Payments for Ecosystem Services: An Introduction and Case Study on Lao PDR

Payments for Ecosystem Services:An Introduction and Case Study on Lao PDR Michael Esbach and Mike Hedemark INTRODUCTION SLIDE 1 This synthesis presentation serves as an introduction to t

Payments for Ecosystem Services:

An Introduction and Case Study on Lao PDR

Presentation notes

Michael Esbach and Mike Hedemark

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Payments for Ecosystem Services:

An Introduction and Case Study on Lao PDR

Michael Esbach and Mike Hedemark

INTRODUCTION

SLIDE 1

This synthesis presentation serves as an introduction to the concept of Payments for Ecosystem Services (PES) through a case study on Lao PDR This gives students a real-world perspective on the applicability of and opportunities that exist for PES

WHAT IS AN ECOSYSTEM?

SLIDE 2

Ecosystems refer to the combination of living organisms and their non-living

environment Ecosystems are dynamic and complex; they vary in size, richness and diversity of species, amounts of carbon they store, and how they use and transport energy At the same time, ecosystem components are interconnected Remind students that humans are an integral part of ecosystems

WHAT IS AN ECOSYSTEM SERVICE?

SLIDE 3

Humans benefit from a number of fundamental services provided by ecosystems The United Nations Millennium Ecosystem Assessment (2005) broadly groups these into four broad categories: provisioning services (supply of goods giving direct benefit to people), regulating services (moderate natural phenomena, making ecosystems

sustainable and functional), cultural services (non-material benefit that contributes to the intellectual, cultural, and social development of people), and supporting services

(consistent, underlying natural processes with indirect or very long-term impacts on

people, which are essential for the production of other ecosystem services, particularly provisioning services)

GUESS THE ECOSYSTEM SERVICE

SLIDE 4

In order to engage students, go through the pictures and have students explain the service provided and determine to what category they belong

Bee pollinating flower (regulating service); timber/lumber for housing/fuel (provisioning service); dung beetle-nutrient cycling (regulating service); recreation/tourism (cultural service)

THREATS TO ECOSYSTEMS

SLIDE 5

Ecosystem services are so fundamental to life that they are easily taken for granted At the same time, they are so large in scale that it is hard to imagine that human activities could destroy them Yet resource demands from a growing human population place a large amount of stress on ecosystems Many human activities disrupt, impair, or alter ecosystems every day, including the following list

LAO PDR IN NUMBERS

SLIDE 6

Many students are probably unfamiliar with Lao PDR—a landlocked, mountainous and thickly forested Southeast Asian country bordered by the Mekong River to the west and Vietnam to the east Lao PDR has a relatively small population and intact natural

environment, although forest cover is on the decline While the economy has a high growth rate (>7%) the country’s infrastructure is still underdeveloped, especially in rural areas Approximately 75% of workers are employed in agriculture, many of whom are subsistence rice farmers Economic growth has reduced official poverty rates to 26% (2010) (CIA Factbook)

ECOSYSTEM SERVICES IN LAO PDR

SLIDE 7

Lao PDR’s natural resources represent a wealth of natural, cultural, and economic values Threatening much of this biological richness and diversity is the dominance of natural resources in the Lao economy, which places enormous pressures on the

integrity of their ecosystems (the country’s top exports are wood products, coffee, electricity, tin, copper, and gold – the latter three are mined minerals)

Important forest ecosystem services in Lao:

 NFTPs – Non-timber forest products: food for consumption and sale, vegetation for livestock

 Energy: 85% of Laotians get cooking energy from fuel wood

 Housing material: majority of Lao houses are built with forest material

 Medicinal: ~80% of population in Asian countries depend on natural medicinal products (WHO Factsheet #134 2008)

 Ecotourism

THREATS TO ES IN LAO PDR

SLIDE 8

This slide shows some examples of how ecosystem loss happens The presenter could only show half of these and get the students to think of more examples

NATIONAL PROTECTED AREAS (NPAS)

