Evidence of voluntary transactions: Illustrative case studies


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Presented by Michael Richards and Sara Namirembe. This presentation provides examples of places where payments for environmental services (PES) have been implemented.

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  • PPT: Evidence of Voluntary Transactions:  how much has been paid  for what kinds of transactions, who has been paid and who has received funds, forms of payment, conditionality h
  • Voluntary programs are on the riseLocalized transactionsPWS and WQT as an integrated watershed management toolLittle consistency across programsDemand is lackingGovernments are key fundersSustainable funding is lacking
  • Latin America is the leader These are all voluntary PWS programs not WQT
  • The City of Dar es Salaam provides water to some four million inhabitants and roughly 80 percent of industries. The public water utility, Dar es Salaam Water Supply and Sewerage Corporation (DAWASCO), currently spends nearly US$2 million per year in water treatment costs due to increased sediment load in the Ruvu river, which feeds the city. The Equitable Payments for Watershed Services (EPWS) program aims to improve the quality and flow of water for downstream users by compensating upstream farmers to engage in various land-use practices to control soil erosion brought on by unsustainable farmland expansion and irrigation practices, deforestation, and illegal mining activities in river systems and within forest reserves. The project aims to establish long-term financial investment in modifying land use to conserve and improve watersheds for reliable flow and quality of water to establish a compensation mechanism that recognizes the needs and priorities of marginalized and poor people, and to improve quality of life of communities through substantial benefits to the rural poor hence contributing to poverty reduction.
  • There are currently no active offset programs in Africa, but six are in development. South Africa is the leader in African offset policy development, with a national and two provincial policies in the works. While other countries have developed EIA law and some voluntary offset projects, the majority of the continent has little in the way of offset and compensation program creation. Extended notes South Africa is at the forefront of biodiversity offsetting in Africa. Its history stems from the Environmental Impact Assessment (EIA) regulations promulgated by the National Environmental Management Act 107 of 1998 (NEMA). The national environmental principles contained in Section 2 of this Act specify that significant negative impacts on biodiversity must be avoided and, if they cannot altogether be avoided, must be minimized and remedied. There is currently no explicit legal definition of what “remedy” means in the context of the Act. However, in practice it is interpreted as the need to compensate for any residual negative impacts on biodiversity after efforts to minimize these impacts have been taken into account, through the use of offsets. Although offsetting is still an emerging practice, draft guidelines have been prepared in two provinces, and a national offsets framework policy is currently being drafted. In the province of Western Cape, a Provincial Guideline on Biodiversity Offsets was first drafted in 2007. Draft biodiversity offset guidelines are just being developed in KwaZulu-Natal, and offset measures are additionally required in the province’s draft Biodiversity Conservation Management Bill (2009). For example, the Grasslands Programme of the South African National Biodiversity Institute (SANBI) is currently developing a wetland mitigation banking program with a pilot project set to begin in the coalfield area of the Mpumalanga province.4 South Africa also has a voluntary program in which landowners can, in exchange for management support, legally reserve their land for conservation purposes. A future offset scheme could modify this current voluntary program to allow landowners to develop biodiversity credits and sell them to developers requiring biodiversity offsets.Uganda is in the early stages of developing offsets. The country’s EIA law provides a supporting framework for compensation schemes, and a few pilot projects are in the works.8 The Uganda Wildlife Authority (UWA) is in the early stage of developing a biodiversity offset policy, although the Department of Energy has reservations regarding the financing of the scheme in as far as it involves oil companies.vi The UWA is also investigating voluntary offsets with oil companies (particularly Tullow Oil) with an aim to catalyze national law for compliance-based offsets in the future.9 Current pilot projects include efforts by the Wildlife Conservation Society (WCS) to protect fisheries as a potential site for a voluntary offset by offshore oil drilling companies10 and a voluntary compensatory conservation project for the Bujagali hydropower plant on the Victorian Nile. Madagascar, with high levels of endemism and biodiversity, has a long history of efforts to conserve its unique biomes. EIA regulations play an important role in Madagascar, providing guidelines for major projects and requiring the hierarchy of avoidance, minimization, and restoration, although there is no law requiring offsets for residual impacts to biodiversity.The Environmental Action Plan (Plan d’Action Environnementale, PAE) was established in 1992 to address the threats to its biological resources. Within the PAE, Madagascar aims to develop a biodiversity offset policy for mining and logging companies along with other incentives for environmental protection.Namibia has taken some steps to include the concepts of the mitigation hierarchy and “no net loss” in a Strategic Environmental Management Plan (SEMP) in response to a large increase in exploration and mining license applications. The country has been enacting a moratorium on issuing licenses since 2007 while a Strategic Environmental Assessment (SEA) was conducted for the Uranium Province (Erongo and Southern Kunene regions). In 2009, the SEA commenced and recommended biodiversity offsets
