Chronically Underfinanced – Mobilization of Additional Resources for Biodiversity, Workshop, 30 January 2010, Bonn Payments for Environmental Services

Chronically Underfinanced – Mobilization of Additional Resources for Biodiversity,

Workshop, 30 January 2010, Bonn

Payments for Environmental Services

Examples and perspectives for the future

Irene RingDepartment of Economics, UFZ

and Ecological Fiscal Transfers:

Irene Ring: PES and EFT – Examples and perspectives

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Outline

Introduction: TEEB Background

Payments for Environmental Services (PES)

Ecological fiscal transfers (EFT)

International PES, REDD+ and EFT

Conclusions


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About TEEB…

An “Open Architecture” project… over 500 contributors across partner institutions, universities, individuals…

An international and diverse “Community” of economists and ecologists…

Makers of “Global Public Goods”: the TEEB Report suite Some of our key partners….

3

About TEEB…


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Part I The need for actionChapter 1 The global biodiversity crisis and related policy challengeChapter 2 Framework and guiding principles for the policy response Part II Measuring what we manage: information tools for decision-makersChapter 3 Strengthening indicators and accounting systems for natural capitalChapter 4 Integrating ecosystem and biodiversity values into policy assessment Part III Available solutions: instruments for better stewardship of natural capitalChapter 5 Rewarding benefits through payments and marketsChapter 6 Reforming subsidiesChapter 7 Addressing losses through regulation and pricingChapter 8 Recognising the value of protected areasChapter 9 Investing in ecological infrastructure Part IV The road aheadChapter 10 Responding to the value of nature

TEEB D1: TEEB for International and National Policy Makers

Available at www.teebweb.org


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Payments for Environmental Services

A voluntary transaction where a well-defined ecosystem service (ES) (or land use likely to secure that service) is ‘bought’ by at least one ES buyer from at least one ES provider, if and only if the ES provider secures ES provision (conditionality). (adapted from Wunder 2005)

Broad range of schemes for various ecosystem services and land uses in many countries and at different spatial scales:Public, public-private and private schemes at local, regional and national levels.

Important: regulatory baselines and additionality – PES will always be part of a policy mix!


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PES: Opportunities and Challenges

PES can help make the value of ES more explicit and thus modify and potentially reverse incentives for resource users

Sequence of measures: First, remove perverse subsidies!

Voluntariness is a key feature – but legal/regulatory underpinning essential

Potential to scale up existing PES, e.g. from local initiatives to national coverage, and to implement them in more countries.

PES schemes face constraints: investment in information and capacity building, e.g., mapping supply

and demand of ES, engaging stakeholders, training administrators PES are not appropriate everywhere: need of sufficiently defined

resource tenure and use rights, equal bargaining power between stakeholders


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PES example: Costa Rica

Among the first national PES programmes in developing countries

Well-cited example, but therefore also well-studied and permanently improved

Set up in 1997, it remunerates landholders for providing carbon sequestration services, hydrological services, for preserving biodiversity and landscape beauty.

Source of funds: national (fossil fuel tax) and international (Norway, World Bank, GEF, KfW) – partly IPES


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Fore

st c

over

Time / Space

Stage 1:Undisturbed/littledisturbed forests

Stage 2:Forest frontiers; high deforestation/extraction rates.

Stage 3:Forest mosaics with stabilised cover; (low or zero net deforestation)

Stage 4:Increasing forest cover and quality due toafforestation and reforestation

MACRO NATIONAL

LANDSCAPE

&

FOREST STAND

FORESTTRANSITIONSTAGES

Challenge: Land-use transition ’path dependency’’

Sources: Flores Rodas, 1985; MINAE; FONAFIFO n.y. in Kleinn et al. 2002; CATIEDavid Barton, NINA.


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Recent review: Some propositions

PES is more effective in promoting forest recovery than preventing deforestation (Sanchez-Azofeifa et al. 2003; Arriagada 2008)

PES is only cost-effective in the last stages of the forest transition, in a landscape mosaic with land-use specialisation at forest stand level (García-Fernández et al. 2008)

Land cover, land use and institutional contexts appropriate for PES represent a minor part landscape and biodiversity variation under threat. Protected area buffer zones play a key role in increasing PES effectiveness (Calvo-Alvarado et al. 2008)

Carefully check where use of PES is most (cost-)effective!

