Towards a framework for peatland Payments for Ecosystem Services Andrew Moxey “VNN workshop on assessing & valuing peatland ecosystem services” Presentation on 18/01/2012, Leeds
Introduction• Markets neglect most ecosystem services need to correct for various, overlapping market failures• Range of policy options: Carrots, Sticks and Sermons – pros & cons of each• PES is one topical option; lure of private funding...
PES in theory• Voluntary provision• Beneficiaries pay (bundling, layering, piggy-backing)• Service providers paid directly• Additionality• Conditionality
PES in practice?• Conditional on actions not outcomes• Intermediaries take/make payments• Publicly rather than privately funded – e.g. agri-environment schemes (PES-like)• Voluntary additionality uncertain and reversible
Conditionality?• Uncertain causality – complex relationships – distant outcomes, both spatially & temporally• Payment on result is an inadequate incentive – risk of poor outcome through no fault of land manager – timelag on payment won’t cover immediate costs payment for actions more commonplace
Use of public intermediaries• (Often) Many providers, many beneficiaries – diffuse effects – transaction costs of negotiating contracts/payments – governance issues• Public funding – novelty of PES (i.e. private sector unfamiliarity) – public good nature of many (but not all) ES – free rider problems
Spatial coordination• ES delivery affected by scale & connectivity Coordination/collective action problem• Possible natural landscape unit for water-based ES• Less obvious for GHG emissions or biodiversity• Administrative transboundary/sectoral issues – government failures in promoting integrated land use
Voluntary provision?• Freedom of entry & exit – take-up may not be as hoped for – ES gains may be reversed if market signals change• Incentive structures? – opportunity costs – transaction costs (inc. unfamiliarity) – asymmetric information – risks & timeframes – capacity?
Property rights, reference pointsReference point ofsocietal expectations Regulatory obligations Voluntary provision (Polluter pays) (Beneficiary pays) Increasing desired ES delivery
Regulatory approach?• Avoid uncertainty/reversibility of voluntary provision• Direct state management of peatland – ala Forestry Commission?• Pro/prescribed private peatland management – site designations? – cross compliance?• High political & economic costs?
Agri-environmental schemes• Different terminology & structures across UK• Upfront capital payments plus annual payments• Limited duration & subject to political whim• Not value of ecosystem services delivered• Income forgone & costs incurred (inc. transaction) – WTO constraint, politically difficult to get relaxed
Effectiveness?• Based on best management practices, but...• Critical evaluation by European Court of Auditors• Lack of routine, comprehensive monitoring• Vague descriptions/recording of actions• Targeting & spatial coordination design issues• High administrative costs...
Still, a tempting pot of cash...• Total UK CAP expenditure c.£3500m/yr• CAP & SSSIs c.£10m/yr across UK peatlands – some way short of perceived funding needs• Current CAP proposals unlikely to increase this?• Private funds via PES an alternative?
Towards Peatland PES?• Need greater acceptance of ideas – awareness raising – involve providers & beneficiaries in design process – build confidence & capacity (inc. within govt)• Need greater market confidence in delivery – better data on causality – better monitoring (avoiding “lemons”) – greater permanance (e.g. long term easements) – (public or NGO) proof of concept demonstrations
Towards Peatland PES?• Need better incentive structures – data on opportunity and transaction costs – ES values rather than income foregone – creation of intermediary bodies• Need better spatial coordination – facilitation of neighbour interaction – agglomeration bonuses? – insights from cooperative models in other sectors?
Pro-PES regulation?• Establishing compliance markets• Allowing voluntary arrangements – CSR, water company deals with land managers• Setting monitoring & performance standards• Rewarding value rather than income foregone• Promoting integrated land use – (e.g.) spatial planning processes? Joined-up govt?
Conclusions• PES need to overcome various market failures – information, coordination, free rider problems• Technical and social remedies needed – better data on site conditions, costs, performance etc. – stakeholder engagement, social learning, governance• Public sector role – direct funding – promoting/demonstrating feasibility – supporting market creation through pro-PES regulation