SLIDE 9

The National Protected Area (NPA) system in Lao PDR was initiated in the late 1980s – today there are 21 NPAs consisting of representative ecosystems and covering over 3.5 million hectares (15% of total land area) NPAs have three objectives: protection of forests, wildlife, and water; maintenance of natural abundance and environmental

stability; and protection of natural beauty for leisure and research (Robichaud et al 2001)

Lao Forestry Law recognizes five types of forest: protection, conservation, production, rehabilitation, and degraded Two of these land use classifications are especially

important to NPAs in Lao PDR and national ecosystem services Protection forest is

intended to protect watershed areas and prevent soil erosion It also includes areas of forestland important for national security and protection against natural disasters

Conservation forest is intended for the conservation of wild animal and plant species,

and has various other historical, cultural, tourism, educational, and scientific values

THREATS TO NPAS IN LAO PDR

SLIDE 10

Using a threat assessment methodology (Salafsky and Margolius 1999), five key direct threats to NPAs were identified and ranked by Lao’s Ministry of Agriculture and Forestry and the Science, Technology and Environment Agency: slash & burn agriculture,

harvesting of NTFPs for sale, hunting of wildlife for sale, harvesting of NTFPs for food, and hunting of wildlife for food

PAYMENTS FOR ECOSYSTEM SERVICES (PES)

SLIDE 11

Ecosystems provide people with a wide range of services that are necessary for their well-being At present, however, many of these ecosystem services are either

undervalued or have no economic value Due to growing concerns, markets for

ecosystem services are beginning to emerge around the world PES is an intervention

that offers incentives (e.g money) to farmers or landowners to invest in restoration and maintenance of a particular ecosystem service Explain the key attributes of PES (from Wunder 2005)

WHO ARE ECOSYSTEM SERVICE BUYERS?

SLIDE 12

Explain or have your students come up with different individuals or groups that could be potential ecosystem service buyers and determine what they are ‘buying’, e.g

governments buying carbon credits

WHO ARE ECOSYSTEM SERVICE PROVIDERS?

SLIDE 13

Briefly explain different groups of potential providers

CASE STUDY: ELD’S DEER

SLIDE 14

Using the case study from Box 2 in the synthesis, break down the PES scenario into the key attributes (Wunder 2005) as best as possible Ask students if they think there are any issues with this assessment (e.g perhaps the ecosystem service does not seem clearly defined)

VALUING ECOSYSTEM SERVICES

SLIDE 15

Through the valuation of ecosystem services, PES brings ecosystems into the economy and, by extension, our daily lives It can also serve as a means to protect and restore ecosystems because it provides a way to justify and determine priorities in programs, policies, or even actions Ecosystems are valued by how important they are to people

The price for an ecosystem service is ultimately determined by what the buyer is willing

to pay and what the seller is willing to accept and deliver

There are four main values of ecosystem services: social (quantification of economic benefits from societal POV), financial (costs of developing transaction and/or of making management changes), alternative cost (see next slide), and market price

Discuss benefits of valuing ES (recognizing the costs and benefits of ecological

sustainability) and limitations (certain characteristics of ecosystem services that cannot

be expressed in dollar values; from human point of view)

ALTERNATIVE COST EXAMPLE

SLIDE 16

Alternative cost: The actual private financial benefits to specific actor(s) that can be estimated based on the costs of replacing an ecosystem service if it became damaged

or not available

Example: Scientists estimate that up to 65% of the destruction from Hurricane Katrina could have been avoided if actions had been taken to conserve the shoreline protection provided naturally by wetlands (WBSCD 2007) [Wetland protection cost: $14 billion vs hurricane destruction: $200 billion]

ECOSYSTEM SERVICES VALUES IN LAO PDR

SLIDE 17

Assigning monetary values to the services provided by ecosystems in Lao PDR is a complex task, but some preliminary efforts have been made Estimates that exist can be found in the following table See corresponding synthesis for explanations and data

resources under section: Ecosystem service values in Lao PDR.

