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Payment for Ecosystem Services (PES)

Compensation for Ecosystem Services

Case study from Peru

Ingrid Prem

Sustainable Rural Development Program – PDRS/ Peru

LAC- Regional Working Group on Finance for Conservation

Financial instruments for conservation

29 July – 3 August 2007, Vilm

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Contents1. Framework Conditions and Background: PES

in Peru

2. Case study PES Alto Mayo

3. Strategic elements, interventions, firstimpacts

4. Some lessons learnt

5. Next steps

6. Recomendations

31.07.2007 Seite 3Programa Desarrollo Rural Sostenible – PDRS Perú

Environmental Servicios in peruvianlegislation – some highlights

General Environmental Law (2002):“…environmental services are: the protection of hidrological resources, protection of biodiversity, mitigation of green house gases, landscapebeauty, amongst others….the provision of environmental services comes from the natural resources and their components”

Decentralization process (2007): “… the selling of environmental services have to become a mayor function of the decentralized governments… therefore they need to havean economist within their organic structure”

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PES in Peru

National Working Group on PES (Institut for Natural ResourceManagement)

Around 8 pilote experiencies in working process (local level)

Mainly PES linked to hidrological services

Rising interest for carbon market, few experiencies

Few experiencias with PES -biodiversity, oportunities from ongoing decentralization processes (regional and local PA systems)

Paradox: Peru is a poor country – Peru is a rich country: newoportunities due to profit re-distribution law from extractive industries fresh money for the regions

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The Study Side:Watershed AltoMayo

Area: 7,818 Km2Poblation: 213,000 habitantsSealevel: 800 – 3800 High level of subistence andpovertyBiodiversity hotspotIncome generation mostly from Coffee, rice, maiz, someforest productsHigh migration areaRegion mostly affected from deforestation in Peru

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National protected

Area:

177,749,84 ha

Protected areas at municipal level:

1,897 ha

Indigenous peoplesareas

Micro- watersheds:

28,979 ha32,344 ha

28,979 ha

32,344 ha

1897 ha

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Where are we in the process?Identification of the providers of the ES

Identification of the mayor problems in the watershed

Relation between landuse practices and provision of ES

Analisis of the changes in landuse and other practices needed for the provision of the ES and the costs related (ongoing)

Identification of the users/ beneficiaries

willingness & capacity to pay

Valorization of the ES

Setting up the institutional framework and governances structuresCreation and strengthening of a community steering committee

Monitoring system with good advances (combined water & biodiversity index)

Priorization of projects for overcoming of the contraints

Fund raising (ongoing) internalising “environmental issues” in the water taxing fees (end of july)

First comitments for “seed money” (regional government, public investment, internationalcooperation)

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“Under construction”

Institutional arrangementbuilding up the mecanism for the fund

further strengthening of local governance structures / compliancestructures

Setting up fair contractual arrangements and implement monitoring system

Put into practice of the PES: compensationsFundraising (C.I., others) (ongoing)

Tecnical asistence (ongoing)

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Main problemsDeforestation and degradation due to (illegal) logging, agricultural frontier

Conflicts on access to and use of land, land rights, access to resources

Erosion, productivity losses in agriculture (seasonal limitation of water)

Loss of biological diversity andlandscape beauty (turism)

Little knowledge on sustainable land use practices (migration area)

Water contamination from livestockmanagement and agricultural chemicals,

Increased negative impacts on natural risks (natural hazards + vulnerability)

Increased costs for watertreatment

31.07.2007 Seite 10Programa Desarrollo Rural Sostenible – PDRS Perú

The PES- scheme

People in the upper part of thewatershed

ProvidersProvidersPeople in the town of Moyobamba

(local demand)

Users/ BeneficiariesUsers/ Beneficiaries

No deforestation

Sustainable land use practices

No water contamination

Biodiversity conservation

Agreed mecanisms Cost reduction (water companies´costs for water treatment)

Water for consumption andagricutlure in quality and

quantity

Transactionmecanisms

Compensation forEcosystem Servicies

Individual/ collective

agreements

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The actors

Providers of the Services: People in the upperpart of the watershed (protected area atmunicipial level); mainly living from agriculture (coffee) and livestock

Users/ beneficiaries of the Services: People in the town of MoyobambaInstitutional Set- up: Comunity SteeringCommittee (“Comité Gestor”), includingwatershed committees (built upon the irrigationcomittés): more than 25 institutions (public, private, civil society, church)