Role of spatial targeting


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Another Challenge: Addressing the opportunity cost of conservation of both private and public actors

PES literature has largely increased in recent years

Focus on the opportunity cost of conservation for land users: local private actors

Largely missing: Addressing the opportunity cost of conservation for local public actors

However, municipalities and local communities are important actors for implementing conservation policies at the local level (spatial planning, PAs as development obstacle)

Ecological fiscal transfers as a suitable instrument: Include ecological indicators into intergovernmental fiscal transfers to the local level


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Taxes Public revenues Distribution to state and local levels

Fiscal transfers tothe local level

e.g., Governmental levels in the German or Brazilian federal systems:

Federal States Local

Intergovernmental fiscal transfers


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Substantial source of income for municipalities: 30% in West-Germany, 50% in East-Germany

Not considered:

Ecological services involving spatial externalities: spillover benefits

Urban agglomerations Rural and remote areas

Fiscal compensation today:

Fiscal transfer systems to the local level


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Ecological fiscal transfers – Experiences

Portugal: since 2007, under investigation

Brazil: since 1992, has gained positive experiences with ecological fiscal transfers: ICMS-Ecológico

Compensation for land-use restrictions Incentive to create and maintain protected areas

*

or commonly also called:

Ecological value-added tax


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States with ICMS-E legislation in Brazil (2008)

Ecological indicators

“Conservation Units”: officially registered protected areas for nature and biodiversity conservation

Watershed protection areas Solid waste disposal Sanitation systems and sewage

disposal Slashing and burning control Soil protection Local environmental policy


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Paraná: Increase in conservation units

Protected areas Until 1991 [ha]

Created after 1991 [ha]

Total by 2000 [ha]

Increase[%]

public

Federal 289.582 50.846 340.428 18

State 39.859 13.804 53.663 35

Municipal 1.429 2.740 4.169 192

private/mixed

APA 306.693 905.631 1.212.324 295

RPPN 0 26.124 26.124

Other 0 53.607 53.607

Total 637.563 1.052.752 1.690.315 165

APAs (Environmental Protection Areas) can be designated at federal, state or municipal level. RPPNs (Private Natural Patrimony Reserves) can be designated at federal or state level.

Source: May et al. 2002; Ring 2008


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Paraná: 1994 – 2000 50 Mio. R$ annually 06/2001:São Paulo: 1994 – 1996 23 Mio. R$ annually R$ 1,00 =Minas Gerais: 1998 – 2000 15 Mio. R$ annually US$ 0,41

Paraná: Piraquara (100% water reserves + CUs): local income increased

by 84% until 1995 São Jorge do Patrocínio (52% CUs): 71% of ICMS transfers based

on CUs (2000)

Minas Gerais: Marliéria (55% CUs): 68% of ICMS transfers based on CUs;

Increase of transfers from R$ 36.648 (1995 before ICMS-E) to R$ 811.335 (1996 after implementation of ICMS-E)

Fiscal effects of ICMS-E on municipal budget


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Consideration of conservation areas within the intergovernmental transfer system to the local level – possible scenarios:

Set aside a definite budget in advance and allocate according to share of conservation units within

municipal territory

Brazilian model:

Consideration of conservation units as part of the additional approach

to allocate lump-sum transfers (analogous to area, pupils, etc.)

Alternatively:

Corresponding scenarios are calculated at UFZ

for the Free State of Saxony

Transfer potential of Brazilian model to Germany


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KFA Saxony 2002 - Scenario 1: Lump-sum transfers considering conservation units

Percentage change of general lump-sum transfers in Saxony

GIS: A. Kindler & H. Hartmann

1 ha Conservation unit

= 1 inhabitant


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KFA Saxony 2002 - Scenario 2: 90 Mio. € set aside for conservation

Relative change of unconditional

conservation transfers and lump-sum

transfers in Saxony [%]

GIS: A. Kindler & H. Hartmann

90 Mio. Euro set aside for

conservation

(corresponds to compensation of

road burden)


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Ecological fiscal transfers: A promising way to go?

1. International transfers (IPES), e.g., Indonesia: Role of local governments in forest conservation. Need to combine REDD and fiscal transfers to the local level based on cost and benefits of forest conservation.

2. National scale, e.g., Portugal, communal financing law Since 1 Jan. 2007: introduced Natura 2000 and other protected areas as indicators for fiscal transfers from the national level to municipalities.

3. State level, e.g., the ICMS-Ecológico in Brazil, acknowledging conservation units for redistribution of state value-added tax revenues to local governments


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Conclusions: Challenges and prospects

PES Transfer and upscaling of successful schemes

Consider constraints, policy mix and check applicability

Ecological fiscal transfers Adress local governments in their role for biodiversity conservation

and protected area management

Brazil/Portugal: Transferability of approach to other countries

International PES and national REDD(+) implementation combine biodiversity conservation & climate mitigation policies

careful checking of co-benefits

go for broader range of actors and instruments

do not forget local governments – role of ecological fiscal transfers!

Documents

Chronically Underfinanced – Mobilization of Additional Resources for Biodiversity, Workshop, 30 January 2010, Bonn Payments for Environmental Services