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ZEF-CIFOR workshop:

Payments for environmental services in developed and developing countries

Titisee, Germany

I. Objectives

The objective of the case studies of payments for environmental services (PES) presented in this workshop is to learn from different existing schemes: what worked and what did not, in terms of reaching specific objectives? What conclusions on optimal scheme design under different settings can be drawn? On an environment-development scale, the primary focus of this workshop is the efficiency of PES instruments in reaching environmental objectives. The secondary focus is on the human welfare aspects of PES, as an instrument to reach the environmental objectives and as an independent side-objective of its own.

II. Case studies - common questions

We would like case-study authors to address the following common questions – and we encourage discussants to equally relate to this guiding structure. We realize that not all questions are relevant for all case studies, nor is all the required information relevant for and available in every single case. However, we would definitely like case-study authors to stick as much as possible to this content format, rather than exclusively writing what they personally think is interesting. Only in this way can we facilitate the workshop’s overall comparative approach; we ask for our contributors’ understanding.

We would also like authors of methods papers to closely read the following common questions, in order to give particular emphasis to methodological aspects that have relevance to these common questions.

1. Services and actors: Did the initiative for the PES scheme come from the ES buyers, from the sellers, or from third parties? Was the PES scheme motivated by one single or by several simultaneously provided environmental services? Who pays? Is the group of buyers fully over-lapping with the group of alleged beneficiaries? Do buyers implicitly or explicitly pursue side objectives (poverty alleviation, regional development, governance, etc.) that influenced scheme design and targeting? How are the participating sellers selected? Is government or other third parties acting as brokers mediating between buyers and sellers? Is compliance defined in terms of service delivery or land- and resource-use caps? How well documented is the link between the two? How is compliance monitored? Are sanction mechanisms for non-compliance credible? Is the scheme truly conditional (quid pro quo)?

2. Implementation: What are the spatial and temporal scales of the scheme? Did this scheme build on any pre-existing alternative scheme, or was it built from scratch? Is the payment exclusively in cash, or does it involve other benefits? Were ES providers’ opportunity costs for PES delivery studied in advance? How are the payments structured? Does the PES scheme build on/ is it jointly applied with other management instruments (command-and-control, integrated projects, other economic incentives, etc.), or does it rather replace those? Are all parties likely to be better off from the scheme? Have the economic gains been quantified? Who are likely to be the prime winners? What proved to be the main obstacles to implementation (financial, institutional, “trust building”, etc.)? How high are PES transaction costs (start-up, running), compared to the proper PES transfers?

3. Additionality and baseline establishment: Does the scheme make sure that environmental services ´bought´ constitute an improvement over the “business as usual” scenario? What implicit or explicit baseline of service provision was used to this respect? How much de facto additionality has the scheme likely provided? Are there any obvious lessons on how PES additionality alternatively could have been improved?

4. Permanence, accounting and leakage: How have benefits over time been assessed? Is there any mechanism aimed at ensuring benefits beyond the duration of the scheme? Does the scheme provide a mechanism to ensure environmental damages are not transferred to other areas/locations (e.g., people protecting forests under PES but then shifting pressures to other forest areas)? If so, was this mechanism effective? Are there suggestions regarding alternative mechanisms?

5. Differentiation: Does the scheme differentiate/ target payments in space and/or across agents by:

• level of opportunity costs,

• level of actual environmental services provided,

• level of threat of resource degradation, or

• by offering a variety of contracts to choose from?

Does the differentiation mechanism appear to be effective, in terms of increased additionality, permanence, or reduced leakage? Does this targeting significantly raise administrative/ transaction costs? Are mechanisms potentially available to keep these costs low?

6. Participation of disadvantaged groups: If the scheme uses mechanisms to target the participation of small-scale landowners and impoverished communities, what was the approximate cost of introducing such targeting mechanisms? Does the scheme run the risk to become a rural welfare subsidy with low environmental efficiency? Whether the PES is targeted or not, what has been the likely impact of the scheme on the welfare of disadvantaged groups, whether these are the scheme’s buyers, sellers or non-participating groups? Are there side benefits from PES (improved organization, land tenure, visibility vis-à-vis donors, etc.)?

7. Next steps: Are there plans to expand current PES initiatives -- whether by expanding current programs, replicating them, or using their principles in new ways? What are the lessons learned as perceived by key stakeholders? Are there plans to modify current PES programs in light of the lessons learned to date? Are the main stakeholders happy with how things are going? What do they, and the author, see as the main problems or challenges?