Status of Pro-Poor Payments for Ecosystem Services in Africa and Prospects for the Future Sara Scherr Forest Trends Ecoagriculture Partners December 2005

Investing in “Natural Infrastructure’ The Forest Climate Alliance Strategic Advice to National Policy Initiatives Biodiversity Offsets Carbon sequestration and storage Soil formation and fertility Decomposition of wastes Landscape beauty Wilds species & habitat protection Plant pollination Watershed protection and regulation Air quality Pest & disease control

a) Self-Organized Private Deals Private entities pay for private services Tourist operators in Kenya and Zimbabwe pay communities for wildlife and habitat conservation * TNC, CI, WCS payments to farmers and communities for conservation management Price of service typically negotiated, based on willingness to buy and sell (valuation studies may be an input for negotiation)

Public agency pays for service Public payments for watershed rehabilitation in South Africa Kenya government pay herding communities to protect corridors to Nairobi National Park Price of service either set by program (based on willingness to sell and valuation studies) or through auction b) Public Payments to Farmers, Communities

c) Open Trading of Ecosystem Credits Under a Cap or Floor Landowners either comply directly with regulations, or buy compliance credits * Land use projects for Kyoto compliance through Clean Development Mechanism Price of service is based on supply and demand for the service (with demand determined by regulation)

THE FOREST CLIMATE ALLIANCE d) Eco-labeled farm, forest, natural products Consumers prefer certified sustainable supplies * Certified “shade-grown coffee” in Kenya * Certified timber in S. Africa * Eco-landscape source labels (Roobis tea in S. Africa) Price of service embedded as part of product price--usually by market (FSC), sometimes by negotiation (Starbucks)

Building Blocks for Ecosystem Services Payments and Markets

Potential Benefits for Sustainable Development Poverty Reduction  Draw in new sources of finance for conservation, esp. outside Protected Areas  Creates incentives for rational decision-making about resource use and management  Source of income for rural communities with few other market opportunities (e.g., where no transport)  Rewards rural communities for real benefits they provide to others in the country  Source of financing for transition to sustainable agriculture, forestry and fisheries

PES in E. & S. Africa  Critical need for new sources of conservation finance  Many one-off projects being developed or in the pipeline  Importance of adapting models to local social and institutional conditions  Major questions about govt roles  Weak strategic connection of PES to nat’l conservation, dev. strategy  Value of lessons from other NRM for PES design

Current Obstacles to Developing PES in Africa  Lack of technical and market information  Potential buyers not organized  High costs of finding, negotiating, monitoring deals  Lack of experience and capacity  Inadequate legal and regulatory framework  Political conflicts over resource rights and responsibilities  Distrust of markets for public goods  Lack of institutions to link communities & buyers

Potential Benefits & Risks for Community Sellers Benefits * New, often more regular, flows of income (15-25% +) * Portfolio diversification * Catalyst for adopting better management practices * Asset appreciation (pest & disease control, high inventory) * Locally-valued ecosystem goods and services * Social investment, such as preserving cultural heritage Risks * Loss of economic use options * Loss of land and forest ownership or access * Loss of local ecosystem services * Contractual obligations if services not delivered

Overcoming Obstacles for Community Producers Democratize information about ecosystem service markets Encourage broad participation in policy dialogue about the rules and shape of ecosystem service payments Reduce learning costs for new entrants to these markets; training programs and enterprise support; financial viable and appropriate business models Reduce transaction costs through institutional innovations like suitable intermediaries, ‘bundling’, large- area programs, integrate with economic activities

The Katoomba Group for E. & S. Africa - Vision 5 years: The institutional framework, enabling environment and technical/financial capacity is in place to contribute to env & dev goals 25 years: PES are contributing significantly to realizing conservation & development outcomes

The Katoomba Group Eastern & Southern Africa - Objectives 1)To support participating countries to establish at least one new high-quality PES project, achieving key ES with related institutional framework & capacity 2)To establish mechanisms to mobilize international and national buyers of ES 3)To influence national policies to include PES as an active tool to conserve ES

The Katoomba Group for Eastern and Southern Africa - Activities Information clearinghouse about PES ( Rapid response team for design assistance to projects and policies Mobilizing links to buyers Raise public awareness about PES Supporting a network of regional innovators, with links to international expertise