Paying for Biodiversity

Paying for Biodiversity

Enhancing the Cost-Effectiveness of Payments for Ecosystem Services You do not have access to this content

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Author(s):
OECD
Publication Date :
04 Oct 2010
Pages :
196
ISBN :
9789264090279 (PDF) ; 9789264090262 (print)
DOI :
10.1787/9789264090279-en

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Biodiversity and ecosystem services provide tangible benefits for society, such as food provisioning, water purification, genetic resources or climate regulation. These services provide critical life support functions and contribute to human health, well being and economic growth. Yet biodiversity is declining worldwide and, in some areas, this loss is accelerating. The need for policies that promote the conservation and sustainable use of biodiversity and ecosystem services is more important than ever.  

Payments for Ecosystem Services (PES) is a direct and flexible incentive-based mechanism under which the user or beneficiary of an ecosystem service makes a direct payment to an individual or community whose land use decisions have an impact on the ecosystem service provision. Interest in PES has been increasing rapidly over the past decade: PES are proliferating worldwide and there are already more than 300 programmes in place today at national, regional and local levels. 

Drawing on the literature concerning effective PES and on more than 30 case studies from both developed and developing countries, this book aims to identify good practice in the design and implementation of PES programmes so as to enhance their environmental and cost effectiveness. It addresses the following questions: Why are PES useful and how do they work? How can they be made most effective environmentally and how can their cost-effectiveness be maximised? What are the different potential sources of finance for PES programmes, and how can they be secured? and What are the lessons learned from existing PES programmes and insights for future programmes, including international PES?

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    Foreword
    Biodiversity and associated ecosystem service loss and degradation present one of the major environmental challenges facing humankind. Despite the significant economic, social and cultural values they provide, such as food provisioning, clean water, genetic resources, climate regulation, and recreation benefits, biodiversity continues to be lost and in some areas at an accelerating rate. Given these trends, there is an urgent need for both (i) greater application of policies and incentives to address biodiversity conservation and sustainable use, and (ii) more efficient use of available finance in existing programmes. The latter is especially important in the context of the current economic crisis where public and private budgets are increasingly constrained and are competing with multiple demands.
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    Acknowledgements
    This book is a product of the Environment Directorate of the OECD. Preliminary versions of the chapters were presented at the meetings of the Working Group on Economic Aspects of Biodiversity (WGEAB) of the Environmental Policy Committee. Participants to these meetings provided valuable comments and suggestions. The book also builds on discussion at an OECD expert workshop on "Enhancing the Cost-effectiveness of Payments for Ecosystem Services" held on March 25, 2010. www.oecd.org/env/biodiversity
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    Acronyms and abbreviations
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    Executive summary
    Biodiversity and ecosystems provide invaluable services to society. These include food, clean water, genetic resources, recreational services, flood protection, nutrient cycling and climate regulation, amongst many others. Ecosystem services provide critical life support functions and benefits, contributing to human health, security, well-being and economic growth. Despite the significant economic, social and cultural values of biodiversity and associated ecosystem services, biodiversity worldwide is being lost, and in some areas at an accelerating rate. Without renewed efforts to address this environmental challenge, OECD projections to 2030 indicate continued biodiversity loss.
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    Introduction
    This chapter introduces the different components of biodiversity and ecosystem services, the benefits they provide to society, and the categories of economic value that are associated with them. The underlying drivers of biodiversity loss and degradation are described and estimates on the costs of inaction are presented, demonstrating the need for renewed policy efforts to address this global environmental challenge. The chapter proceeds to discuss the role of Payments for Ecosystem Services in promoting the conservation and sustainable use of biodiversity and ecosystem services, and how PES fits into the broader policy framework.
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  • Expand / Collapse Hide / Show all Abstracts Designing and implementing effective payments for ecosystem services programmes

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      The economics of payments for ecosystem services
      This chapter presents the main concepts in the economics of Payments for Ecosystem Services. The underlying mechanism for making payments for the provision of biodiversity and ecosystem services is illustrated in the context of market failures. The chapter also discusses how the use of spatially-explicit cost benefit analysis can help target the payments to enhance the cost-effectiveness of PES programmes.
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      Environmentally effective payments for ecosystem services
      This chapter considers key design elements that need to be considered for the establishment of an environmentally effective PES programme. This includes ensuring that the necessary pre-requisites are in place, such as clearly defined property rights, and other design parameters such as a robust monitoring framework, establishing a business-as-usual baseline, and addressing environmental risks such as leakage and lack of permanence.
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      Cost-effective targeting of payments for ecosystem services
      Individuals or communities with the potential to influence the supply of ecosystem services will often differ in the magnitude of benefits they can provide, the risk that these services will otherwise be lost or the extent to which their management activities can enhance biodiversity and ecosystems, as well as the costs of service provision. This chapter discusses how PES programmes can be designed to address these issues, and presents the tools and methods through which payments can be targeted to increase PES cost-effectiveness.
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      Mobilising finance for payments for ecosystem services
      This chapter considers the different sources of PES finance, broadly classified as direct user-financing and third-party financing where governments or organisations act on behalf of the beneficiaries. The advantages and disadvantages associated with each are assessed. The motivations for private sector financing of PES programmes are illustrated with examples, highlighting the opportunities and challenges for scaling up private sector engagement.
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      Insights for international payments for ecosystem services
      This chapter considers how the insights provided by local and national PES programmes apply to international payments for ecosystem services. IPES refer to programmes where the buyers and sellers of ecosystem services cross jurisdictional boundaries. The chapter discusses IPES-like programmes that are emerging for carbon-related ecosystem services and how international payments for biodiversity and other non carbon-related ecosystem services can be designed and implemented.
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  • Expand / Collapse Hide / Show all Abstracts Payments for ecosystem services programmes case studies

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      United States
      This chapter presents the design and implementation of the USDA Conservation Reserve Programme, a national agri-environmental programme that provides payments to landholders to retire farmland and improve the environmental quality of agricultural land. The CRP implements a range of management practices to protect highly erodible and environmentally sensitive land, improve water quality, and enhance wildlife habitat. The programme allocates contracts via an auctioning mechanism, targeting payments according to environmental benefits and cost. This helps enhance the cost-effectiveness of the programme. The challenges and lessons learned from the CRP are discussed.
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      Australia
      This chapter presents the Tasmanian Forest Conservation Fund, a PES programme that aims to protect old growth forest on private land. Design elements, such as the use of a Conservation Value Index to identify areas of forest with high benefits and high threat of loss, and the use of inverse auctions to reduce the costs of obtaining these benefits are discussed. Finally, the chapter discusses the lessons learned and how these are being applied in the Environmental Stewardship Programme.
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      Indonesia
      This chapter discusses a pilot inverse auction PES programme applied in the Sumberjaya Watershed in Indonesia to reduce sedimentation from coffee plantations. The process of design and implementation is discussed, highlighting issues that arise in a developing country context. The chapter also discusses how the pilot auction can be used as a price revelation mechanism, enabling payments to better reflect the costs of ecosystem services provision for any future scaled-up PES programme.
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      Conclusions
      This chapter highlights the key policy-relevant outcomes and lessons learned from across the book to enhance the cost-effectiveness of current and future Payments for Ecosystem Services programmes. In particular, the key criteria for effective PES are summarised and the main design elements of the three in-depth PES case studies reviewed in the book are compared.
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      Annex A
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