TYPES OF PAYMENTS

SLIDE 18

Listed below are the basic types of payments that can be made for ecosystem services

Real-world examples of each can be found in the Developing a PES Program section of

the synthesis See if your students can think of initial or additional examples for each

WHAT CONTRACT TYPES EXIST?

SLIDE 19

There are many different types of contracts or agreements that can be made between the buyer and provider The contract will largely be based on the amount of money exchanged, the time duration, the measurements and monitoring that is needed, and trust between the parties Contracts types include: Memorandum of Understanding (MoU), legal contracts, customary law agreements, and others Following is checklist of common contract components

COMMON CONTRACT PARTS

SLIDE 20

While contracts and agreements for PES vary, some parts common to all include the following list (can be brainstormed by students)

BENEFITS OF PES

SLIDE 21

Some possible benefits from PES include the ones listed on this slide Additional

benefits could include poverty reduction (discussed in the next slide) and more

CAN PES REDUCE POVERTY?

SLIDE 22

Lao PDR has a population of 6.3 million people, 80% of whom live in rural areas Within this rural population, 26% live below the poverty line (CIA Factbook) and over 75% live

on less than $2 a day (FAO) Currently, there are many incentives that exist for

unsustainable use of resources In certain contexts, however, PES can provide

incentives for sustainable use of natural resources by providing a reliable source of income or employment for rural community members Payments that are delivered consistently and reliably over many years can create a strong incentive to adapt

sustainable land use practices Describe the potential various short-term and long-term benefits of PES

RISKS TO SELLERS

SLIDE 23

The following is a range of potential risks that exist for the rural poor in entering into PES deals Prior to investing in a PES deal, potential sellers and their partners should conduct a risk assessment to understand the issues relevant to the specific site It is also important to consider the context in which PES deals are currently carried out, as well as the situations in which PES deals are most relevant and likely to succeed

NAM ET – PHOU LOUEY (NEPL)

SLIDE 24

The neighboring Nam Et and Phou Louey (NEPL) NPAs cover hilly and mountainous terrain that hosts the richest biodiversity in northern Lao PDR (ICEM 2003) These areas contain endemic and threatened species, ecosystems, and natural resources, provide stability and maintenance for land and water systems, and sustain national, provincial, and local economies in ways that are only now becoming apparent A closer look at NEPL will demonstrate the high economic value of protected areas as well as the potential for PES programs in Lao PDR and globally

Explain in detail the opportunities that exist for each of the following in NEPL Examples follow on the next two slides for biodiversity conservation and bundling payments Add

or modify examples to fit your class

EX: BIODIVERSITY CONSERVATION

SLIDE 25

The push for biodiversity payment programs comes from both an increased recognition

of the role that biodiversity plays in ecosystem functioning, and also a heightened

awareness of the fragility of most ecosystems by the international community NEPL’s high biodiversity represents an important gene pool and repository of wild species, many of which are endemic, rare, or endangered (ICEM 2003) Payments for

biodiversity in NEPL could secure many different services For instance, payments could be made to gain access to particular species or habitats, while others could buy management contracts for habitat or species conservation on private farms, forests, or grazing lands Many of the living resources present in NEPL have potential commercial values for a range of domestic, agricultural, industrial, and pharmaceutical uses

The Cambodia example is from Clements et al (2010) utilized in Box 13 in the

synthesis A PES program was established in 2002 for nine bird species in the Northern Plains of Cambodia threatened by the collection of eggs and chicks for consumption or trade by local communities A program was therefore created in which payments,

sponsored by WCS, would be delivered to local people if nests were protected until the chicks fledged Protectors received $1/day for work, as well as an extra $1/day if chicks fledged successfully (see paper for more detailed explanation) Since the program started, more than 1,550 nests have been protected in 21 villages over an area greater than 4,000 square kilometers Payments total over US $30,000 per year, 71-78% of which is paid directly to local people Locals who participate in the program receive between US $80-160 per year, in a region where typical income is ~$1/day

EX: BUNDLING PAYMENTS

SLIDE 26

Bundling payments is the organization of multiple services into a single product for a buyer This is helpful for conserving large areas, as selling one service may be