  • What is included? What types of activities? Establish biological corridors between protected areasCreate new protected areas, strengthen existingReplant degraded areas with native speciesMaintain healthy soils and minimize fertilizers and pesticidesManage biodiversity to maintain quality agricultural products, ensure pest control, pollination, genetic resources or of key habitatsAvoid damage to areas of cultural, spiritual or aesthetic valueLaunch conservation projects outside of project areas
  • Activities Revenue-sharing by tourist hunters: A voluntary 10% tax above tourist trophy fees implemented by hunting outfitters can generate profits of up to US$ 12,500 a year for villages occupying the hunting concession.Local sourcing of products: Hotels, lodges and hunting camps obtain food products from local sources. This demand provides additional community income and encourages diversified farm production.Community wildlife-cropping: Communities are allocated wildlife cropping quotas. By legalizing/ restricting the sale and consumption of game meat and products, poaching is controlled and a market for wildlife products stimulates revenues flowing to communities.Land-leases and joint tourism enterprises: Private sector tourist operators form partnerships with communities to develop land lease agreements, wildlife camps, joint ventures, etc. which supply labor, food products, and profit-sharing to local stakeholders. EXTENDED NOTES BackgroundThe Serengeti ecosystem forms one of the most important wildlife areas in Eastern Africa. The Serengeti provides habitat to 30 species of ungulates (species with hoofs like rhinoceroses, elephants and hippopotami), 13 species of large carnivores and more than 500 species of birds. Directly bordering the Serengeti National Park are range and farmlands occupied by over 10,000 community households. Faced with poverty and employment challenges, local communities have historically not valued diverse wildlife due to its role in crop destruction. This area has seen a sharp decline in wildlife diversity and frequency due to habitat loss from agriculture impacts, deforestation and poaching. Project In the North-West Serengeti the development of a range of markets for wildlife products and services has provided communities the incentive to conserve wildlife habitat and end poaching. Villagers outside of The Serengeti National Park deliver ecosystem services in schemes driven by private-sector demand. Buyers are local corporations and the commercial tourism industry due to their reliance on community wildlife conservation activities. Results By increasing the economic value of wildlife to communities, wildlife is integrated into local land use planning and is a critical aspect of community livelihoods. Incentivizing conservation has generated significant revenues for community participants. This project is an example of community and private sector coordination coupled with collaboration among numerous villages for the delivery of ecosystem services through market incentives.
  • South Africa, Sierra Leone, Uganda, Kenya, Mauritius (5 countries supplying credits)
  • Number of Suppliers by Country Interesting to note – number of suppliers in US up, transaction volumes of credits generated in US down.
  • “Other” (<1%) types includes geothermal, bike share and other previously untracked project typesLand-based credits sequester 46% of OTC market share
  • Beatrice is Chairperson of the Bitreko Women’s Group, Director of a private primary school, Board member of a village Bank, mother of two, and…co-coordinator of tree -farmers for carbon in 3 sub-counties of UgandaAfter 15 years she can harvest the timber from the hectare. Beatrice has also planted an additional 2.5 hectare plot of carbon trees which generates approximately 145 tons of sequestered carbon. Beatrice is generating additional income to supplement her teacher’s salary while also protecting her community’s natural resources. “I am so proud,” Beatrice says, “not only do I use my work as an example when I teach my school children, and not only do I get to talk to and meet people from all over the world, but now my neighbors come and ask me questions about my carbon and my trees. Can you believe, I have become a consultant!” So far Beatrice has travelled to Canada, South Africa, Tanzania, Washington DC and Sweden to present about her experiences in the carbon market.
  • Role of Forests, Soil and AgricultureEmission source and sinkLandowners and farmers critical political stakeholders Balance carbon flows Green carbon under-utilized in market based climate change solutions
  • At www.forestcarbonportal.com, the Ecosystem Marketplace tracks and posts active forest carbon offset projects.
