Creating Markets for Ecosystem Services

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• Creating Markets for Ecosystem Services
• Economic Commission for Europe
• Seminar on the Role of Ecosystems as Water
  Suppliers
• Geneva, 13-14 December, 2004
• Gonzalo Castro
• Head, Biodiversity Team
• Global Environment Facility

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GEF Biodiversity Portfolio Summary(FY91-FY03)
Number of Projects 336 GEF Funding US1.54
Billion Co-funding US3.24 Billion Number of
Countries 140
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Lessons Learned(Independent OPS-2)

• STRENGTHS
• Excellent Ecosystem Representation
• Wide Coverage
• Innovative Financing (Trust Funds, PES, etc)
• Impact on Capacity Building
• Strong Stakeholder Participation
• Addresses Cross-Cutting Issues
• Includes Science and Technology Issues

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Lessons Learned(Independent OPS-2)

• WEAKNESSES
• Fails to Address Root Causes
• Weak Sectoral Linkages (mainstreaming)
• Weak Sustainability
• Weak Private Sector Participation
• Poor Capacity to Measure Results

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Change in Paradigms
From How to make project sustainable? To How
to sustain conservation? From Project
success To Changing behavior of societies and
economies From Short-term projects To Long-te
rm programs
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GEF-3 Strategic Priorities US3.1 Billion (ca.
US800 Million for BD)

• Catalyzing Sustainability of Protected Areas
  (US400M)
• Mainstreaming Biodiversity in Production
  Landscapes and Sectors (US250M)
• Capacity Building for the Implementation of the
  Cartagena Protocol on Biosafety (US80M)
• Generation and Dissemination of Best Practices
  for Addressing Current and Emerging Biodiversity
  Issues (US70M)

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MAINSTREAMING BIODIVERSITY OBJECTIVE
To integrate biodiversity conservation in
agriculture, forestry, fisheries, tourism and
other production systems and sectors to secure
national and global environmental benefits
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Water services
Supply of services Upstream land uses affect the
Quantity, Quality, and Timing of water flows

• Demand for services
• Possible downstream beneficiaries
• Domestic water use
• Irrigated agriculture
• HEP
• Fisheries
• Recreation
• Downstream ecosystems

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The logic of payments for environmental services
Conservation
Benefits to land users
Important! This logic is repeated every year
Need annual payments
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Example 1Silvo-Pastoral Systems (Central
America, Colombia)
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Expansion of livestock production is a major
cause of habitat loss in Latin America
Deforestation in Nicaragua, 1983-2000
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Much of this expansion is in lands unsuited to
it, quickly degraded
Quindío, Colombia
Esparza, Costa Rica
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Silvopastoral systems

• Combine trees with livestock production
• Use of trees in pastures
• Cut-and-carry systems
• Live fencing

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Benefits of silvopastoral systems

• On-site benefits
• Promote soil fertility
• Provide shade
• Provide fodder
• Provide additional products (timber, fruit, etc)
• Biodiversity benefits
• Host larger number and wider variety of species
• Help connect remaining natural habitats
• Carbon benefits
• Sequester more carbon in soil and biomass
• Water benefits
• Higher infiltration
• Improved water filtration

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Profitability of silvopastoral practices from
land users perspective
Note 20ha farm in Nicaragua
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Biodiversity index
0.1 for multiple species (gt5) 0.1 for multiple
shade species 0.1 for multi strata 0.1 for
connectivity 0.2 with understory 0.3 with
species enrichment 0.1 if riparian 0.1 with
species enrichment
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Finca Putumayo (Quindío, Colombia)
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Finca PutumayoLand use plan
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Finca Putumayo Payments under RISEMP
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Impact of PES on profitability of silvopastoral
practices
Note 20ha farm in Nicaragua
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Primary ForestsTotal US102/ha/year(Constantino
and Kishor, 1993)
Example 2Ecomarkets (Costa Rica)
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Creation of Ecomarkets

• Costa Rica Forestry Law
• Pays landowners 40/ha/year

• Same hectare

Market Creation
Over 500,000 ha under system!
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Example 3Biodiversity-Friendly Shade Coffee (El
Salvador)
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Coffee grown under shade The forest is
structurally complex and provides some
degree of habitat richness
Coffee grown in the sun The forest is gone and
the value of this plantation for biodiversity is
very marginal
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• Certified Coffee
• Better taste
• Less volatile prices
• Ecosystem Conservation
• Water Conservation

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Water services Key characteristics

• Water flows downhill

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Water services vary substantially
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Venezuela Canaima NP Project
Pto. Ordaz
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Venezuela Canaima NP Project
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Can we actually get people to pay? Costa Rica
Payments by water users