Payment for Ecosystem Services (PES) in Tropical Forests: RUPES

							Payment for Ecosystem
   Services (PES) in
Tropical Forests: RUPES
     Experiences,
  Opportunities and
      Constraints
           Emma P. Abasolo
         ENR Financing Forum
          September 23, 2009
          Crown Plaza Hotel
Presentation Outline

 What are ecosystem services?
 What is PES?
 What is RUPES?
 Procedure, benefits, risks, challenges
 and opportunities:
   Carbon sequestration and storage – CDM
    (Kalahan)
   Watershed protection services –

    hydropower (Bakun)
What are ecosystem
services (ES)?
 the benefits from the functioning of
 ecosystems
 provided by natural processes/
 components to satisfy human needs
 (de Groot 1992)
 consist of flows of materials, energy,
 and information from stocks to
 produce human welfare (Costanza et al,
 1997)
ES Classification

 Carbon stocks
     tree cover/forest carbon
 Watershed functions
     water flows, water quality
 Biodiversity functions
     conservation
 Human health and landscape beauty
     ecotourism
Are ES important to US?

 Used as raw materials for the
 economy;
 Offer benefits that cannot be provided
 elsewhere;
 Indispensable for reproducing
 additional goods and services.

                   Collados and Duane (1999)
Why are ES Declining?

 In the Philippines, forests are severely
 degraded
  1990s –21 M ha
  2004 – 6 M ha

 Ecosystems are under valued or worse
 not valued at all!
  market failure
  nature of property rights

  policy failure
What is Payment for
Environmental Services (PES)?
 A voluntary transaction where
 a well-defined ES (or a land-use likely to
 secure that ES)
 is being “bought” by an ES buyer (s)
 from a seller (s)
 if and only if the provider secures
 continuous provision of the environmental
 service (or protection of land use) -
 conditionality
                               (Wunder 2005)
PES Framework

 Scoping
  Identifying the environmental service(s)
   and baseline
  Modelling scenarios

  Identifying the buyers and sellers and
   assessing their motivation to engage in
   PES
 Stakeholder analysis
  Selecting the service seller(s)
  Selecting the service buyer(s)
Continuation…

 Negotiation
    Defining and agreeing on the reward
 Implementation and monitoring of
 agreements
  Setting in place an agreed transfer
   mechanism
  Developing a monitoring system

  Transferring the actual reward
ES Compensation and
Incentives: Payments/rewards
 direct payments
 financial incentives
 payments in kind
   provision of infrastructure
   market preference

   planting materials

   health and educational services

   skills training, technical assistance

   land tenure security
What is RUPES?
 “Rewarding the Upland Poor for
 Environmental Services they Provide
 (RUPES)”
    Phase 1: 2005 – 2008 - Local pilot projects
 Aims to enhance the livelihoods and reduce
 the upland poverty while conserving the
 environment
 Rewards for, Use of and Shared Investment
 in Pro-poor Environmental Services
    Phase 2: 2009 – 2011 - National policy-making
     and institutional support
Why RUPES?

 Benefits and costs of conserving
 ecosystems providing ES are borne
 unevenly
  beneficiaries do not pay
  providers do not get compensated

  costs are borne by disadvantaged groups

  in cases where payments are made, they

   do not reach the poor providers
 Which ES? RUPES Action
 Research Sites
                Bakun,
                Benguet
                Watershed protection
                services (WPS)
                                  Manila
                            Kalahan,
                             Nueva
                             Vizcaya
Carbon
sequestration
and storage
(CSS)
Carbon Sequestration and
Storage
                      CO2


                 Biomass is about
                 50% Carbon by
                     weight
Photosynthesis                      Burning
Carbon Pools in Forest
Ecosystems
               ABOVE-GROUND BIOMASS
    TREES



                  UNDERSTOREY
                         NECROMASS
                              LITTER
      ROOTS      SOIL CARBON
Payment for CSS: CDM

 Clean Development Mechanism - a
 flexibility mechanism under the Kyoto
 Protocol
 allows industrialized countries to
 implement emission reduction projects
 in developing countries and receive
 credit
    Certificates of Emission Reduction (CERs)/
     carbon credits: 1 ton CO2 = 1 CER
Forestry (Sinks) CDM Projects

 Only reforestation and afforestation
 projects allowed
 Small-scale forestry projects eligible
 (< 8000 t CO2/year)
 Bundling of individual parcels of land
 allowed
 Socio-environmental impacts assessed
 according to country procedures
“CDM”able Forest Lands
RUPES CSS Site: Kalahan
www.worldagroforestrycentre.org/Sea/Networks/RUPES/