  • Cocoa in Ghana: supports both local livelihoods and deforestationIndustry threats: depleted soil fertility, reduced water supplies, and disease High-forest region: 66% of Ghana stored CO2, heavy cocoa farmingExtended notes: Ghana is the second largest producer of cocoa after the Ivory Coast, with an annual yield (2007) of 680,000 tons. It is estimated that there are more than 1.5 million hectares enrolled in cocoa production in Ghana. The crop supports 30% of the population, and cocoa exports account for about 40% of total exports. Cocoa is both key to local livelihoods but also an important driver of deforestation as farmers search for more productive ground. Industry insiders estimate that the value of carbon stored in Ghana’s cocoa landscapes is over $2.2 billion dollars. Traditional shade- cocoa stores as much as twice the carbon as shade-free farms – farmers could potentially get paid to decrease cocoa yield and increase canopy. Bonsambepo: (key species include Chimpanzee, Bongo, Forest Buffalo, and the White-Necked Rock Fowl, which was previously thought to be extinct in Ghana)
  • Furthermore, it plans to use the associated carbon-based financing to leverage other potential streams of revenue and benefits, including certification (which brings a premium of at least $150/ton of cocoa), and access to extension services and credit facilities that will enable significant increases in on-farm productivity. There may be some tradeoffs, however, given that shade-grown cocoa may lead to lower productivity and thus more land will be needed to maintain current cocoa production levels.
  • Evidence of voluntary transactions: Illustrative case studies

    1. 1. Evidence of Voluntary TransactionsTraining Workshop on Payments for Ecosystem Services (PES) and Reducing Emissions from Deforestation and Forest Degradation (REDD+)<br />Illustrative case studies<br />9 August 2011<br />
    2. 2. Evidence of Voluntary Transactions<br />Water <br />Biodiversity <br />Voluntary Carbon <br />Forest Carbon <br />
    3. 3. 1. Water Transactions<br />Payments for Watershed Services: <br /><ul><li>$9.25 billion total transacted
    4. 4. 216 total programs (113 active)</li></ul>Water Quality Trading: $10.8 billion total <br /><ul><li>$10.8 billion total transacted
    5. 5. 72 total programs (14 active) </li></ul>Payment Mechanisms <br /><ul><li>Government direct
    6. 6. Private negotiation
    7. 7. Market-driven transactions </li></ul>Source: State of the Watershed Payments : An Emerging Marketplace. June 2010. Stanton, Echavarria, Hamilton, Ott. Ecosystem Marketplace<br />
    8. 8. 1. Water Transactions<br />Source: State of the Watershed Payments : An Emerging Marketplace. June 2010. Stanton, Echavarria, Hamilton, Ott. Ecosystem Marketplace<br />
    9. 9. Equitable Payments for Watershed Services Tanzania<br />Facilitators: CARE International, WWF, IIED, PREM<br />Buyers: Industry in Dar es Salaam and Tanga (DAWASCO, Coca-Cola, etc.) <br />Providers: 450+ farmers in Uluguru and East Usambara Mountains, Ruvu and Sigi River Basins<br />Goal: long –term financial investment in upstream land-use changes to conserve and improve watersheds <br />Challenges: <br /><ul><li>Farm expansion
    10. 10. Unsustainable irrigation
    11. 11. Illegal mining </li></ul>For more information: http://www.fao.org/es/esa/pesal/attachments/5_Dosteus_day1.pdf<br />
    12. 12. 2. Biodiversity Transactions<br />Worldwide<br /><ul><li>2,4 – 4.0 billion USD min. Annual
    13. 13. 187,000 hectares
    14. 14. Compensatory mitigation programs: 45 operating, 27 developing </li></ul>Africa <br /><ul><li>6 biodiversity offset programs developing
    15. 15. South Africa: leader with one national and two provincial offset policies
    16. 16. Uganda, Madagascar, Ghana, Namibia exploring EIA and offset policy </li></ul>Source: State of Biodiversity Markets: Offset and Compensation Programs Worldwide. July 2011. Madsen, Carroll, Kandy, Bennett Ecosystem Marketplace<br />
    17. 17. 2. Biodiversity Transactions<br />Source: State of Biodiversity Markets: Offset and Compensation Programs Worldwide. July 2011. Madsen, Carroll, Kandy, Bennett Ecosystem Marketplace<br />
    18. 18. Wildlife Protection in North-West Serengeti<br />Project profile: Markets for wildlife products and services provide incentives to conserve wildlife habitat and end poaching <br />Suppliers: villagers outside of The Serengeti National Park <br />Buyers: local corporations and commercial tourism industry<br />Activities <br /><ul><li>Revenue Sharing by Tourist Hunters
