OVERVIEW OF PAYMENT SYSTEMS Sara J. Scherr Presentation to CARE/ WWF April, 2004

TYPES OF ECOSYSTEM SERVICE MARKETS Self-organized private deals Public payments to private land and forest owners to protect or manage ecosystem services Open trading of environmental credits under a cap or floor Eco-labeling of forest or farm products

SELF-ORGANIZED PRIVATE DEALS WHAT: Private entities pay for private services in direct, usually closed, transactions with little government involvement WHO: B: Offsite beneficiaries of forest services (companies, urban conservationists) S: Forest landowners responsible for those services INSTRUMENTS: Purchase of development rights, direct payments EXAMPLE: Bottling company pays upstream landowners to improve land-management practices to ensure water quality

PUBLIC PAYMENTS WHAT: Government payments for better land and forest- management for protection of ecosystem services WHO: B: Government or public sector institution S: Landowners/managers (individual landowners, common property forest owner groups, organized watershed users) INSTRUMENTS: Direct payments EXAMPLE: Conservation easements, contracted farm set- asides for conservation, co-finance programs, payments for endangered species presence

OPEN TRADING WHAT: Government regulation creates demand and buyers/sellers of environmental service engage in trading in order to comply WHO: B: Companies, utilities, other institutions S: Land-owners/ managers of ecosystem services INSTRUMENTS: Direct payments for credits EXAMPLE: Tradable development rights, carbon emissions offset trading

ECOLABELING WHAT: Forest/farm products produced under certified management systems WHO: B: Consumers who wish to buy environmentally- friendly S: Forest/farm producers INSTRUMENTS: Payment embedded in traded product, third-party certification or marketing EXAMPLE: Forest Stewardship Council wood, Marine Stewardship Council

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