Today’s agenda                                                   Introduction to PES                                      ...
Current situation                                                     Ecosystem functions “Since WWII increases in provisi...
PES                                                   Definition Payments for ecosystem services (PES) is often        A P...
Who might pay?                                     Additionality Water companies: improving water quality and       “Payme...
Barriers                                                                              Lack of awareness and information La...
Spatial variability                                           Potential leakage PES often criticised for making fixed unif...
Challenges in valuation                                  Perceived risk Many services are generated                       ...
Costs                                               Costs High initial investment costs                       High transac...
Flood risk                                                  Flood risk 5.2 million properties in                          ...
SCaMP                                                      Carbon     12,322 ha of blanket bog within                     ...
Urban (green infrastructure)                                   Tourism PES      In London this could equate to an addition...
Breakout session 2:                               Opportunities         Capitalising on                                  L...
Evidence gathering                                      Evidence gathering In relation to:                                ...
Thank youSteven SmithURS / Scott Wilson6 – 8 Greencoat PlaceLondon SW1P 1PLT: 020 7798 5121E: ...
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Barriers & Opportunities to Payments for Ecosystem Services in England


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Presentation given by Steve Smith from Scott Wilson URS about preliminary findings from research commissioned by Defra into barriers and opportunities for PES in England

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Barriers & Opportunities to Payments for Ecosystem Services in England

  1. 1. Today’s agenda Introduction to PES Barriers and opportunities Barriers and Opportunities PES in practice to the Use of Payments for Study recommendations Ecosystem Services Facilitating future PES 3 x breakout sessions Stakeholder workshop, 8 April 2011 Ecosystem services “the benefits that people obtain from Payments for Ecosystem ecosystems” Services: A brief (Millennium Ecosystem Assessment, 2005) introduction Ecosystem services include: provision of food, water, timber and fibre (provisioning services) regulation of climate, water quality and flood risk (regulating services) opportunities for recreation, tourism and cultural development (cultural services) underlying functions, e.g. photosynthesis and pollination (supporting services)A growing agenda Including in the UK… International Year of Forests (2011); UN Defra’s Natural Value Programme Decade on Biodiversity (2011-20) Defra’s Ecosystem Approach The Economics of Ecosystems and Biodiversity (TEEB) Action Plan Intergovernmental Science Policy Platform on UK National Ecosystem Biodiversity and Ecosystem Services (IPBES) Assessment International payments for ecosystem Countryside Survey Integrated services (IPES), e.g. REDD+ Assessment Nagoya ‘Aichi Biodiversity Targets’, Lawton Review recommended the EU target to halt the loss of biodiversity and establishment of payments for the degradation of ecosystem services in the EU by 2020 and restore them in so far as ecosystem services feasible Natural Environment White Paper 1
  2. 2. Current situation Ecosystem functions “Since WWII increases in provisioning services, Ecosystem services are underpinned by including crops, livestock, and trees, have been achieved through both using more land and ecosystem functions, for example: intensification, and enabled the UK to produce more food primary production and timber in the last decade than at any time in the last century. However, the expansion of agriculture, forestry nutrient cycling and new settlements demanded by the growing soil formation population has come at the expense of some key supporting services, especially nutrient cycling, water retention regulating services, including soil quality, the control of pest and diseases, and possibly pollination by insects, The Millennium Ecosystem Assessment argued and cultural services, for example changes in that biodiversity underpins ecosystem function landscape” (although this is the subject of continuedUK National Ecosystem Assessment: Draft synthesis of current status investigation) and recent trends (2010)Ecosystem functions Making the connections For example, woodlands within a catchment may have the function of slowing the passage of surface water, thereby attenuating flood risk Whether this function is regarded as a service depends on whether or not ‘flood control’ is considered a benefit (since communities will value this function differently in different places at different times) Adapted from Haines-Young, R., Potschin, M. and Cheshire, D. (2006). Defining and identifying Environmental Limits for Sustainable Development. A Scoping Study. Final Full Technical Report to Defra, 103 pp + appendix 77 pp, Project Code NR0102.Ecosystem markets Ecosystem markets The Lawton Review argued that as our In particular, the Lawton Review argued that understanding of the links between biodiversity, “There is an urgent need to develop market ecosystem function, ecosystem services and the mechanisms through which landowners can values people place on these services continues realise the value of the ecosystem services that to improve: their land provides to society” “The urgent and logical next step is to develop markets that enable these values to be realised for services such as water quality, flood risk management, climate regulation and other benefits” 2
