Primary Beneficiaries[buyers]
Potential Sellers
1. Provisioning Food, wood, fishLocal households(national, global)
MCMNP
2. Carbon sequestration
Climate regulationGlobal citizens
HH in rehabilitation area
3. Absorbing storm surge
Protection of buildings, infrastructure
Local and regional citizens
HH in rehabilitation area
4. Prevention of salt water intrusion into
aquifers
Protection of drinking water & irrigation
Local households,industry
HH in rehabilitation area
5. BiodiversityTourism Resilient ecosystems
Global citizens
HH in rehabilitation area
6. Aesthetic quality/landscape
Tourism and cultural values
Local, national and global citizens
MCMNP & HH in rehabilitation area
Our 4 Alternative PES structures:
PES #1a – Aquaculture & Agriculture livelihood
PES #1b – Eco-tourism/Homestay livelihood
PES #2 – Traditional with state as buyer
PES #3 – Carbon market
PES #4 – Eco-labeling
Why these 4 PES alternatives?
• Illustrate PES possibilities
• Illustrate buyer & seller possibilities
• Cover many Ecosystem Services in MCMNP
• Cover many different geographic scales Local National Global
• Illustrate possibilities to combine/layer PES structures
PES #1a – Aquaculture & Agriculture
A proposed livelihood model in MCMNPEcosystem service Food, habitat
Buyer Local HHs
Seller MCM National Park
Geographical scale Local
Interventions by seller Contribute money/materials for mangrove restoration
Payment by buyer In-kind “labor hours” to protect forest
PES #1b – Ecotourism/homestay
A proposed livelihood model in MCMNPEcosystem service Recreation
Buyer Tourists & tourist businesses
Seller Local HHs
Geographical scale MCM National Park
Interventions by seller Constructs homestay building, improves scenery
Payment by buyer Cash payment too HHs
PES #2 – Traditional: State as buyer
A proposed PES model for Coastal Protection in MCMNPEcosystem service Protection against costal storm surge
Buyer State government (or environmental NGOs)
Seller Local HHs
Geographical scale National (affects all citizens)
Interventions by seller Protecting, enhancing, or planting mangrove trees
Payment by buyer Input-based cash payments (based on actions taken)
PES #3 – Carbon market
A proposed PES model for Carbon credits in MCMNPEcosystem service Climate regulation
Buyer Private companies, environmental NGOs, etc
Seller Local HHs
Geographical scale International or national
Interventions by seller Protecting, enhancing, or planting mangrove trees
Payment by buyer Cash payments based on actual carbon stored (output-based) or actions taken (input-based)
PES #4 – Eco-labeling
A proposed PES model for Organic certified Seafood in MCMNPEcosystem service Food provisioning (e.g., shrimp)
Buyer Consumers in developed countries
Seller Local HHs
Geographical scale International (national too?)
Interventions by seller Eco farming practices (e.g., re-forestation, etc)
Payment by buyer Higher price for shrimp (shared between export company and local HH)
Is PES #1a sufficient? BuyerSeller
Payment:Forest Protection
• LUR to farmer• Tech assistance• Trees to plant• Small wage
EcosystemServices
(ES)
BuyerSeller
A good livelihood model … but:1. Many more beneficiaries out there …2. Need buyers who can can/will pay3. Sufficient incentive/income for HHs to protect forest?
Payment:Forest Protection
• LUR to farmer• Tech assistance• Trees to plant• Small wage
Is PES #1a sufficient?
Let’s introduce a new buyer …
Eco-Label Shrimp
Seller Buyer / Seller Buyer
EcosystemServices
(ES)Input #1:
ES
Input #2: KnowledgeLivelihood
PES
Now HH has better economic incentive to protect forest
• MCMNP is a strong candidate for PES
• All PES structures should be “tested – evaluated – improved” repeatedly
Conclusions and Recommendations (1)
• Some PES structures more likely to succeed than others. Key criteria to be met:• Voluntary transactions • Additionality• Include maximum number of beneficiaries
Conclusions and Recommendations (2)
PES #1b Eco-tourism
• Should be expanded to include additional HHs
• Strong focus on innovative marketing strategies
• Potential effects on ES should be further discussed and evaluated
PES#2 (coastal protection) and PES #3 (carbon)
• Suggest a PES structure that includes “layering” to improve income possibilities for HHs
Conclusions and Recommendations (3)
Combine PES #1a and PES#4
• PES#1a is a good first step but is expensive
• PES#4 Eco-labeling is the logical next step, as it identifies more potential buyers and creates improved incentives for HHs to protect the forest.
• Eco-labeling is promising because:
• Current shrimp production already meets “eco” standards – very important (!)
• Can rely on existing contracts between HHs & NP• Good opportunity for piloting this PES #4 in 2014 when re-newing
contracts• Self financing (after initial investment)
Recommended next steps
• Given trade-offs between PES alternatives, should consider the top policy priority:– Raising gov’t revenue?– Reducing poverty?– Improving ecosystem services?
• Review PES #1a and #1b pilot before proceeding to next stage
• Consider piloting our PES #4 alternative• Further investigation need for
PES #2 and PES #3
