Aichi Target 3 on positive incentives: Can Payments for Ecosystem Services deliver?

Tree Diversity Day, CDB COP12PyeongChang, South Korea, 10 October 2014

Romain Pirard (CIFOR), Renaud Lapeyre (IDDRI)

OBJECTIVE

What are the governance challenges for PESto deliver on resource mobilization and incentivizing?

POLICY RELEVANCE(Resource mobilization + Positive incentives)

• Item 12: “Understanding behavioral change and the performance of economicinstruments, as well as improved guidance and tools to develop positive incentives”;“exploration of innovative financial mechanisms, inter alia payments for ecosystemservices”

• Item 14: “mobilization of all sources to increase international and domesticfinancial flows, inter alia from private sources, public sources and innovativefinancing mechanisms”

INDONESIAN CASE STUDIES

LOMBOK

3 successive PES: voluntary, tax, internalization

Focus on evolution of the scheme governance

CIDANAU

One water company as funder, heavy support by donors

Extensive household surveys on governance, analysis ofincentives (theory of signals)

Governance studied from various angles

Role of Multi-stakeholder agencies

Targeting of service providers as participants

Transmission of the economic signal

MULTI-STAKEHOLDER AGENCIES

AS INTERMEDIARIES

000

000

LOMBOK

Regional district administration

Restoration of recharging area andupstream community strengthening programs

PDAMRegional public water

supply company

PES 2IMP

Multi-stakeholder agency

60 to 70% for activities

25% allocated to regional budget

75% to IMP

PDAM’s operational costs internalized in price of water

Former voluntary payment independent from water bill

External supports(UNDP, Ford Foundation)

Before

Now

Regional tax added on theprice of water in the water bill

Water consumers

Bestari Community FundFormer intermediary body

PES 1

5 to 15% to cover IMP’s costs (new)

Arrows: money flows

Boxes: actors

In italic: useful information

PES 3

CIDANAU

Water bills

External supports(LP3ES, GTZ, IIED)

Regional public water supply company

(PDAM)

Intermediary: Multi-Stakeholder Cidanau

Catchment Communication Forum

(FKDC)

Approx 120 industrial users (in Cilegon)

Water collecting private company: PT Krakatau Tirta

Industry (KTI)

Farmer groups

Contractual payment

Contractual paymentNGO: Rekonvasi Bhumi

Capacity building and information

Capacity building and information

Watershed services: replanting and conserving trees upstream

No guarantee of equal power in decision making

Effectiveness affected by political purposes

TARGETING OF SERVICE PROVIDERS

Social connections as most decisive factor(e.g. through farmer group leader and previous schemes)

Hydrological studies are not used at full potential(selection more on practical reasons)

Additionality is unlikely(e.g. 88% had previous motivations such as productive trees)

IS THE SIGNAL LOST IN TRANSLATION?

Motivations much more than financial(e.g. 35% display social motivations: pressure, external choice, do like neighbor, good reputation…)

Significant problems of information sharing(Rules are partially known, but payment aspects remain confused)

What about procedural equity?(Lack of ownership, responsibilities associated to farmer group leader)

LESSONS

Local PES complex and expensive… a credible sourceof funding?

Qualified market-based… yet governance is a greatchallenge for implementation (additionality and incentivizing)

Mandatory approaches prove valid for funding… but innovativeapproaches not to be dismissed

FURTHER READINGPirard R., de Buren, and R. Lapeyre, 2014, Do PES improve governance of forest restoration?, Forests, 5 (3), pp. 404-24.

Pirard, R. and R. Lapeyre, 2014, Classifying market-based instruments for ecosystem services: A rough guide to the literature jungle, Ecosystem Services, 9, pp. 106-14.

Lapeyre, R. and R. Pirard, 2013, Payments for environmental services and market-based instruments: next of kin or false friends? IDDRI Working Paper N°14/13, Institute for Sustainable development and International Relations (IDDRI), Paris.

Pirard, R., 2012, Payments for Environmental Services (PES) in the public policy landscape: “Mandatory” spices in the Indonesian recipe, Forest Policy and Economics, 18, pp. 23-29.

Pirard, R., 2012, Market-based instruments for biodiversity and ecosystem services: A lexicon, Environmental Science & Policy, 19-20, pp. 59-68.

Pirard, R., Billé, R. and T. Sembrés, 2010, Upscaling Payments for Environmental Services (PES): Critical Issues, Tropical Conservation Science, 3(3), pp. 249-61.