PES incentive levels are needed to motivate land owners (producers of environmental services [ES]) to adopt desired conditions of PES which generate ES. Unrealistic/Unfair value(s) for ES
Riverine tropical forests, high socio-economic and ecological importance.
Higher NPV/ha/yr (weighted average) obtained before (US$140) than under PES scheme (US$ 71 from RI and US$55.2 ha-1yr-1 from degraded forests).US$33ha-1yr-1 project PES payment - Set in consideration of market prices, available funds, household annual income/ha of land.Low project compensation in the short and long term (30 years) for foregoing either cultivation or unregulated extraction of wood products. Gained some benefit by conserving their forests instead of cutting it for cultivation. Reforesting cultivated areas resulted in a net negative NPV of discounted net benefit stream. Besides, the project payment is fixed throughout the rotation, which fixed prices may not respond to changes in the PFOs’ opportunity cost. The value needs to be revised annually to cater for time preference for money (especially for volatile economies [common with many developing nations]) and change in opportunity cost due to changing patterns of livelihoods.
Opportunity cost is fairer, more justifiable, understandable and acceptable to producers.The PES payment that can at least make PFOs’ net benefit under PES scheme equal to that prior to the scheme is about Ush 250,650/ha/yr (US $104.4) of PV Ush 223,800 (US $93.3)/ha/yr for RI, and 298,700 (US$124.5)/ha/yr of PV 266,700/ha/yr (US$111.1) for degraded forests on adopting regulated forest product harvesting; and Ush 293,600/ha/yr (US $122.3) of PV Ush 262,150/ha/yr (US $109.2) for replanting trees in cultivated forest areas of RI and degraded forest.Conservativeopportnutiy cost Opportunity cost would be fairer, easier to justify, understand and acceptable to the producer. It is however difficult to attain, too expensive and also not practical, especially for small holder farmersThe compensation declines with time as the foregone benefit reduces due to dwindling forest product quantities before sufficient forest recovery and declining fertility of cultivated forest land. Initially more benefit is foregone for degraded in comparison to than RI forest but declines at yr 3 as the forest reduces (benefit) lost for degraded.The minimum compensation figures based on opportunity cost are conservative considering only a few selected tangible benefits but not all foregone benefits. Even then, this smallest foregone benefit is not compensated for by the project level. It can only compensate the lost benefit in the long term (30 years) if paid continuously for the 30 years after the opportunity cost considerably reduce due to reduced foregone benefit, but not for reforestation.
Small tree farmer PES projects in Uganda and East Africa (e.gEcoTrust and The International Small Group Tree Planting Program [TIST]) buy carbon credits at US$4 - 20/tCO2/yr.For this carbon stock, the market price gives corresponding PES payments of about US$20.4 - 100.4/ha/yr. At lower carbon price (4/tCO2/yr), the corresponding market price payment is smaller than the project compensation (US$33/ha/yr) and compensation for smallest opportunity cost born by PFOs (US $104.4 or 124.4/ha/yr for RI and degraded forests respectively). Net creditable carbon benefits of the project forest patches are projected at 5.2 tCO2/ha/yr during the first 10 years (Ebeling and Namirembe, 2010). In addition, the forest patches are too small, average 1.15ha/PFO (similar with small holder farmers in most developing countries), to continuously generate ES units worth a payment(s) that is able to motivate PFOs undertake the good practices for continued supply of ES. The average 1.15ha/PFO is worth about US$23.5 – 115.5/yr, which is still smaller than per ha project payment and opportunity cost compensation equivalent. such small land units are costly to manage under individual PES contracts. Group contracts and payments can lower the operational cost, but it also creates high chances of elite capture which can further deprive the poor (small) famers. Never the less, fair mechanisms for small land holders need to be sought as these are critical ecosystems (ES) for But these cannot be neglected if ES are critically needed to continuously be produced because for many developing countries with weak policies and private tenure, the ecosystems are at danger of degradation while they (contain/compose a big component of environmental resources e. 70% of total forest land in Uganda is private. forest ecosystems are inherently complex with unclear boundaries for individual ES. ES markets tend to bundled the ecosystem services together as one marketable service, using proxies to commodities/estimate the service. Many potential ES (they are not paid for what they provide/produce) end up not being paid for and in a specified ES market, viewed as positive externalities. This also leads to underpaying of land owners, especially where there is limited understanding of the ES market dynamics. Efforts to recognize the different ES by a particular buyer would aid at improving incentive payments (additive) especially for small land holders such that it becomes more meaningful (attractive).