  3. 3. PES Definition Payments for ecosystem services (PES) is often A PES is: used as an umbrella term for a wide variety of a voluntary transaction where schemes in which the beneficiaries, or users, of a well-defined ES (or a land-use likely to secure that ecosystem services provide payment to the service) stewards, or providers, of ecosystem services is being ‘bought’ by an (minimum one) ES buyer from a (minimum one) ES provider if and only if the ES provider secures ES provision (conditionality) Wunder S. (2005). Payments for environmental services: Some nuts and bolts. CIFOR Occasional Paper No. 42, Centre for International Forestry Research, Bogor, IndonesiaTwo key types Agri-environment schemes Public payment schemes for private land Environmental Stewardship delivers over £400 owners to maintain or enhance ecosystem million a year to farmers and landowners in services return for more environmentally sensitive Self-organised private deals in which farming individual beneficiaries of ecosystem services contract directly with providers of those servicesPrivate PES What does PES look like? “Of particular interest is in understanding the opportunities for new financing streams and considering the potential for private PES schemes to emerge” “PES provides some key opportunities to link up those involved in ‘supplying’ ecosystem services more closely to those benefiting from the same ecosystem services and in doing so, potentially provide cost- effective ways of developing new streams of financing” 3
  4. 4. Who might pay? Additionality Water companies: improving water quality and “Payments should typically be for actions that hydrology are additional to what is usually expected of Local residents: interest in reduced flooding landholders – they should not be compensated Insurance groups: interest in reduced flooding for obeying the law, but rather for actions that or storm / hazard regulation society considers beyond the landholder’s responsibility” Recreational users: interest in enhanced recreational opportunities Conservation groups: interest in enhanced RSPB (2010). Financing nature in an age of wetland habitat austerityPES internationally Research, pilots and examples Last 10 – 15 years have witnessed a Defra ‘multi-objective demonstrator projects’ rapid proliferation of PES schemes (which seek to apply the ecosystem services globally approach to flood risk management schemes) According to a recent OECD report, there are already more than 300 Natural England’s ecosystem approach pilots PES programmes in place at SCaMP (Sustainable Catchment national, regional and local levels Management Programme) International payments for ecosystem services (IPES) include WATER (a partnership to take forward a reforestation projects under the market-based catchment restoration scheme Clean Development Mechanism based on a PES model in the South West) (CDM) and REDD+ Nurture Lakeland Green Development Mechanism (GDM) under discussionOur research URS / Scott Wilson in partnership with Macaulay Land Use Research Institute, the University of Aberdeen and a range of academic specialists Barriers to PES from across the UK commissioned by Defra to investigate the “Barriers and Opportunities to the Use of Payments for Ecosystem Services” 4
  5. 5. Barriers Lack of awareness and information Lack of awareness and information For many ecosystem services, ‘suppliers’ and Scientific uncertainty ‘beneficiaries’ may not be aware of their roles Spatial variability Potential leakage In particular, potential buyers of ecosystem Locational issues services (consumers, businesses, utilities, government agencies) are often unaware of their Time lags and horizons dependence on ecosystem services Challenges in valuation Perceived risk Limited access to information about PES, the Legal and policy environment economics of land use, and prospective PES Costs buyersScientific uncertainty Scientific uncertainty Biodiversity ? ecosystem function ? Scientific understanding of the complex ecosystem services ? benefits to people relationships between ecological and biophysical (values) processes and service provision is limited Our capacity to make linkages between A necessary condition for the design of ‘genuine’ biodiversity and ecosystem services “at spatial PES is a clear relationship between the type of (landscape) scales relevant to the human land use being promoted and the provision of enterprise is limited at present”* ecosystem services (Defra, 2010) *Balvanera et al (2006). Quantifying the evidence for biodiversity effects on ecosystem functioning and services. Ecology Letters 9:1146-1156Scientific uncertainty Spatial variability Ultimately, how certain can we be that a particular set of A site’s capacity to generate ecosystem services management practices will result in a specific set of is affected by various factors including: ecosystem service-related outcomes?