Individual / collective agreements, “conservation agreements” (C.I.) (undercontruction)

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In favor

85.16%

Not in favor4.30%

No opinion

2%

In favor, without WTP

8.98%

Capacity to payPolitical value S./ 1.00per conection/ month

Willingness and capacity to pay (Nueva Cajamarca)

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Managing instruments of the water company (municipality/ private)Water Master Plan (5 years)

Assumption: water provision is continuosly over time

Indicators:

- mere economic: efficiency of the company, coverage over time and spatial, administration

Projects are not orientated to protection of watersheds orenvironmental management

Water user fees for PES are not posible in Peru (national legislation)

Alto Mayo region was classified as a pilotstudy (learning by doing, upscaling)

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Regional Conservation

Fund

Board of Directors

Community Steering CommitteeMultiple Financial sources:-Water fees-Regional Government-Public Investment- International Cooperation (C.I., ??)-Extractive Industries??

Biodiversity conservation and recuperation of degraded lands

Local economic development / Agriculture (incentives for agroforestry)

Environmental management & environmental education

Capacity Building; strengthening local & regional governance

Posible institutional Set- up of the PES- Scheme (under construction)

Board ofDirectors**- Regional Government-Waterprovidingcompany- Repr. ComunitySteeringCommittee- Intern. cooperation

Audit & Evaluation

Monitoring

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Financial Sources in the broader context of Alto Mayo region- Regional Government: 30,000 USD (agricultural improvement)

- Water Fees: 25,000 USD / year (watershed- management)

- Public Investments: ??? ongoing (infrastructure, agroforesty)

- Conservation International: 25,000 USD (baseline + ??)

- FONDAM: 40,000 USD (preparation fase, matching founds)

- GTZ: (technical assistence, valorizing in process)

- Profite re-distribution law from extractive Industries (???)

++++

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Sensibilization of people on environmental issues and water & development: education program in implementation

First changes in land-use to sustainable land use practices (e.g. agroforestry)

Water fees internalise watershed protection

Results up to now

Governance structures on local/ regional level strenghtendComunity steering committee, relationship between private sector and farmers (coffee comercializing, watershedcommittees)

Good advances in monitoring systems (water & biodiversityindex)

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First Lessons Learnt - DificultiesIncoherent public policies, lack of continuity

Little synergies between environmental politics, sectorial politics, regional politics

Little experience with market instruments in a lot of rural areasLittle understanding/ experience how to valorize market goods andoportunity costs

Time- delay between action and results “A lot of discussion and papers, little experience on the ground”

Perception of water: right for everybody, public good, privitization? political and cultural aspects (payments compensations)

High transaction costsInstitucionalidad y reglas de juegos transparentes, confianza

True participation and ownership of local peopleLittle information, little capacities

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First Lessons Learnt - Oportunities

new understanding: from “non-use” to sustainable natural

resources management and conservation

rising importance of eco-negociations and “green- marktes” (e.g.

coffee)

Survival of ancestrial institutions and rules (“informal”)

Combination of diferent financial sources (conservation, agriculture,

local development, extractive industries)

Increasing awareness of population (and decision makers) about

values and importance of conserving natural resources and

environmental protection

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Favorable pre-requisites for the aplication of PES in PeruLandscape planning processes, decentralization procesesManagement plans of PA, diferent PA categories (local- regional- national)political backing, water as a “felt need”, very visible, local peoples´ involvementclarity on providers and beneficiaries/ users willingness to pay: water fees

Challenges for the aplication of PESin general: little experiences with PES

small transaction costs

bundling diferent ecosystem services (water, biodiversity, carbon)

private sectors involvement

capacity development and strengthening of local / regional governance

economy of scale (flexibility, institutional arrangement)

fair contractual arrangements and appropriate monitoring mechanism

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Recomendations

it´s a long-term process, the political willigness and backing over the time is a pre-requisite for success

market instruments have to be combined, and adapted to local capacities andnecesities

PES is an instrument, not an objective/ project type try to combine diferentinstruments, based on the realities

combination of protection and sustainable management, conditioning therevenues

harmonization between proceses and programs of sustainable land use management, local/ regional planification

environmental comunication & education is a fundamental pilar of the work

how to avoid to create new institutionality but built up on existing structures

efficient monitoring system is crucial (whom to compensate, why, compliance)

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Thank you very much for your atention!