    19. 19. Local Sourcing of Products
    20. 20. Community Wildlife – Cropping
    21. 21. Land-leases and joint tourism enterprises </li></ul>For more information: http://pubs.iied.org/pdfs/7794IIED.pdf<br />
    22. 22. 3. Voluntary Carbon Transactions<br /><ul><li>OTC average: $6/ tCO2e
    23. 23. Total 2010 value : 424 million USD
    24. 24. Total 2010 volume: 131 MtCO2e
    25. 25. Land-based credits ≈50% of 2010 OTC market, 100% of African
    26. 26. Sellers transacting credits in 2010
    27. 27. 284 suppliers
    28. 28. 38 countries
    29. 29. 9 suppliers in Africa, 5 countries
    30. 30. Buyers: for profit, motivated by credit retirement, led by the EU </li></ul>Source: Back to the Future: State of Voluntary Carbon Markets 2011. Peters=Stanley, Hamilton, Marcello, Sjardin. Ecosystem Marketplace<br />
    31. 31. 3. Voluntary Carbon Transactions<br /><ul><li>34% of suppliers from US
    32. 32. Suppliers from developing countries doubled (2009: 29; 2010: 58)
    33. 33. 9 Suppliers from Africa
    34. 34. Kenya (1) , Uganda (2) , Sierra Leone (2) , Mauritius (1), South Africa (3) </li></ul>Source: Back to the Future: State of Voluntary Carbon Markets 2011. Peters=Stanley, Hamilton, Marcello, Sjardin. Ecosystem Marketplace<br />
    35. 35. 3. Voluntary Carbon Transactions<br />Transaction Volume by Location and Project Type<br />Source: Back to the Future: State of Voluntary Carbon Markets 2011. Peters=Stanley, Hamilton, Marcello, Sjardin. Ecosystem Marketplace<br />
    36. 36. 3. Voluntary Carbon Transactions<br />Transaction Volume by Project Type<br />Source: Back to the Future: State of Voluntary Carbon Markets 2011. Peters=Stanley, Hamilton, Marcello, Sjardin. Ecosystem Marketplace<br />
    37. 37. A Personal Forestry Carbon Sale in Uganda <br /><ul><li>ECOTRUST with ICRAF, CARE, LTS International and ECCM project to aggregate local farmers to sequester carbon
    38. 38. Beatrice Ahimbisibwe, Mitooma-Bushenyi in 2003:
    39. 39. Contract with ECOTRUST
    40. 40. 1 ha of native trees, 52 tons CO2 ,10 years
    41. 41. USD 8/ ton = $416 total
    42. 42. Since 2003:
    43. 43. Beatrice plants additional 2.5 ha
    44. 44. Her son 2.5 ha, and her daughter 1 ha
    45. 45. Price up 50% to USD 12/ton
    46. 46. Number of farmers in total project = 300
    47. 47. Buyers: Tetra Pak UK, YOU, CAMCO and WE (through ECOTRUST)
    48. 48. Beatrice travels to build capacity for local Ugandan farmers</li></ul>For more information: http://www.planvivo.org/ <br />
    49. 49. 4. Forest Carbon Transactions<br /><ul><li>2009 value: 20.8 MtCO2
    50. 50. 226 projects
    51. 51. 2.1 million hectares
    52. 52. $149.2 million credits
    53. 53. Average price $8.99/ tCO2
    54. 54. 86% use third party standard
    55. 55. Africa 11% of volume, $20.9 million in revenue
    56. 56. 2009 project types: A/R 53%, Mixed 24%, IFM 20%
    57. 57. Suppliers: 53.7% NGOs, 40% private sector, 7% public </li></ul>Source: State of the Forest Carbon Markets 2009: Taking Root and Branching Out. Hamilton, Chokjalingam, Bendana. Ecosystem Marketplace<br />
    58. 58. 4. Forest Carbon Transactions<br />Source: http://www..forestcarbonportal.com/ <br />
    59. 59. Cocoa Carbon in Ghana<br /><ul><li>Shade cocoa farming techniques to store 2X CO2 (159 tonnes/ ha)
    60. 60. Benefits: carbon income and increased soil quality
    61. 61. Approx. 120,0000 has cocoa farming landscape in Bonsambepo
    62. 62. Sellers: Farmer and cocoa-buyer groups
    63. 63. Developers: Incubator, NCRC
    64. 64. High biodiversity benefits </li></ul>For more information: http://www.katoombagroup.org/incubator<br />
    65. 65. Cocoa Carbon in Ghana<br />Project Goals <br />Pilot development of REDD+/ agricultural carbon credits <br />Reduce emissions from forest degradation, enhance carbon stock<br />Improve productivity and ecological resilience of cocoa farming<br />Livelihood benefits through capacity and increased income <br />Introduce certification, extension services, and credit facilities for higher productivity <br />Increasing farm profits will avoid deforestation and degradation for new farms. Using shade-grown approach will increase carbon stocks and enhance soil quality. <br />For more information: http://www.katoombagroup.org/incubator<br />
    66. 66. Michael Richards <br />The Katoomba Incubator <br />mrichards@forest-trends.org<br />www.forest-trends.org<br />www.katoombagroup.org/incubator<br />Thank You! Questions and Discussion<br />