* What level of biophysical characteristics (e.g. soils, topography) confidence is necessary for a PES scheme to be viable? history (e.g. previous management) characteristics of neighbouring sites (e.g. seed banks, What level of certainty does a buyer (e.g. a water habitats) company) need to have in order to show a local managerial capacity (e.g. skills, access to comprehensive review of the issues (‘due diligence’)? capital) These factors are highly variable, meaning that the marginal costs of delivering services also * Many natural resource management activities yield no saleable ecosystem services vary spatially (do PES schemes have to be highly localised?) 5
  6. 6. Spatial variability Potential leakage PES often criticised for making fixed uniform payments Buyers need to be assured that a PES deal will on a per hectare basis whereas ecosystem service not shift unsustainable land management provision tends to vary from one location to another practices to other areas (known in the carbon arena as “leakage”) Accounting for spatial variation in ecosystem service benefits via economic valuation, benefit scoring, and mapping tools, allows payments to be prioritised to those areas that provide the highest benefits (OECD) European Commission has suggested that farmers in areas with specific natural constraints receive additional income support, in the form of an area-based paymentLocational issues Locational issues The diffuse nature of some ecosystem services The value of services is often contingent on makes it difficult to locate precisely who is location responsible for their provision (e.g. for water For example, an accessible forest is worth more quality and carbon sequestration) than that same forest in a remote location with respect to use values; benefits (values) may Can lead to different payment systems with therefore be shaped by population distribution taxpayers tending to fund diffuse services (e.g. (contrast one tonne of carbon which has the through agri-environment schemes) same value everywhere)Time lags and horizons Time lags and horizons The provision of ecosystem services in response Tensions between commercial and ecological to a change in management regime may take time horizons some time to materialise and compromise the uptake of ‘results-based’ schemes For example, Ten Year HLS agreements are long-term in relation to European and domestic funding streams, but ten years is not long in Upfront funding for start up and transaction costs terms of many farm businesses and it is very may be necessary (who bears the risk?) short when considering the long-term aims of a resilient and coherent ecological network (Lawton Review) 6
  7. 7. Challenges in valuation Perceived risk Many services are generated High perceived risks amongst both buyers (who jointly (e.g. multifunctional may have low confidence in providers delivering) agriculture) and are delivered and sellers (who may not be insured against the and utilised as bundles of risk of external factors, e.g. weather and disease, affecting their ability to meet the PES services; pricing individual agreement) components can be therefore be difficult Payment reliability is key since landowners will assess the potential risk against the equivalent characteristics of market returns, i.e. trend over time versus inflation, sudden peaks and troughs, etc.Perceived risk Perceived risk Loss of flexibility for sellers; poorly-designed Different ecosystem services display different long-term contracts can limit land management degrees of non-excludability; for services such activities to a narrow range of alternatives as enhanced biodiversity and attractive landscapes it is difficult to exclude ‘free riders’ Need for insurance; where payments are dependent upon delivery of specific ecosystem service outcomes, factors outside producers’ control may result in failure to achieve contractual obligations and, subsequently, non- paymentLegal and policy environment Legal and policy environment English proprietary rights to land are complex Numerous EU directives (Water Framework, The capacity of private individuals or bodies to Nitrates, Habitats) contract CAP reform Lack of effective enforcement mechanisms if the Localism and ‘Big Society’ agenda ‘seller’ fails to deliver the required service New Community Infrastructure Levy (CIL) The need to consider the burden of proving that New marine planning framework failure is the ‘seller’s’ responsibility rather than, for example, another upstream water proprietor 7