PES is likely to be outcompeted by alternative (undesirable) land uses/practices.Higher deforestation rates in private forests, for example, of up to 21.6% and 26.16% in Hoima and Kibaale districts (NEMA, 2008; Biryahwaho and Ruhweza, 2009), exceeding the national average deforestation rate (2%). Country wide, the most degradation occurs on private forests (50% is degraded) than in protected areas (15% is degraded) due to inadequate incentives to promote sustainable management of the private forests compared to the protected forests (RoU, 2002a). Cover 70% forest land cover
Session 3.6 can pes steer sustainable mgt of of forest patches
Can Payments for Ecosystem Services Steer Sustainable
Management of Forest Patches in an Agricultural Landscape?
Valuing Environmental Services for PES
Nasta Babirye, Sara Namirembe and Byamukama
11th February, 2014
4. PES for small tree farmers
Payments for Ecosystem Services (PES):
Economic incentives to land users for continued
supply of environmental services (ES)
Sufficient PES incentive levels are needed to
motivate land owners
To examine the practicability of PES levels to
sustain small forest owners’ implementation of
Analysis of PES compensation
PES level by project
Carbon market price
Project “Developing an Experimental Methodology
for Testing the Effectiveness of PES to Enhance
Conservation in Productive Landscapes in Uganda”
Hoima and Kibaale districts, Albertine
Rift, Western Uganda.
Global Environmental Facility.
National Environment Management Authority
(Uganda) and local partners
a. Project PES compensation
Private natural forest owners (PFOs)
Pays PFOs US$33ha-1yr-1
Prior to PES
A. Cultivation on forest land
B. Unregulated forest product harvesting
A. Regulated forest product harvesting
C. Additional activities:
2a. Project Compensation cont.
Higher NPV/ha/yr (US$140)
obtained before than under PES
scheme (US$ 71 for relatively intact
[RI] and US$55.2 ha-1yr-1 degraded
Affordable to ES buyers but
unjustifiable to ES producers
2b. Opportunity cost
Minimum PES compensation to break even:
$104.4 for RI and US$124.5/ha/yr for degraded forests, on regulating
forest product harvesting
US$122.3/ha/yr for replanting trees in cultivated forest areas.
Project compensation (US$33/ha/yr) unable to compensate
smallest opportunity cost
Opportunity cost is fairer.
Compensating bare minimum opportunity cost is un realistic
Difficult to attain
2c. Market price
Carbon market price range is S$4 - 20/tCO2/yr in East
Corresponding financial worth of study forests =
US$20.4 - 100.4/ha/yr. (net creditable carbon benefit = 5.2
Smaller payment than project or opportunity cost
Imbalanced understanding of PES market dynamics.
Complex ecosystems, un specified and bundled ES.
Small forests to generate reasonable continuously ES units.
Total worth per average forest (average forest size is 1.15ha per
land owner) = US$23.5 – 115.5/yr.
Costly to operate under individual PES contracts.
2c. Market price cont.
Project PES incentive payment provides insufficient incentives to
Generally, PES Incentive levels (study project, minimum opportunity cost
and market prices) are too low to sustain land owners’ participation.
Need for higher, realistic and fair incentive levels.
Buyers are unwilling to pay more.
PES schemes are more expensive to operate under individual PES
contracts for small forest owners farmers.
5. How can PES work for small forest
Holistic and integrative strategies
Partnering into broader government programs.