  Ikalahan Ancestral Domain
  Indigenous people (IP): Ikalahan and
  Kalanguya
  58,000 ha (including 14,000 forest
  reserve)
  Kalahan Educational Foundation (KEF)
Specific PES-related Activities:
Scoping
 Prepared Project Identification Notes
 (PIN) for the potential CSS
 Kyoto market CDM - 900 ha
 agricultural land: 89,776 tons of
 CO2e/20 years
 Voluntary carbon-offset markets -
 10,000 ha secondary forests: 1.7 M
 tons of CO2e /20 years
  Estimated net cumulative
  CO2-e removals
                                  Net Cumulative CO2-e Removals by the Kalahan
                                       Reforestation Project, Philippines

   450,000

   400,000
                                    High Scenario
   350,000                          Medium Scenario
                                    Low Scenario
   300,000
t
CO 250,000
2-e
    200,000

   150,000

   100,000

    50,000

         0
          2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026


                                                           Year
Benefits and Opportunities

                               Total Values

CERs (t CO2) generated at        11,890
2009-2012
Present Value of 900ha CDM       95,120
at US$8 (Discounted at 5-7%)
Estimated Transaction Costs      +25,000

Estimated Net Revenues           <70,120
Risks and Challenges

 Base financing:
     project implementation
 Transaction cost: (> US$ 200,000)
     costs of conducting the CDM process
 Carbon credits not sufficient to cover
 total cost of project
 Carbon Buyer (Mitsubishi UFJ
 Securities not willing to provide
 project implementation cost)
What Can be Done?

 Negotiation toolboxes (e.g. Rapid
 Carbon Stock Appraisal; Land-use
 Assessment; etc)
 Linking tree farmers to buyers
 Finding partners who can shoulder
 transaction costs (ca $100,000)
WPS Payments

 WPS are considered to be the first ES
 recognized for payments due to its
 immediate relevance to the people (van
 Noordwijk, 2005)
 Commodities derived from watersheds
     water flow regulation
     water quality maintenance
     erosion and sediment control
     land and salinisation reduction/water table
      regulation
RUPES WPS Site: Bakun
www.worldagroforestrycentre.org/Sea/Networks/RUPES/



   Bakun - Benguet province in the
   Cordillera Administrative Region (CAR)
   with total area 30,678.74 hectares,
   (7 barangays or villages)
   First to be issued a Certificate of
   Ancestral Domain Title (CADT)
   Predominantly poor IPs: Bago-
   Kankanaey tribe
Specific PES-related Activities:
Scoping
 Bakun watershed:
     Domestic water supply
     Irrigation water for rice fields
     water for power generation:
       • Luzon Hydropower Corporation (LHC)
       • Northern Mini Hydro Corporation (NMHC).
 Problems of power companies: high
 sediment load: PHP230 M (US$5.2)
 estimated cost to dredge
 The IPs - reduce the sedimentation process
 and hydroelectric companies will reward
 them.
PES schemes

 Payments from hydroelectric companies
    Mandatory taxes (predetermined under RA
     7638) - US$ 3.7 million since 2000
 Benefits of the community:
    Electrification fund
    livelihood development
     watershed rehabilitation fund - US$ 165,000
    possible employment
    scholarships and internships for students
Benefits and Opportunities

 MOA between Province of Benguet
 and LHC and NMHC
   Realty tax
   National wealth tax (1% of gross revenue

    of the power plant for water utilization)
   Sharing scheme according to MOA:

      • Province    20%
      • Municipal   45%
      • Barangay    35%
Risks and Challenges

 Very limited financial capacity of IPs
 and LGUs to implement a PES
 mechanism
     High transaction costs
 Lack of clarity about impact of land-use
 on water
     WPS suppliers lack leverage for
      demanding payment
What can be Done?

 Government regulations for improved
 water quality
 Improve buyer understanding of
 watershed benefits
 Defining property rights for water
 Intermediary organizations to lessen
 transaction costs
Lessons learned
 Knowing what, where and who ES providers are
 indispensable for PES
 PES mechanisms promise a sustainable source of
 income, but faces many constraints
 Philippines has a great potential for global carbon
 markets
 Involvement of LGUs is important
 PES schemes work when
    threats (e.g. water scarcity)
    values (e.g. strategic point for commerce)
    opportunities (e.g. people see the benefits from ES)
    trust (e.g. trust between government, people and buyers).
 are met
Have a good day!
      Give a man a fish and you
     feed him for a day. Teach
   him how to fish and you feed
               him for a lifetime.
                           Lao Tzu


       Emma P. Abasolo
      Researcher, RUPES
        e.abasolo@irri.org