Assessing the livelihood impacts of incentive payments: implications for REDD Luca Tacconi Sango Mahanty Helen Suich Research funded by: Australian Agency for International Development

REDD and payments for environmental services (PES) PES: a system to pay for the provision of environmental services, conditional on performance Can be used to link national and sub-national REDD activities: redistribute REDD revenues to local forest and land users and local governments REDD would involve payments to developing countries

Research questions  What have been the impacts of existing PES schemes on livelihoods?  What are the implications for the design of incentive mechanisms for REDD at the local level?

CountryEnvironmental service targeted Scale of schemeOwnership of land Global GEF review Variety of case studies including carbon, watershed protection National to sub-nationalCommon property, private Mexico*Carbon (also hydrological services and biodiversity) NationalCommon property Brazil*Bundle – reduced deforestation, carbon sequestration, biodiversity conservation, hydrological functions fire management Sub-national (nine states of the Amazon region) Private Indonesia*Watershed protectionSub-national (watershed spanning 2 regencies and 6 sub-districts) Private Philippines*Watershed protectionSub-national (spanning multiple local government units) State UgandaCarbonSub-national (small scale)Private and state MozambiqueCarbonSub-national (ssmall scale)Common property Nicaragua & Colombia Biodiversity conservation, carbon sequestration Sub-national (small scale)Private

Analytical framework Impacts on livelihood assets: Financial, physical, human, social, natural What are the impacts of PES schemes on local livelihoods? capabilities, assets, activities required for a means of living (Chambers and Conway 1988) Access to schemes

Access to PES schemes  Participation by poor households possible  Typically constrained by: tenure, labour, capital needs, transaction costs  Design and facilitation can overcome some of these constraints

Financial and physical capital  Individual payments = small % of household income  Collective payments invested in infrastructure, services  Payments don’t reflect opportunity costs  Disjuncture between payment timing and contract duration Photo: Rowena Soriaga

Social capital  Existing community institutions strengthened: resource management & coordination capacity, external linkages  Instances of conflict caused by access disparities, changing labour patterns/roles

Natural capital  Weak evidence of change in access to resources Most case studies were on private or collectively owned land A risk for public forests given evidence of impact on informal resource use  Weak monitoring of environmental outcomes Satellite view of deforestation in Brazil

Human capital  Intermediaries facilitate capacity building environmental awareness, land management, governance, business development, PES  Long term impacts not known; some persisting confusion about PES

What are the implications for REDD?

Can PES be used for state-owned forests?  Limited PES experience available on state lands, but some 80% of forests in REDD eligible countries are state owned  Outcome based mechanisms could reward local people’s involvement in state forest conservation  Payments to local level governments could possibly enable them to provide some foregone services

Access to PES and forests  Poorly managed access and benefit distribution could contribute to conflict  Access to schemes threatened by high transaction costs: collective agreements  Intermediaries play an essential role in facilitating access, and also capacity building: but the capacity of intermediaries sufficient?

How will payments measure up?  Payments in existing PES schemes often not based on opportunity and transaction costs  Opportunity costs change, contracts need to be dynamic  Consult with communities on payment design: individual vs community payments cash vs non-cash payments  Timing of payment

Monitoring and performance  PES schemes have not monitored performance well, implementation of REDD would require MRV mechanisms  In case of non-performance over the long term, difficult if not impossible to recover funds advanced through PES National implementation of REDD needs to factor in this risk (eg establishment national fund)

More on PES and REDD  Look out for our forthcoming book: Livelihoods in the REDD? To be published by Edward Elgar in 2010