Promoting Sustainability and Market-based Payment for Ecosystem Services: Insights from a Pilot Project in Lijiang, China

Slide1Towards MoreSustainable and Market-based Payment for Ecosystem Services A Pilot Project in Lijiang, China Lu Zhi

Slide2How does CI approach payment forecosystem services programs?  Target areas for payment for ecosystem services and determine opportunity costs  Integrate ecological processes and development needs into payment mechanism design across priority landscapes  Replicate and scale up successful models, and share new tools and results with key decision-makers  Foster enabling conditions: provide data on service flows, value of services, policy frameworks, governance, market development, and structure implementing entity

Slide3Target areas: Bundling services inMadagascar Each individual ES layer was: • Z-normalized (mean=0 and standard deviation=1) • Combined using equal weights • Scaled between 0 and 1 BUNDLED ES:  percent overlap of three services

Slide4Target areas: Opportunitycosts in Madagascar PROBABILITY OF DEFORESTATION ADDITIONALITY: Bundled ES * Probability of deforestation HIGH OPPORTUNITY COSTS TARGETED PAYMENTS FOR ES BIODIVERSITY : number of mammals, birds & amphibians weighted by threat status CARBON : above- and below-ground biomass WATER:  water quality weighted by human population, rice & mangroves BUNDLED ES:  percent overlap of three services WATER:  water quality weighted by human population, rice & mangroves

Slide5Incorporate ecological processes andservices into land use planning and decision- making: Landscapes Integrate hydrological processes within a systematic conservation planning framework Bundle biodiversity and ES into conservation and development Leverage ES into sustainable financing for conservation landscapes • Generate a body of knowledge and analytical lessons in: • Mapping key features of ecosystem processes and services • Addressing issues in scale and management (biomes and institutions) • Incorporating ES into land use and development planning (costs and trade-offs) • Economic valuation and design of PES mechanisms (markets, stakeholders, policy) • Understanding ES and landscape resiliency with change

Slide6Case Study: China• China, with 1.3 billion people, is listed as one of the 13 most water-deficient countries in the world. • China pollution trends are threatening economic growth, human health and watershed ecosystems. (63 ％ of monitored sections in 7 major river basins can not meet standard for drinking water resource’s quality) • Water distribution is extremely uneven in time and space.

Slide7The root causes of issues…and solutions • The environmental benefits and relevant economic gains have been allocated unfairly between the protectors, beneficiaries, the destructors and victims. • PES (Payment for Environmental Services) is the generic name of a variety of arrangements through which the beneficiaries of ecosystem services pay back to the providers of those services.

Slide8Existing applications of PES oreco-compensation in China • Huge conservation incentive programs exist in China (the planned investment for the Natural Forest Conservation Program and the Grain to Green Program is $100 billion) • These schemes are based on top-down government decisions, with little attention to the demand or supply forces (market) behind the implementation and public participation

Slide9Key words

Slide10Market-based PES mechanism• a new market is created and revenues are collected • an explicit link is made between those who benefit from an environmental service and those who provide the same services Financing Mechanism Payment Mechanism Beneficiary Beneficiary Beneficiary Beneficiary Beneficiary Beneficiary Beneficiary Land user Land user Land user Land user Land user Land user Land user Governance structure Environmental Financing Mechanism Payment Mechanism Beneficiary Beneficiary Beneficiary Beneficiary Beneficiary Beneficiary Beneficiary Land user Land user Land user Land user Land user Land user Land user Governance structure Financing Mechanism Payment Mechanism Beneficiary Beneficiary Beneficiary Beneficiary Beneficiary Beneficiary Beneficiary Land user Land user Land user Land user Land user Land user Land user Financing Mechanism Payment Mechanism Beneficiary Beneficiary Beneficiary Beneficiary Beneficiary Beneficiary Beneficiary Land user Land user Land user Land user Land user Land user Land user Governance structure Governance structure Environmental       services

Slide11Factors determining the ease or difficultyof establishing a PES system • The “distance” between cause (providers) and effect (beneficiaries) • The numbers of service providers and service beneficiaries • Collecting beneficiary payments and making transfers payments to service providers (channel availability) • The legal and institutional framework • The outcome monitoring system

Slide12Illustration of a potential PESapplication: the cases of Lijiang

Slide14The environmental services• Global benefits are traditionally not included in local PES schemes. • The payment collecting channel of visitors was available – easy to implement

Slide15Quantification of the ES•  Estimating the costs of provision (minimum level)          ►  Water improvement (Agriculture income losses to          farmers): 0        ►  Birds biodiversity (Losses to farmers from the bird          sanctuary): US$250,000 •  Estimating the theoretical value (maximum level)

Slide16Potential PES options• Environment friendly agriculture through carefully designed capacity building campaigns and extension services        ►  Lower fertilizer and pesticide inputs and       improved land use        ►  Organic farming under proper       conditions (may influence birds due to       greenhouse)

Slide17Proposed compensation standard(based on WTP)

Slide18Institutional set up• Special fund        ►  financial transparency        ►  public participation • Coordinating body • Outcome monitoring • Enhance public awareness

Slide19Growth createsenvironmental risks…. …but also opportunities for innovation and reformation Thanks!