  8. 8. Costs Costs High initial investment costs High transaction costs Establishing a PES scheme can be costly and involve: Identifying ecosystem service(s) PES schemes may require high investment Establishing appropriate land use / management techniques costs in order to carry out the land use changes Identifying, recruiting and organising buyers and sellers Holding negotiations and establishing protocols required under PES agreements; these costs Demonstrating management practices may be prohibitive particularly for payment-by- Monitoring, evaluation and review (e.g. value of ES may vary results schemes where there is a considerable over time) time lag between management change and For example existing HLS agreements can be quite complicated to set up and require considerable and service delivery ongoing advice (is cost-benefit analysis necessary?) Barriers Breakout session 1: Lack of awareness and information Scientific uncertainty Addressing barriers to PES Spatial variability Potential leakage Locational issues Time lags and horizons Challenges in valuation Perceived risk Legal and policy environment Costs Ideal conditions for PES Demand for ecosystem services is clear and financially valuable to one or more Opportunities for PES players Supply is threatened Specific resource management actions have the potential to address supply constraints Effective brokers or intermediaries exist (who can suggest resource management alternatives, engage and negotiate with prospective buyers etc.) Resource tenure is clear Katoomba Group, UNEP and Forest Trends (2008). Payments for Ecosystem Services: Getting Started – A Primer 8
  9. 9. Flood risk Flood risk 5.2 million properties in The Government has recently England at risk from completed a consultation on future funding for flood and flooding with 3.8 million coastal erosion risk from surface water flooding management Average annual cost of Consultation argues that flood damage in England since costs currently fall exceeds £1 billion almost entirely to the general taxpayer, this artificially Costs borne by constrains how much can be householders, businesses, achieved, as well as creating central and local potential for inequity in the government and insurance system companiesFlood risk Flood risk Government would like to According to the consultation, encourage additional local “Greater local choice and investment in flood and coastal discretion over what projects can erosion risk management, and give proceed, and when, based on local areas at risk a bigger say in the willingness to contribute towards action taken the benefits that would be Consultation proposes a new delivered” ‘payment for outcomes’ approach Does this provide the framework to determining funding for all capital for locally designed PES maintenance and defence projects schemes? from 1 April 2012 Buyers might also include insurance groups interested in reduced floodingWater quality SCaMP “Businesses can benefit by establishing privately Partnership between United financed payments for ecosystem service schemes. The Utilities (UU) and RSPB to promise for new schemes is greatest in water quality improve the upland land owned management; outside of this area the potential remains by UU (2005 – 10) limited” Funding from UU and agri- environment schemes RSPB (2010). Financing nature in an age of austerity Meet targets for SSSI condition and improve water quality (reduction in suspended solids, pathogens, nutrients and water colour) Based on whole farm plans 9
  10. 10. SCaMP Carbon 12,322 ha of blanket bog within Science of carbon and land use SSSIs into management toward continues to improve favourable condition May one day be an increase in 19.9ha of upland heath restored habitat restoration and creation Improved water quality (colour as a form of carbon PES (RSPB, and suspended solids) 2010) Decrease in the levels of carbon Peatlands cover 11% of in dissolved form year on year England’s land area and provide Socio-economic benefits (e.g. an important terrestrial store of tenant farming viability) organic carbon; 70% of SCaMP2 underway supported peatlands are degraded in some by Ofwat and DWI way Carbon Urban (green infrastructure) “However, research is still needed to establish the Green infrastructure (GI) can relationships between peatland restoration and GHG provide regulating services (e.g. emissions for UK peatlands, to enable the emissions urban cooling and removal of benefits to be valued confidently” (Natural England, pollutant particles) and significant 2010) cultural services (e.g. improved Accurate metrics needed for measuring carbon stores mental and physical health) under different management (RSPB, 2010) Continuing increase in the Recent studies suggest that saltmarsh store a mean 1.51 tonnes of carbon per hectare* demand for land for development, with particular pressures in the South East (Foresight Report on Land Use Futures)* GRID-Arendal and UNEP (2009). Blue carbon – therole of healthy oceans in binding carbon Urban (green infrastructure) Urban (green infrastructure) Local authority managed green “…survey reveals that the space usually funded from the private sector is more than authority’s general revenue willing to invest in open budget spaces if the right vehicle for Community Infrastructure investment is made Levy (CIL) widens the scope available, and their of Section 106 agreements to investment is managed allow a more strategic properly” approach to the use of 95% of respondents not only developer contributions and believe good open space could see money channelled adds value to commercial into local priorities, including GI property, but are prepared to pay at least 3% more to be in close proximity to it 10
