Could Payments for Ecosystem Services Be A Climate Change Solution?

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A robust, thriving ecosystem provides abundant and reliable flows of clean water, fertile, nutrient-rich soil, and other services essential to humans, plants, and animals. However, many ecosystems worldwide are in danger of being annihilated. 

To say that human activity has hurt ecosystems is an understatement.

People routinely engage in environmentally destructive practices such as rampant deforestation, drilling in ecologically sensitive areas, and dumping toxic chemicals into the ocean. 

What is a payment for ecosystem service (PES)?

One of humanity’s biggest challenges is how to entice individuals, communities, and governments into preserving environments instead of destroying them. 

One method that has shown promise is Payments for Ecosystem Services (PES). In this innovative approach, the beneficiaries of ecosystem services financially reward the providers of the services. 

A PES scheme is predicated on two premises: ecosystems have quantifiable economic value, which can be used to encourage investment in their protection. PES agreements limit activities property owners can perform in exchange for money. In this way, both buyers and sellers of ecosystem services profit while saving fragile ecosystems.

Paying for the benefits provided by wilderness areas, fertile soil, and other ecosystems is an excellent way to ensure that the benefits continue indefinitely. This is especially true when you consider that funding for natural resource management is dwindling rapidly. 

A crucial distinction 

The definition of a PES transaction encompasses more than money merely changing hands and delivering a valuable environmental service. It also means the payment caused the benefit to occur where it otherwise wouldn’t have. 

Why it’s essential to understand the economic value of ecosystems 

While PES programs have a proven track record of shifting land-use patterns for the better, they’re only effective if payments exceed the opportunity costs of alternative activities. If this doesn’t happen, landowners won’t change what they’re currently doing.

That’s why it’s crucial to understand the economic value of ecosystems to those who benefit from them. Then, schemes can be devised that enable economically disadvantaged individuals to earn cash by restoring and conserving vital habitats

This is a huge selling point because many people living in rural areas earn their living from pursuits such as forestry and farming. However, PES schemes aren’t a cure-all because PES seldom provides all the financial resources a family or community needs. 

Furthermore, PES schemes aren’t always feasible. For example, in places where resource access and ownership are in dispute, it’s not advisable to broker a PES agreement. 

Secondary benefits of PES  

Although a PES scheme might focus on protecting one specific ecological benefit, it usually safeguards other ones too. For example, reforestation might be done for carbon sequestration but also boosts water quality and biodiversity. 

In addition, PES schemes can improve the economic conditions of landowners, boost rural employment rates, promote community unity, and prevent rural populations from migrating to urban areas. 

Types of PES schemes 

Public payment schemes for private landowners

This is an arrangement where a government agency or other public institution makes payments to landowners to manage their property to best protect vital ecological services. 

For example, in 2008, the US-based Conservation Reserve Program paid $1.7 billion to farmers to protect endangered wildlife habitats, wetlands, and open spaces. 

Self-organized private deals

Self-organized private PES deals are forged between individual beneficiaries of ecological services and the providers of those services. 

For instance, a company pays the landowners who live next to the spring where they get the mineral water they sell. In this case, the enterprise does it to ensure abutters engage in land-use practices that keep the water pristine. 

Certification programs

Certification programs reward manufacturers that help preserve ecological services. Customers not only pay for the products but for the environmentally friendly ways in which they’re produced. 

For example, the Forest Stewardship Council established a labeling system that takes into account best forest management practices and timber extraction guidelines. The Rainforest Alliance and Sustainable Agriculture Network issue certification for coffee, oranges, bananas, and other products grown in ecologically sensitive areas. 

Certification programs include product-based schemes where consumers pay a premium to ensure an ecologically friendly production process and the preservation of vital ecosystem services.

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Examples of PES schemes 

One example of a PES scheme is paying indigenous peoples to plant trees that remove carbon from the atmosphere. Another one is paying landowners to preserve wilderness habitats at the headwaters of a river that provides drinking water to a city downstream. 

In the second case, the people living downriver put a dollar amount on the value of a clean and consistent water source. Then, they pay the people upstream to manage their land so that this essential ecological benefit is protected.

Costa Rica’s early use of PES 

The first PES program to be used nationally was in Costa Rica. It was a direct offshoot of Forestry Law 7575, which prioritized environmental services over other forest activities such as timber production. 

The program hands out payments for ecosystem services that include mitigation of carbon emissions, biodiversity protection, and preservation of scenic beauty. At the conclusion of 2005, 95% of land enrolled in the program was under forest conservation contracts covering 10% of the nation. 

Forest cover increased from 2.1 million hectares in 1986 to 2.45 million hectares in 2005. This early PES scheme prevented over 11 million tons of carbon emissions from being emitted into the atmosphere between 1999 and 2005. 

PES schemes in China 

China is a sponsor of one of the most ambitious PES schemes on the planet, the Sloping Land Conversion Program. It encourages Chinese farmers to replant trees on erosion-prone land in exchange for grain and cash subsidies.

Another Chinese PES scheme is “Grain for Green,” a landscape restoration project that involves handing out cash incentives to 32 million households. In the 20 years this program has been in existence, over 28 million hectares of habitat have been reestablished. 

The birds of Jamestown 

In Jamestown, Rhode Island, farmers typically harvest hay in their fields twice yearly. Unfortunately, this practice destroys the habitats of local birds. Professors from the University of Rhode Island and EcoAssets Markets raised cash from residents who wanted to help their avian friends

Enough money was raised to compensate three local farms for the cost of reducing their yearly harvest and getting their hay from another source. This gave the birds plenty of time to nest and leave the grounds without being disrupted. The contributors to the project benefit because they get to experience the exquisite satisfaction of helping the birds, and the farmers benefit because they don’t have to work as hard. 

PES in Ecuador

In Ecuador, the Third Millenium Alliance pays farmers $1,821 over five years to reforest their own land. This will result in the removal of over 78 tons of carbon dioxide from the atmosphere for each acre that’s reforested. 

However, there are other benefits too. For example, endangered species habitat restoration, erosion control, and watershed protection. The scheme boosts farmers’ earnings by 300% per acre. Profits from the initiative account for over 50% of the farmers’ total annual income. 

PES in the Ruvu watershed

The Uluguru Mountains in eastern Tanzania are directly in the path of moisture coming from the Indian Ocean, resulting in an abundance of rain falling on the peaks. This precipitation flows into the complex stream network forming the Ruvu River, which supplies water to over four million people in the Dar-es-Salaam region. 

In 2007, a study by CARE-WWF found a significant reduction in water quality in the area because of a dramatic buildup of silt and sediment. Human activity was found to be contributing to the problem. 

The water quality was so bad that the government contemplated severely rationing the water supply. However, that proved unnecessary after upstream landowners were given economic benefits if they adopted agricultural practices to control runoff and soil erosion. 

This ingenious PES scheme was a collaboration between downstream buyers, including the industrial Water Supply and Sewerage Corporation [DAWASCO] and Coca Cola Kwanza Ltd, and upstream farmers.

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