Payments for Ecosystem Services: Motivating Buyers Ivo Mulder, Kerry ten Kate, Sara Scherr

Why is it important to focus on buyers? If beneficiary/user doesn’t pay…. no disincentive for damaging behaviour and incentive for conservation no market unless there’s demand as well as supply potential scale of PES limited If only government payment…. private sector not engaged just shuffling existing public money – no additionality PES may not be most efficient/effective way to protect ecosystem services

Kinds of buyers Public: Central to local government Private: Institutional – i.e. companies Retail - i.e. consumers / private households

Private Sector Payments Scope of “private PES” Private entity pays for clear ES for business motivation. Payments made on behalf of the consumers / households (eg higher water prices) Payments for an ecosystem good (eg NTFP, genetic resources);offsets; indirect payments/ conservation (eg shade-grown coffee) “Narrow” definition private sector payment “Narrow” definition ecosystem service “Broad” definition ecosystem service “Broad” definition private sector payment Private Sector Payments Ecosystem Services 1 3 2 4 Figure …: Schematic overview of differentiation in private payments for ecosystem services.

The private PES study Phase I: existing buyers Assess the scale and nature of private PES of four kinds: carbon, water, biodiversity, landscape beauty Discuss with private buyers their motivation, experience and appetite for PES Phase II: potential buyers Assess the potential scale and nature of private PES Assess prerequisites for private PES to take off

Motivations of buyers Regulatory compliance Treaties (Kyoto/CDM and carbon; CBD and genetic resources) Cap-and-trade system Benefits related to core business functions Business opportunity: new markets (carbon offsets) or marketing/“green” branding Access to raw materials: secure, sustain or reduce costs of key natural resource inputs (eg uncontaminated water for bottling, “Charismatic” macrofauna for ecotourism) License to operate: better relations with regulators and local communities Value: Enhance or maintain the financial value of land, forest or other assets belonging to the company Employees: staff pride and morale, recruitment and retention. Benefits related to philanthropy/charity Community relations, good PR. Different budgets from core business, less reliable

What are buyers looking for? Clarity on the services. Clarity on the business case. “What are we paying for and why?” Defined property rights. Policy support for markets. Something they don’t get for free already. Low transaction costs. Reliable and informed partners.

Can you help us? Do you know examples of private PES? Do you have opinions on the scope and definition of private PES? Do you have views on the potential for private PES?

Conclusions There’s no market without demand. PES research is dominated by supply-side analyses. There is inadequate information on the existing and potential demand for PES, particularly from private buyers. Work in this area would help countries establish their strategy and expectations for PES.

Thank you Ivo Mulder Ivo.Mulder@wur.nl Kerry ten Kate Ktenkate@forest-trends.org Sara Scherr sscherr@forest-trends.org