  11. 11. Urban (green infrastructure) Tourism PES In London this could equate to an additional £1.3 Nurture Lakeland: registered charity with over billion of additional capital that could be invested 275 business members representing more than in open spaces 1200 tourism businesses and holiday cottage Report recommends that appropriate investment owners models need to be identified Fundraising donations channelled into conservation and local community projects Projects on water quality, carbon and sustainable transportSource: Natural England Agriculture Agriculture Ongoing discussions on CAP reform Defra’s response to the Commission emphasises that the European Commission argues that “Targeting UK favours a very substantially support exclusively to active farmers and reduced CAP budget focused on remunerating the collective services they enhanced Pillar 2 measures and provide to society would increase the the delivery of environmental effectiveness and efficiency of support and public goods further legitimize the CAP” Commission has stated that a wide range of Determined switch away from direct support payments to targeted tools will remain useful under Pillar 2, including payments for environmental public PES goods could mean more funding for AES in the longer-term Agriculture Role of business “sustainable intensification a necessity” (Foresight Could business act as a buyer of ecosystem Global Food and Farming Futures Project) services in order to generally offset its activities? “We currently lack knowledge of how best to optimise agricultural land management for multiple outcomes, “There is much current interest in enabling the how to address the scale dependencies of such private sector to invest in peatland restoration to optimisations, assess the impact of land management on help meet their own voluntary carbon targets some services, or the impact of some services on while contributing to national carbon agricultural production. Sustainable land management at commitments” (Natural England, 2010) regional scales will be difficult to deliver without influencing decision making through the creation of new patterns of knowledge generation and exchange, market mechanisms, incentives and regulation” (NEA) 11
  12. 12. Breakout session 2: Opportunities Capitalising on Local flood management PES opportunities for PES Water quality PES Habitat creation / restoration and carbon PES Urban green infrastructure PES Tourism PES Refined agri-environment schemes General business engagement in PES Study recommendations Capacity building Evidence gathering Study recommendations Improved valuation Spatial planning / targeting Identify brokers Explore innovative ideas Recommendations not aimed specifically at Government but a wide range of stakeholdersCapacity building Capacity building In relation to: “Due to the amount of specialized information Awareness of buyer / seller roles and dependencies needed to get PES deals off the ground, support on ecosystem services institutions may be a cost-effective – and Recruiting and organising buyers and sellers perhaps unavoidable – investment” Negotiation of complex agreements and financial management Implementation of appropriate land use / Katoomba Group, UNEP and Forest Trends (2008). Payments for management techniques Ecosystem Services: Getting Started – A Primer Assurance, monitoring, evaluation, verification and review Guidance and case studies 12
  13. 13. Evidence gathering Evidence gathering In relation to: “For example, when scientific understanding of Links between biodiversity, ecosystem function and the causes of the loss of bees is further ecosystem services advanced, it is possible to envisage a private Links between land management practices and PES where landholders that rely on pollination ecosystem service outcomes pay for a reduction in damaging actions Metrics to measure services (e.g. measuring carbon elsewhere” stores under different management regimes, biodiversity benefit indices) Benefit scoring and mapping tools RSPB (2010). Financing nature in an age of austerity Data availability is keyImproved valuation Spatial planning / targeting Develop agreed valuation methods (e.g. for “…biodiversity and ecosystem benefits tend to carbon storage, flood risk attenuation) vary from one location to another… The greater Agree a margin of error (+/- 10 – 20%?) the spatial variation in costs and benefits, the Further research on services of value to the larger the potential cost-effectiveness gains are public – gain consensus when PES programmes are designed to take these differences into account” OECD (2010). Paying for Biodiversity: Enhancing the Cost-Effectiveness of Payments for Ecosystem Services (PES)Identify brokers Explore innovative ideas Facilitate the development independent and For example: scientifically credible brokers Inverse auctions (where potential sellers submit bids indicating the minimum payment they are willing to accept for the provision of an ecosystem service) Brokers can: Help sellers assess an ecosystem service ‘product’ Government provision of part funding for benefits and its value to prospective buyers that do not accrue to business (RSPB, 2010) Assist sellers with establishing relationships and rapport with potential buyers Trust fund repositories for payments that can then be Enable sellers get to know potential buyer(s) channelled into landscape restoration etc. Assist with proposal development 13
  14. 14. Thank youSteven SmithURS / Scott Wilson6 – 8 Greencoat PlaceLondon SW1P 1PLT: 020 7798 5121E: 14